Understanding the concept of not-for-profit–organizations

Understanding the concept of not-for-profit–organizations

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Created By Admin Last Updated Wed, 30-Dec-2020

Meaning- Not-for-profit organizations are a type of organizations that basically do not earn profits for their owners. All the money earned by these organizations or you can say the money which is donated to these organizations are used in pursuing the organization’s objectives and helps in running it.

Mostly these organizations do not pay most of the taxes, they are tax exempt. However, their businesses are not automatically exempt. Basically for tax exemption, one needs to apply for it through IRS. Not-for-profit organizations qualify for and can apply for 501(c) (3) status.

Know the purpose of Not-for-profit organizations

Not-for-profit organizations support a cause, activity, or the community. Their fund activities, hobbies and recreation are related to their cause or for their organization’s goal.

Who can opt for Not-for-profit organizations?

 Anyone can start a not-for-profit organization. If you see a need in your community or the world (for example homelessness) you can opt for one. But keep this in mind if you want a start such an organization there must be a cause relating to scientific, religious, or public safety purposes. You need to create a business plan too as other entrepreneurs create. Outline the problem, objectives of your organization, and how you plan to reach your goals.

Know the types of Not-for-profit organizations-

Basically, there are two major types of such organizations which include: Social organizations, Community organizations.

Social organization

Such type of organization strives to improve the social causes. They must assist the homeless, provide free legal services, or help veterans in finding work. Their earnings typically come from donations or profits made from selling goods.

Community Organization

Most of the not-for-profit organizations considered community organizations. They could range from small local groups to large agencies that have branches across the country. These organizations help with causes around the community like cleaning up the community, improving neighborhoods, etc.

There is a difference between Non-profit organizations and Not-for-profit organizations

Many people confuse these two organizations as there is a slight difference between them. Typically Nonprofit organizations support charitable, educational, or religious purposes while on the other hand Not-for-profit work for a cause or community. The profit earned by a Non-profit organization is used to support the organization’s cause or goal too but the funds can also be used to pay for employee salaries and administrative needs. The availability of tax exemption is also for such organizations.


Not-for-profit organization’s owners make little or no profits from their business. The organization is established to help with a cause or the community. To run any organization you need an easy way to track how your organization is spending the money or you need a business plan to run it successfully in order to fulfill your goal behind creating it. Thus, focus on the plan the same as with any other businessmen's point of view in running an organization.