{"id":29530,"date":"2025-04-16T09:00:00","date_gmt":"2025-04-16T13:00:00","guid":{"rendered":"https:\/\/www.sage.com\/en-us\/blog\/?p=29530"},"modified":"2025-04-08T11:51:49","modified_gmt":"2025-04-08T15:51:49","slug":"nonprofit-vs-not-for-profit","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-us\/blog\/nonprofit-vs-not-for-profit\/","title":{"rendered":"Nonprofit vs. not-for-profit: What\u2019s the difference?"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-us\/blog\/category\/strategy-legal-operations\/\" class=\"entry-header__link\">Strategy, Legal &amp; Operations<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tNonprofit vs. not-for-profit: What\u2019s the difference?\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-04-16T09:00:00-04:00\">April 16, 2025<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"Nonprofit vs. not-for-profit: What\u2019s the difference?\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-us\/blog\/nonprofit-vs-not-for-profit\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-us\/blog\/author\/yassirmalik\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2024\/03\/Yassir-Malik.jpg\" class=\"entry-author__image\" alt=\"yassir-malik-profile-picture\" \/>\t\t\t\t<span class=\"entry-author__name\">Yassir Malik<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n<p>Nonprofit vs. not-for-profit. Hands up, who thought the two were the same thing? While the two terms might seem interchangeable, they represent two distinct types of organizations. <\/p>\n\n\n\n<p>They share many similarities, however. Both aim to serve their communities without making a profit, but they differ in their missions, business structures, tax implications, and accounting needs.\u00a0<\/p>\n\n\n\n<p>This article will dive into the definitions of not-for-profit and nonprofit organizations, explore their key differences and similarities, and discuss important accounting considerations to keep in mind.&nbsp;<\/p>\n\n\n\n<p>Here&#8217;s what we cover:<\/p>\n\n\n<?xml encoding=\"utf-8\" ?><div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-what-is-a-nonprofit-organization\" data-level=\"2\">What is a nonprofit organization?<\/a><\/li><li><a href=\"#h-what-is-a-not-for-profit-organization\" data-level=\"2\">What is a not-for-profit organization?<\/a><\/li><li><a href=\"#h-differences-between-nonprofit-and-not-for-profit-organizations\" data-level=\"2\">Differences between nonprofit and not-for-profit organizations<\/a><\/li><li><a href=\"#h-similarities-between-nonprofit-and-not-for-profit-organizations\" data-level=\"2\">Similarities between nonprofit and not-for-profit organizations<\/a><\/li><li><a href=\"#h-nonprofit-vs-not-for-profit-examples\" data-level=\"2\">Nonprofit vs. not-for-profit examples<\/a><\/li><li><a href=\"#h-choosing-the-right-structure-for-your-organization\" data-level=\"2\">Choosing the right structure for your organization<\/a><\/li><li><a href=\"#h-simplify-your-finances-with-nonprofit-accounting-and-management-software\" data-level=\"2\">Simplify your finances with nonprofit accounting and management software<\/a><\/li><li><a href=\"#h-case-study-how-room-to-read-turned-a-new-page\" data-level=\"2\">Case study: How Room to Read turned a new page<\/a><\/li><li><a href=\"#h-nonprofit-vs-not-for-profit-faqs\" data-level=\"2\">Nonprofit vs. not-for-profit FAQs<\/a><\/li><\/ul><\/div>\n\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">The Nonprofit Finance Team Survival Guide<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p class=\"\">Find out what it takes for nonprofit finance teams to not only survive but thrive with our Ebook survival guide. <\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"https:\/\/www.sage.com\/en-us\/cp\/ebook-the-nonprofit-finance-team-survival-guide-nfp\/\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\tid=\"cta-id-19354\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tdata-button-location=\"cta_box\"\n\t\t\t\t\t\t\t\t\t\t\t>Download now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1097994958-1440x810.jpg\" class=\"single-cta__image\" alt=\"Woman listening with rapt attention\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1097994958-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-a-nonprofit-organization\"><strong>What is a nonprofit organization?<\/strong><\/h2>\n\n\n\n<p>Your nonprofit organization exists to serve a greater good rather than turn a profit. <\/p>\n\n\n\n<p>Your organization may typically focus on public service, addressing social causes, and supporting communities through its work. It could come in many forms, such as charities, foundations, educational institutions, religious groups, and hospitals.\u00a0<\/p>\n\n\n\n<p>While each nonprofit organization has a specific mission, their shared purpose is to positively impact society and help those in need. Unlike a for-profit business, your nonprofit doesn\u2019t distribute profits to shareholders. <\/p>\n\n\n\n<p>However, it still needs to generate revenue to sustain operations. Your nonprofit would do this through donations, grants, and endowments, with all funds going directly toward advancing the causes it supports.