If you live in the 21rst century globalized society you probably already know what profit and non-profit organizations are.
Profit organizations are businesses that are born and exist with the aim of receiving revenues, surpluses or expenditures. Non-profit organizations exist to offer specific services for society, and they cannot rely on revenues.
This is very basic information that you probably already know, but you may have encountered yourself asking what specific differences there are in having a profit or a non-profit organization. In this article we’ll explain some of the most relevant differences between profit and non-profit.
The aim of profit and non-profit organizations
The first and most important difference between profit and non-profit comes when we look at each organization’s aim. While the purpose of profit or for-profit organizations is, precisely such as its name indicates, profit or revenue, non-profit organizations focus their existence and work on helping and improving societies in various topics such as education, health, protection and minimization of violence, poverty, inequalities, environmental issues and social inclusion, amongst others.
Profit organizations focus their products and services on potential consumers, which are usually specific target groups. Non-profit organizations on the other hand decide and implement activities, services and products for their workers, volunteers, donors and target groups. NGOs create interrelations between different social groups that helps each other out and succeeds in building a more interconnected and equal society.
Management and internal working structure also differs from profit and non-profit organizations. Because for profit organizations look out for revenue to be able to increase their gains and to social needs and desires, they value production and innovation. Non-profit organizations don’t need to be profitable, but rather sustainable. Nonprofits don’t have direct financial ownership, and their internal structure can be more flexible than for-profit organizations, changing according to social needs but without stressing out about which products or services will be more profitable.
Funding and taxes
Depending on the type of each profit-organization and the country where it operates there will be different taxes that need to be taken into account when counting total revenues. Profit organizations receive initial and continuous funding from their owners or funders, bank loans, investors and future revenues. Because non-profit organizations cannot rely on revenues for their survival and they work on improving society, they are usually exempted from some taxes. They usually pay less taxes, and mainly corporate taxes that vary from one country to another. Non-profit organizations receive public and private donations in the form of money, work, volunteering, materials, products, services and crowdfundings.
NGOs and Non-profit organizations
Non-governmental organizations (NGOs), also called civil society organizations, are a subtype of non-profit organizations.
NGOs are different from other non-profit organizations because even though they can be financed by public and private institutions such as schools, churches and even governments, they cannot participate in governmental affairs. NGOs need to maintain themselves outside of governmental and political aims and ideas, and their actions must not be dependent on their funders’ positions.
Other non-profit organizations that are not NGOs can are affiliated to the government and other private and public bodies and can show publicly and focus their actions according to their sponsors and contributors political aims.
There are many types of non-profit organizations which we will explain in other articles. But for now we covered the basics of profit and non-profit organizations. We hope to have helped you understand its differences better and that you can now distinguish between which organizations in your country and region are profit, non-profit and NGOs.