Nonprofit vs For-Profit? Perhaps this has been one of the initial doubts you had in mind before starting your organization.

However, there’s more to learn.

Do you have a vision of doing something for the good of humanity? 

Do you want to use your business talent, experience, and education for the world’s good through a nonprofit?

And in the process yield valuable, intangible rewards more valuable than any amount of wealth, and thus change your life as well as the many people’s lives you impact?

Well, while this is indeed a noble cause and idea, things are not always as easy as it seems. You need to learn a few important definitions to avoid the pitfalls of starting a nonprofit, specifically a 501c3 nonprofit. 

What exactly is a nonprofit?

A nonprofit, by definition, is an organization that exists to advance a particular cause – but not to make a profit. Nonprofit organizations range from large charities and foundations to small grassroots organizations that benefit schools, churches, or communities.

A nonprofit isn’t owned by any single individual but is instead run collectively by a board of directors. And yes, a nonprofit is allowed to sell goods and services and make a profit.

However, if there is a profit at the end of the year, the extra money does not go into the founder’s pockets. Instead, the nonprofit use that money again to continue to further their charitable purpose.

What Is the Difference Between a Nonprofit vs For-Profit?

As the name suggests, a “for-profit” business exists to sell a good or service to make a “profit” for the owners or shareholders of the company.

When you think of a for-profit company, think of most of the goods and services you use every day. Behind those products and services are companies constantly innovating to reduce their costs, offer more products and raise their prices.

This helps to make more profit for their owners and shareholders.

Besides, individuals own for-profit businesses.

At the end of the year, the individuals who own the business receive any money left over. They receive a transfer into their personal bank accounts. 

If they ever decide to close the business, they can sell everything the company owns and then keep the proceeds for themselves after paying any pending bills and debts.