\u00a0<\/p>\n\n\n\n<p>Because its purpose is centered around public benefit, your nonprofit in the US enjoys tax-exempt status under the IRS 501(c)(3) code. This means it isn\u2019t required to pay taxes on the donations and other forms of income it receives, provided it meets the criteria established by the IRS.\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-a-not-for-profit-organization\"><strong>What is a not-for-profit organization?<\/strong><\/h2>\n\n\n\n<p>Unlike nonprofits, which focus on benefiting the public or a social cause, not-for-profit organizations are set up to benefit their members rather than owners or shareholders. <\/p>\n\n\n\n<p>Any money your non-for-profit raises is reinvested directly into the organization to help achieve its goals rather than being distributed as profits.\u00a0<\/p>\n\n\n\n<p>Interestingly, \u201cnot-for-profit\u201d isn\u2019t an official legal term, even though it\u2019s commonly used. Legally speaking, these organizations are considered \u201cexempt organizations\u201d under the IRS\u2019s broader category of \u201cother nonprofits.\u201d&nbsp;<\/p>\n\n\n\n<p>These organizations can include social welfare groups, community organizations, veterans&#8217; clubs, social clubs, and civic leagues. While not-for-profits don\u2019t necessarily aim to serve the general public, they still play an important role by fulfilling the needs of their members. <\/p>\n\n\n\n<p>For instance, your local football club might raise money to buy new uniforms, or a community group may work on renovating local parks near you.\u00a0<\/p>\n\n\n\n<p>As a not-for-profit, you can apply for 501(c)(3) status with the US IRS. Your not-for-profit might also be tax-exempt under different sections of the IRS code, such as 501(c)(7) for social and recreational clubs, 501(c)(4) for social welfare organizations, or other applicable sections.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-differences-between-nonprofit-and-not-for-profit-organizations\"><strong>Differences between nonprofit and not-for-profit organizations<\/strong><\/h2>\n\n\n\n<p>While nonprofit and not-for-profit organizations share the common goal of serving their communities without making a profit, there are some key differences to keep in mind:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mission-and-objectives-nbsp\"><strong>Mission and objectives<\/strong>&nbsp;<\/h3>\n\n\n\n<p>As a nonprofit organization, you\u2019re all about benefiting the public. Your mission addresses social issues, such as hunger relief or medical care. <\/p>\n\n\n\n<p>On the other hand, if you\u2019re involved in a not-for-profit, you\u2019ll concentrate on fulfilling your own objectives\u202fand\u202fserving your members\u2019 needs rather than the broader community.\u00a0<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-management-and-organization-structure-nbsp\"><strong>Management and organization structure<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Nonprofits tend to be structured like for-profit businesses, with a combination of paid staff and volunteers. Your nonprofit aims to generate revenue to support your mission and sustain your programs.<strong> <\/strong><\/p>\n\n\n\n<p>Not-for-profit organizations are<strong> <\/strong>typically run by volunteers and your aim in this type of organization is to raise just enough funds to support your specific goals.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-legal-status-nbsp\"><strong>Legal status<\/strong>&nbsp;<\/h3>\n\n\n\n<p>One significant advantage for a nonprofit is that it can establish a separate legal entity, which allows it to conduct business more formally. <\/p>\n\n\n\n<p>In contrast, your not-for-profit organization doesn\u2019t have that option. It operates as part of a collective membership, which shapes its governance and activities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-tax-implications-nbsp\"><strong>Tax implications<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Your nonprofit organizations can obtain 501(c)(3) tax-exempt status, which not only helps it operate but also allows your donors to make tax-deductible contributions. <\/p>\n\n\n\n<p>Not-for-profits may fall under various 501(c) sections (like 501(c)(7) for social clubs) too, but most donations aren\u2019t tax-deductible (there are some exceptions).