Non-Profit vs Non-Profit: Is There a Difference?
For people new to the world of nonprofits, there is often a great deal of confusion about the use of the terms “for-profit” and “for-profit.” Many organizations insist on referring to themselves as one or the other, and even some legal and accounting professionals try to draw a clear line between the organizations that are included in these terms. Although there are some technical differences between the two, they are generally used interchangeably.
Some argue that “nonprofit” should refer to organizations that operate with the intention of never making a profit: every penny that comes in is used for the primary purpose of the organization. Essentially, this covers any charity, NGO, civil society, private voluntary organization and any other type of non-profit organization. Often the intent is to make it clear that the business is only asking for what it needs to survive, an attempt to reassure members and potential donors that no one is benefiting from the money coming in.
Some attempt to distinguish nonprofit organizations as unauthorized groups, such as social clubs, civil societies, professional organizations, and the like, while placing publicly supported charities under the nonprofit umbrella. While this distinction may make sense, the definition’s inconsistency makes it difficult to apply. Often the end result is the group’s intent to emphasize its inherent definition: an organization that, by design, does not distribute profits to individuals at the end of the year.
Legal statutes (both federal and state) actually make it clear that “non-profit” and “for-profit” are synonymous. However, the IRS offers a practical distinction in its own definitions. According to the Infernal Revenue Service, “non-profit” refers to a specific activity, such as a hobby. “Not-for-profit” means an organization established for purposes other than profit. This definition does not necessarily mean charity, but rather encompasses any organization that is not intended to make a profit. Amateur athletic leagues, quilt guilds, social clubs, and charities fall under this definition.
Beyond the IRS, a distinction between the terms can also be found in the backgrounds of the people who use them. Lawyers, accountants, and academics tend to prefer the term nonprofit, while seasoned fundraisers (and many people involved in the nonprofit arena) prefer to use nonprofit. Again, fundraisers are likely to prefer nonprofits because it more clearly denotes the fact that no individual benefits from fundraising efforts. Or, it could simply be an exclusionary tactic that helps those in the know identify outsiders… but it’s unlikely to be an organized conspiracy!
The final issue that raises unreasonable disagreement is whether or not the nonprofit should be scripted. Non-profit does not have an inherently different meaning from non-profit, but with the hyphen it is often used in non-profit references. Active philanthropists tend to skip the hyphen. Technically, the hyphen denotes one adjective modifying another. Here, “not” is modifying “profit”… not that this clarification provides any particularly useful insight, except that the very word non-profit is a noun, while non-profit would technically be a modified adjective, by which would require an additional noun to be attached, such as a non-profit organization.
Whatever term you intend to use for your nonprofit, just make sure you have a well-developed pitch ready. Someone will ask about it…probably several people. As long as you sound like you know what you’re talking about, your argument will repeat itself when they they are asked about the difference.
