First, I want to address the difference between a non-profit and a not-for-profit. They seem the same but the IRS categorizes them differently. A non-profit does not set out to make a profit while a not-for-profit is more of a hobby and focuses on activity.
Now a non-profit organization typically:
- Does not set out to make a profit.
- For the public (religious, charitable or educational purpose)
- There is no one person that owns shares of the organization or interests in the property.
- Typically run by board directors that seek to fulfill the purposes of the organization
- Property and income is invested back into the organization to fulfill its mission and activities.
- Organization may qualify for state and federal tax exemptions and donations can be tax-deductible for donors.
While a for-profit organization
- Tries to generate a profit (making more than the amount spent)
- Activity is business-like
- The owners have the power to decide if they want to keep the money for themselves, invest a certain amount or all into the business (or shared with employees)
- Organization does not qualify for state and federal tax exemptions and donations made to for-profit are not tax deductible for donors.