\u00a0<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-scale-and-revenue-sources-nbsp\"><strong>Scale and revenue sources<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Nonprofits are generally larger organizations and rely on a mix of donations, grants, and memberships to fund their missions. They often need specialized tools to manage their complex financial landscapes effectively. <\/p>\n\n\n\n<p>For example, <a href=\"https:\/\/www.sage.com\/en-us\/sage-business-cloud\/intacct\/industry\/nonprofit\/foundations-philanthropic-charities\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>accounting software for foundations and philanthropic charities<\/strong><\/a> can help your organization streamline its financial processes and ensure compliance. <\/p>\n\n\n\n<p>By contrast, not-for-profits are often smaller in scale and generate revenue mostly from sales, membership fees, or fundraising activities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-financial-reporting-nbsp\"><strong>Financial reporting<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Nonprofits must maintain transparency and disclose their financial information. This is so donors and the public can easily see how their contributions are being used to advance the mission. <\/p>\n\n\n\n<p>On the other hand, your not-for-profit\u202fisn\u2019t obligated to publicly report its financials, which can limit transparency and accountability.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Aspect<\/strong>&nbsp;<\/td><td><strong>Nonprofit organizations<\/strong>&nbsp;<\/td><td><strong>Not-for-profit organizations<\/strong>&nbsp;<\/td><\/tr><tr><td>Mission and objectives&nbsp;<\/td><td>Aim to benefit the public by tackling social issues like hunger or healthcare.&nbsp;&nbsp;&nbsp;&nbsp;<\/td><td>Focus on serving their members\u2019 needs rather than the wider community.&nbsp;<\/td><\/tr><tr><td>Management structure&nbsp;<\/td><td>Operate like for-profit businesses with paid staff and volunteers.&nbsp;&nbsp;&nbsp;&nbsp;<\/td><td>Typically run by volunteers, raising funds for specific goals.&nbsp;<\/td><\/tr><tr><td>Legal status&nbsp;<\/td><td>Can establish a separate legal entity to conduct business.&nbsp;&nbsp;&nbsp;&nbsp;<\/td><td>Don\u2019t have a separate legal entity; operate collectively.&nbsp;<\/td><\/tr><tr><td>Tax implications&nbsp;<\/td><td>Qualify for 501(c)(3) status, making donations tax-deductible for donors.&nbsp;&nbsp;&nbsp;&nbsp;<\/td><td>Fall under various 501(c) sections (like 501(c)(7)); donations are usually not tax-deductible.&nbsp;<\/td><\/tr><tr><td>Scale and revenue&nbsp;<\/td><td>Generally larger organizations, relying on donations, grants, and memberships.&nbsp;&nbsp;&nbsp;&nbsp;<\/td><td>Often smaller, generating revenue from sales, dues, or fundraising.&nbsp;<\/td><\/tr><tr><td>Financial reporting&nbsp;<\/td><td>Required to disclose financial information for transparency.&nbsp;&nbsp;&nbsp;&nbsp;<\/td><td>Not obligated to report finances, which may limit transparency publicly.&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-similarities-between-nonprofit-and-not-for-profit-organizations\"><strong>Similarities between nonprofit and not-for-profit organizations<\/strong><\/h2>\n\n\n\n<p>Despite their differences, nonprofits and not-for-profits share some similarities, including:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-shared-mission-focus-nbsp\"><strong>Shared mission focus<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Neither nonprofits nor not-for-profits earn a profit for their owners. Both organizations are dedicated to serving their communities and causes, fulfilling their missions, and addressing the needs of those they serve.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-donations-acceptance-nbsp\"><strong>Donations acceptance<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Both types of organizations can accept contributions from individuals and businesses, which is essential for funding their programs and activities. Although not all not-for-profits can offer tax-deductible donations, you can still effectively raise funds for your not-for-profit.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-tax-exempt-status-nbsp\"><strong>Tax-exempt status<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Both nonprofit and not-for-profit organizations can apply for tax-exempt status with the IRS. Making sure your organization stays compliant with IRS regulations is essential to maintain this important status.<\/p>\n\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">The Nonprofit Finance Team Survival Guide<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p class=\"\">Find out what it takes for nonprofit finance teams to not only survive but thrive with our Ebook survival guide. <\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"https:\/\/www.sage.com\/en-us\/cp\/ebook-the-nonprofit-finance-team-survival-guide-nfp\/\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\tid=\"cta-id-19354\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tdata-button-location=\"cta_box\"\n\t\t\t\t\t\t\t\t\t\t\t>Download now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1097994958-1440x810.jpg\" class=\"single-cta__image\" alt=\"Woman listening with rapt attention\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1097994958-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-nonprofit-vs-not-for-profit-examples\"><strong>Nonprofit vs. not-for-profit examples<\/strong>\u00a0<\/h2>\n\n\n\n<p>Understanding the differences