Question:  What is the difference between a nonprofit (NP) and a not-for-profit (NFP)?  Does it matter?

Answer:  I tend to use both terms as synonyms.  However, there are some distinctions.  I reviewed IRS definitions and learned that NFPs are typically focused on a small group with a core interest in a focused activity such as a sport or hobby.  Non-profits most often focus on issues with broad, social impact.  They also often have a separate legal identity including a charter and a governing board.  Here in the United Sates, NPs may qualify for tax-exempt status while a not-for-profit may not.

Both non-profits and not-for-profits may make money. However, at least in theory, all profit is reinvested in the organization or to support the organization’s mission. Neither type of organization pays stockholders, like a for-profit corporation does, and they are often staffed mostly by volunteers. Further, in the United States, both kinds of organizations can be incorporated at the state level.  This incorporated status insulates NP and NFP leaders from legal and financial liability.

Sometimes, the difference really lies in how people use the terms.  Some use “not-for-profit” to highlight the fact that profits go directly to mission.  Others use “non-profit” to indicate the organization makes no profit at all.  Both are philanthropic organizations.  However, these distinctions may have an impact on marketing and taxation issues.

When deciding how to refer to your organization, or before establishing an organization that looks as if it is either an NP or an NFP, consult with an attorney to choose the designation best fitting your vision, mission and tax filing status.  The consultation will set up sound operating parameters and will give your concrete guidelines about how to organize your documents, finances, staff and marketing materials.  You will also then know the protections available to you under the law.

Contact Karen Alphonse at Karena@execSearches.com or visit ExecSearches.com for more information about our career coaching services.

ExecSearches.com is a job board for nonprofit job seekers interested in fundraising, management and executive nonprofit jobs.

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