- A for-profit business is a privately owned or publicly held organization that exists to earn a profit. Profit is taxed and distributed to owners and shareholders in accordance with U.S. tax laws.
- It is not against the law for a non-profit organization to make money. In fact, it would be nearly impossible for any organization, non-profits included, to maintain operational status if it were not generating income. The majority of non-profit organizations generate money through grants and private donors. Any revenue must be used to pay for rent, utilities, salaries, equipment, supplies, maintenance and repairs. Any left over profit must be funneled into the organization's treasury to allow for the continuation of the service. A non-profit organization does not distribute profits to any individual, with the exception of salaries, under any circumstance.
- Non-profit organizations are distinguished from for-profit organizations by their tax status. Under section 501(c) of the Internal Revenue Service (IRS) code, non-profit organizations are considered tax exempt. The IRS affirms the status of an organization's tax exempt status by issuing a tax exempt number. The tax exempt number is provided to the organization in a determination letter from the IRS. While non-profit organizations are considered tax exempt, there are a few exceptions to the rule. A non-profit organization can be taxed if it engages in revenue generating activities that are not directly related to its mission. For example, if the American Red Cross were to start selling televisions, which is not at all related to its mission, all profits from television sales would be taxed.
- The board of directors of a non-profit organization serves a similar function as the board of directors for a for-profit organization. The board is responsible for determining the mission, vision, values and goals of the organization. The biggest difference between the board of directors in a non-profit organization and the board of directors in a for-profit organization is that members are not paid. Most members are either retired or are employed full time elsewhere. In addition to receiving no monetary compensation for their time and efforts, they often must give financial support. Board members also are encouraged to use their personal and professional contacts to advance the organization's cause, which is usually not the case in a for-profit organization.
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Examples of non-profit organizations are service organizations, colleges and universities, public broadcasting stations, student exchange programs, private schools, charter schools, cultural and/or religious organizations, social clubs, social service providers, health care providers, professional associations, research institutes, advocacy groups, charities, and private foundations.
Many well known institutions are non-profit organizations. For instance, the American Red Cross, United Way, Girl Scouts and the Salvation Army are non-profit organziations. The neighborhood school, the local church and the community library are also non-profit organizations. Even such social clubs as the Freemasons, Order of the Eastern Star and the Elks are non-profit organizations.