between a nonprofit and a not-for-profit organization can be tricky if you\u2019ve always used the terms interchangeably. To help contextualize the differences, here are nonprofit vs. not-for-profit examples:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-examples-of-nonprofit-organizations-nbsp\"><strong>Examples of nonprofit organizations<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Here are examples of large, well-known US nonprofit organizations:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>American Red Cross\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Habitat for Humanity\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Healthcare for the Homeless\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Make-A-Wish Foundation\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Salvation Army\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Feeding America\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>American Heart Association\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Human Rights Watch\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>World Wildlife Fund\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>YMCA\u00a0<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-examples-of-not-for-profit-organizations\"><strong>Examples of not-for-profit organizations<\/strong><\/h3>\n\n\n\n<p>Here are fictitious examples of not-for-profit organizations by different categories:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Social welfare organization, e.g., Helping Hands Community Group\u2014a group working to provide food and job training for local families in need.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Social clubs, e.g., Garden Enthusiasts Club\u2014a fun group for gardening lovers sharing tips and hosting community planting days.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Labor organizations, e.g., Artisan Workers Union\u2014a group representing local artisans, advocating for fair pay and safe working conditions.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Veterans\u2019 organizations, e.g., Veterans Connect\u2014a support network offering resources and social events to veterans and their families.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Business leagues, e.g., Downtown Business Network\u2014a group that promotes local businesses and helps them connect through networking events.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cultural organizations, e.g., Local Arts Collective\u2014a group celebrating local artists through exhibitions and workshops, fostering a love for the arts.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Religious organizations, e.g., Community Faith Center\u2014a church that provides spiritual support and outreach programs for families in the area.\u00a0<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-choosing-the-right-structure-for-your-organization\"><strong>Choosing the right structure for your organization<\/strong><\/h2>\n\n\n\n<p>If you\u2019re passionate about a cause and want to establish an organization, how do you\u202fdecide between forming a nonprofit or a not-for-profit? It comes down to the purpose and goals of your group.&nbsp;&nbsp;<\/p>\n\n\n\n<p>A nonprofit structure may make the most sense if your mission focuses on serving your wider community or addressing social issues. If you structure your organization this way, you can apply for 501(c)(3) status, which grants you tax-exempt benefits and makes raising money for your cause easier.\u00a0<\/p>\n\n\n\n<p>On the other hand, if your organization is designed to benefit a smaller, specific group, like a sports club or a local entrepreneur network, then a not-for-profit structure could be more appropriate. <\/p>\n\n\n\n<p>While you can still qualify for tax-exempt status, donations wouldn\u2019t be tax-deductible for your supporters.\u00a0\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-simplify-your-finances-with-nonprofit-accounting-and-management-software\"><strong>Simplify your finances with nonprofit accounting and management software<\/strong><\/h2>\n\n\n\n<p>You\u2019ve explored the differences between nonprofit vs. not-for-profit organizations. While both share similar goals, they vary in tax status, revenue sources, and financial reporting requirements.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Nonprofit accounting requirements are arguably more rigorous because they focus on transparency and accountability to donors. And that\u2019s where <a href=\"https:\/\/www.sage.com\/en-us\/industry\/nonprofit\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>nonprofit accounting software<\/strong><\/a> comes into play. <\/p>\n\n\n\n<p>For nonprofits, accounting and management software is essential for managing financial data, ensuring compliance, and maintaining <a href=\"https:\/\/www.sage.com\/en-us\/blog\/nonprofit-accounting-internal-controls\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>nonprofit internal controls<\/strong><\/a> that safeguard financial health.