Whether you’re looking for a new job in the non-profit sector, you’re considering changing your for-profit business to non-profit, or you’re involved in some other non-profit endeavor, you’re bound to have a lot of questions about the nature of this type of business.
What constitutes a non-profit? What is the difference between non-profit and for-profit? How does a non-profit pay its employees? And what are the pros and cons of operating a non-profit? In the guide below, we’ll answer all your non-profit questions and help you find
Difference Between Non-Profit and For-Profit
Of course, all businesses have their own purpose, but while a for-profit exists to make revenue, a non-profit business has a mission, and usually that mission involves making the world a better place in some way or another. They exist for a cause that you can believe in. The activities undertaken to accomplish this mission are called “exempt purposes” and include "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals."
It may seem obvious based on the names, but non-profits and for-profits are funded very differently. Non-profit businesses typically rely on grants, fundraising, charitable donations, and mission-related earned income. To contrast this, for-profit businesses usually fund their work through bank loans, investors, and revenue generated from sales.
As far as audience/consumers go, non-profits and for-profits target a very different group of people. For-profits can zero in on a niche user group who needs or wants their products or services. Non-profits, on the other hand, need to reach a much larger and broader audience, usually conveying a message about a product, service, action, or situation. Non-profits aren’t looking for consumers, but rather volunteers, donors, and sponsors.
The leadership structure in a for-profit business is usually quite clear-cut: a president or CEO or a board and stakeholders. One person or entity sits at the top of the business food chain and is primarily focused with generating profits, of which they usually receive an equitable share. Conversely, non-profit organizations are usually controlled by a board of directors. The board can be anywhere from 25 to upwards of 100 members. This board is primarily concerned with upholding the mission of the organization and making sure its goals are accomplished.
Non-profits are typically classified as a 501(c)3 organization, which means they can provide their services or goods as a public service without paying a portion in taxes back to the government. At the same time, anyone who donates to a non-profit is able to write off that payment as tax deductible. For-profits must pay normal taxes as they are not eligible for such deductions.
The workforce of a for-profit organization versus a non-profit is generally very different. A for-profit’s staff is usually made up of paid employees and interns while a non-profit relies heavily on unpaid volunteers. While there are almost always some paid staff in a non-profit company, there will be much less than a for-profit.
NGO vs Non-Profit
Some people assume that non-governmental organizations, or NGOs, are interchangeable with non-profits, but although they are similar, they are not the same. Both types of organizations exist for the betterment of society, human welfare and/or the world. However, the scope and size of the company generally determines the difference. While most NGOs are non-profits, not all non-profits are NGOs. NGOs typically take on mega, international causes and their span is usually across the globe. Meanwhile, non-profits are generally associated with smaller causes and charities. An example of an organization that belongs to both categories is Doctors Without Borders.
Examples of Non-Profit Organizations
So now that you understand the difference between the two types of companies, let’s take a look at some examples of large, well-known non-profit organizations and what they do.
Perhaps one of the most widely known non-profit organizations in the United States is the American Red Cross. They provide disaster relief and military support, giving food, water, and shelter to people affected by natural disasters. The American Red Cross also provides support and benefits for US veterans and operates a blood bank that saves thousands of lives every year.
The Humane Society is the largest animal protection organization in America. While their mission of protecting animals is broad, they provide many specific services such as rescuing animals left behind in emergency situations, operating care shelters for abused or neglected animals, and investigating animal cruelty cases.
The mission of March of Dimes is to protect the health of moms and babies through support and care, giving everyone an equal start to life. Their programs include prenatal education and support, NICU initiatives that provide families with online and in-person care, professional education for health care professionals, medical and scientific research, and health equity initiatives that address the social barriers to infant health.
How Does a Non-Profit Pay its Employees?
Yes, if you work for a non-profit, you can get paid. Both state law and the IRS allow non-profits to pay reasonable salaries to their fulltime staff. In fact, no strict rules exist as to how exactly employees are to be paid. However, the IRS can penalize an organization or an individual for excessive pay. Typically, for 501(3)c organizations, the IRS mandates that non-profits pay their employees a straight salary rather than with bonuses or percentages of profits. And where exactly does the money come from? As mentioned before, a non-profit earns funding through grants, donations, and fundraising. A portion of that money is therefore allotted to pay the fulltime staff.
Pros and Cons of Non-Profit
- Tax Exemption: Probably the biggest benefit for an organization to be non-profit is the tax-exempt status. Once they are exempt from the federal taxes, they are usually exempt from similar state and local taxes. This is a huge plus for companies that often don’t have a large budget to begin with.
- Eligibility for Grants: Non-profit companies are eligible for public and charitable grants that many for-profit companies are not. In fact, many foundations and government agencies limit their grants to public charities.
- Formal Structure: A non-profit exists as a legal entity outside of the interests and/or potential problems of those that may represent it. In other words, the mission matters more than the people. Non-profits are able to jettison representatives without jeopardizing their cause.
- Limited Liability: Under the law, the members, directors, and employees of a non-profit are not liable for the organization’s debts.
- Cost: Forming a non-profit is not cheap or easy. Many fees are required to apply for tax exemption and incorporation as well as a lot of time and labor necessary to get the company up and running.
- Paperwork: Because of their tax-exempt status, non-profits must keep detailed records of their income and submit annual reports to the state and IRS.
- Shared Control: Although those people who start non-profit organizations like to shape and control their companies, a non-profit belongs to the public, not one person. As such, personal control is limited.
- Public Scrutiny: Because non-profits exist for the betterment of the community at large, their filings and finances are all open to the public. Anyone can request copies of a non-profit’s state and federal filings to learn how they manage their money.
Non-Profit Job Search
Now that you’re an expert on all things non-profit, you may be considering finding a job with a non-profit. But how do you go about that? Below are some great websites/non-profit job boards to aid you in your search for a career with a non-profit. Keep in mind while searching for this type of job that volunteer positions will be much more prevalent than paid positions. However, a volunteer job can turn into a paid position with enough time and dedication!
The Idealist boasts a massive jobs board which, as of November 2020, has postings for over 4,000 jobs, nearly 200 internships, and about 160,000 volunteer opportunities across roughly 136,000 organizations.
An encore career is work done in the second half of one’s life that combines continued income with a pursuit of greater personal meaning and social impact. Encore.org is the hub for anyone seeking that type of career change!
This site exists specifically to place managers into non-profit organizations. Commongood Careers, which recently partnered with Koya Leadership Partners, provides “a comprehensive resource for all of your mission-focused executive search and talent needs.”
As you can see, there’s a lot more to non-profit organizations than meets the eye. These are complex and varied companies whose structure, leadership, mission, and workforce differs greatly from that of a for-profit company. But whether you’re searching for a new job or just looking to learn more about them, there is a whole world of fulfillment and world-changing waiting for you in non-profits!
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