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What is a Non-Profit Organization?

501c3GO > 501c3  > What is a Non-Profit Organization?

What is a Non-Profit Organization?

There are so many organizations whose sole purpose is to help individuals as well as communities that are in need. The overwhelming majority of such organizations can be termed as not-for-profit. There is a difference between a for-profit and non-profit organization and you can read on to find out. We’re also going to highlight some tips that can come in handy if you’re looking for information on how to start a 501c3.

Definition of a Non-profit Organization

A not-for-profit organization can be defined as a business that has been granted tax-exempt by the IRS due to the fact that it furthers a social cause. The organization is not required to pay taxes in order for it to be operational. For one to achieve tax-exempt status, the application has to be done via the IRS. You have to apply for the 501c3 to be granted the status.

For-profit Vs. Not-for-profit

There are clear distinctions between the two types of businesses. The main distinction has to do with how the businesses handle profit. A for-profit organization will distribute the profits among the owners. Non-profit organizations rarely make a profit and even if they do, the money is reinvested in the business. Both organizations will use the same tactics when it comes to day-to-day operations. There are goals that are supposed to be achieved.

A for-profit organization can try out different businesses while a not-for-profit will be limited to a particular line of business. The IRS, in particular, is very keen on the business side of such organizations because they’ve been exempted from paying taxes.

Not-for-profits and Nonprofits

A lot of people will use the two terms interchangeably yet they mean different things. When it comes to the purpose, not-for-profit is supposed to support a cause, community, or activity while nonprofit focuses mostly on educational, religious, or charitable purposes.

For the type of employees, there could be volunteers, paid, or a mixture of both. Nonprofit has both paid staff and volunteers.

Types of Non-profit

There are two main types of non-profit: Social organizations and community organizations. The two serve different purposes.

Social Organizations

Such organizations are mainly established to advance a social cause. They can provide legal counsel for free, assist the homeless, and help veterans with their daily needs. The earnings for most social organizations will come from the sale of goods and services. The profits are then reinvested in the business to provide service to those in need.

Community Organizations

The majority of not-for-profit organizations can be termed as community organizations. The organizations are tasked with helping with a cause in a community rather than individuals.

Who is Eligible to Start a Not-for-profit?

Anyone can start a not-for-profit provided they meet the requirements. In order to start such an organization, there will be a need to establish the problem at hand. The business plan will need to clearly outline the goals and objectives of the organization. It is also crucial to highlight how you’re going to raise money for the not-for-profit organization. There will need to have systems in place to track how money is being managed in the organization. For more information on the topic, you can check out https://501c3go.com/how-to-start-a-501c3-nonprofit/

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