\u00a0\u00a0<\/p>\n\n\n\n<p>Below are some key features to look for when you\u2019re considering software options:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Financial reports and dashboards:<\/strong> stay on top of your organization\u2019s financial health and share transparent financial donor updates with easy-to-create reports and customizable, real-time <a href=\"https:\/\/www.sage.com\/en-us\/blog\/dashboards-for-nonprofits\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>dashboards for nonprofits<\/strong><\/a>.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Revenue recognition: <\/strong>automate revenue management with intelligent tools that ensure your nonprofit complies with regulations. This feature is handy if your nonprofit generates multiple revenue streams, such as donations, grants, and program fees.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>AI-powered efficiency:<\/strong> AI-driven workflows can help streamline routine accounting tasks, like reporting and reconciliation, saving your nonprofit valuable time and resources. You can focus more on driving your mission forward and less on manual administrative tasks.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Grant tracking and billing:<\/strong> the right solution should make it easier for you to track, manage, and report on grants, ensuring accurate billing, reimbursement, and audit readiness. This will help your organization maintain compliance and build trust with your funders.\u00a0<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-case-study-how-room-to-read-turned-a-new-page\"><strong>Case study: How Room to Read turned a new page<\/strong><\/h2>\n\n\n\n<p>To illustrate how specialized financial software can elevate efficiency, let\u2019s look at Room to Read\u2019s story\u2014a nonprofit supporting girls\u2019 education and literacy programs.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Room to Read was using a server-based general ledger tool, but decided to upgrade to a cloud-based system, with a more solid and flexible financial infrastructure.&nbsp;&nbsp;<\/p>\n\n\n\n<p><em>\u201cOur financial information simply wasn\u2019t granular enough to add meaningful insights like cost per activity or investment per child.\u201d<\/em>\u00a0 -Shari Freedman, CFO\u00a0<\/p>\n\n\n\n<p>The organization invested in a dynamic solution that could adapt to its increasing operational complexities and long-term growth ambitions, offering global support for accounting and finance staff around the world.&nbsp;&nbsp;<\/p>\n\n\n\n<p>With the new system in place, there\u2019s no longer a need to rely on Excel spreadsheets or spend hours on manual, duplicate data entry. It has dramatically reduced the work needed for the organization to close its books in each country.&nbsp;<\/p>\n\n\n\n<p>As a result, Room to Read has boosted productivity by 25% and increased revenue by 15%, reaching 121,000 more children through literacy and education programs.&nbsp;<\/p>\n\n\n\n<p>Take a look at <a href=\"https:\/\/www.sage.com\/en-us\/success-stories\/room-to-read\/\" target=\"_blank\" rel=\"noreferrer noopener\">Room to Read\u2019s full story<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-nonprofit-vs-not-for-profit-faqs\"><strong>Nonprofit vs. not-for-profit FAQs<\/strong><\/h2>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-can-a-nonprofit-also-be-a-not-for-profit-nbsp\"><strong>Can a nonprofit also be a not-for-profit?<\/strong>&nbsp;<\/h4>\n\n\n\n<p>Technically, yes. From a tax perspective, nonprofit and not-for-profit organizations are eligible for 501(c)(3) status because they are charitable organizations that don\u2019t distribute profits to shareholders or individuals. <\/p>\n\n\n\n<p>However, not-for-profits cover various groups that might focus on specific interests rather than serving the public good. Because of this, they often fall under different sections of the tax code, making them distinct from traditional nonprofits.\u00a0<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-can-a-not-for-profit-make-a-profit-nbsp\"><strong>Can a not-for-profit make a profit?<\/strong>&nbsp;<\/h4>\n\n\n\n<p>Not-for-profit organizations don\u2019t generate profits for their owners. Instead, any funds your not-for-profit earns or donates are reinvested into your organization to help it pursue its goals and better serve the community. Importantly, these funds aren\u2019t distributed to members, directors, or officers.\u00a0<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-are-donations-to-not-for-profits-tax-deductible-nbsp\"><strong>Are donations to not-for-profits tax deductible?<\/strong>&nbsp;<\/h4>\n\n\n\n<p>Donations to US not-for-profit aren\u2019t typically tax deductible as they operate under various sections of the IRS tax code that don\u2019t allow this. There are some exceptions. <\/p>\n\n\n\n<p>For example, donations to certain not-for-profits, like volunteer fire departments, may be deductible. It all depends on your organization\u2019s tax code.