For-Profit Versus Non-Profit

What is the difference between a for-profit business and a nonprofit organization?

There are several differences between nonprofit corporations and profit-driven corporations.

  1. Nonprofit corporations cannot operate for profit.
    This means
    • They cannot distribute corporate income to shareholders.
    • Funds acquired by nonprofit corporations must stay within the corporate accounts to pay for:
      • reasonable salaries
      • expenses and
      • the activities of the corporation
  2. In a nonprofit corporation
    • Income cannot personally benefit any individual, as it does in a profit-driven corporation.
    • Salaries are not considered personal benefits because they are necessary for operation of the corporation
    However, an excessive salary may cause a corporation to lose its nonprofit status.
  3. No one owns a nonprofit organization in the way that shareholders own a for-profit corporation. 

    The typical nonprofit organization is a corporation controlled by a board of directors. 

    The board of directors elects officers who conduct the day-to-day business operations of the organization.
  4. Many organizations qualify for nonprofit status under various definitions and can include everything from churches to sports leagues and public interest law firms.