\u00a0<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-do-nonprofits-and-not-for-profits-have-different-accounting-requirements-nbsp\"><strong>Do nonprofits and not-for-profits have different accounting requirements?<\/strong>&nbsp;<\/h4>\n\n\n\n<p>Yes, they do. Nonprofits, especially those under 501(c)(3), must file <a href=\"https:\/\/www.sage.com\/en-us\/blog\/tips-and-tricks-for-streamlining-nonprofit-form-990-reporting\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Form 990<\/strong><\/a> with the IRS annually and publicly share their financial information. If you receive significant funding as a nonprofit, an audit may also be required. <\/p>\n\n\n\n<p>Not-for-profits have more straightforward reporting requirements and only file Form 990 if they meet specific criteria. They also don\u2019t need to undergo audits\u202funless their funding demands it.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-how-does-nonprofit-accounting-differ-from-for-profit-accounting\"><strong>How does nonprofit accounting differ from for-profit accounting?<\/strong><\/h4>\n\n\n\n<p>There are plenty of differences between nonprofit and for-profit accounting in the US. For example:\u00a0<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Nonprofits report on fund usage, whereas for-profits focus on profitability.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Nonprofits recognize revenue on receiving donations, whereas for-profits do this when income is earned.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Nonprofits track funds by purpose, whereas for-profits use a single financial statement.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Nonprofits prepare a tax-exempt form and statement of activities, whereas for-profits prepare a <a href=\"https:\/\/www.sage.com\/en-us\/blog\/what-why-balance-sheets-important\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>balance sheet<\/strong><\/a> and income statement.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Nonprofits are tax-exempt and can receive tax-deductible donations, whereas for-profit pay taxes on profits and don\u2019t offer tax deductions.\u00a0<\/li>\n<\/ul>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to our Sage Advice Newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Get our latest business advice delivered directly to your inbox.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-ab515c6e-7e90-4c2f-a67e-113872516e8b\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg\" class=\"single-cta__image\" alt=\"Working from home with tea in hand\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Are you an aspiring social-entrepreneur that is wants to start a nonprofit? You might be curious about the difference between a nonprofit and not-for-profit organization. This guide untangles the two and explains how their accounting and tax requirements differ.<\/p>\n","protected":false},"author":1774,"featured_media":20203,"menu_order":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[44,49],"tags":[170,116,34,118],"business_type":[40,41],"lilypad":[],"context":[],"industry":[58],"persona":[98,96,97],"imagine_tag":[233,472,230],"coauthors":[509],"class_list":["post-29530","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-strategy-legal-operations","category-trends-insights","tag-business-strategy","tag-compliance","tag-small-business","tag-tax","business_type-small-business","business_type-growing-business","industry-nonprofit"],"sage_meta":{"region":"en-us","author_name":"Yassir Malik","featured_image":"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/09\/GettyImages-1432209821.jpg","imagine_tags":{"233":"Medium Businesses","472":"Nonprofit","230":"Small business"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice US","distributor_original_site_url":"https:\/\/www.sage.com\/en-us\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts\/29530","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/users\/1774"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/comments?post=29530"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts\/29530\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/media\/20203"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/media?parent=29530"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/categories?post=29530"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/tags?post=29530"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/business_type?post=29530"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/lilypad?post=29530"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/context?post=29530"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/industry?post=29530"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/persona?post=29530"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/imagine_tag?post=29530"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/coauthors?post=29530"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}