What is the difference between a non-profit and a for-profit?
Gail Sonnesso Jan 16, 2009
"The word "nonprofit" refers to a type of Corporation-- one which is
organized under rules that forbid the distribution of profits to owners."Profit"
in this context is a relatively technical accounting term, related to but
not identical with the notion of a surplus of revenues over expenditures" If
there is any "surplus" this in put back into to the non-profit and not
dispersed to the company employees."* However, nonprofit corporations have
to be financially successful, if they are to fulfill commitments to
providing services to the community.
GEM Adult Day Services is a registered 501 ( c ) ( 3 ) charitable
corporation. Donations to 501 c 3 corporations have the highest tax benefits
allowed under federal law. As such, GEM is required to send out a gift
acknowledgement or tax letter with our federal tax ID and acknowledging
particulars of each gift received. Nonprofit corporations are accountable to
the public and must now file annual Form 990 reports with the IRS.
GEM is governed by a Board of Directors that employs staff to deliver
quality services to those with dementia. Yes, GEM does charge for the
services it provides. Excellent dementia care requires a staff with a high
degree of training and expertise. GEM provides those services to our
families at a fee much lower than what the actual cost is to provide the
service. This is possible because of our generous Outer Banks Community,
donations and access to grants.
Tax-exempt nonprofit organizations can, and do, operate in all other
particulars like any other sort of business. They have bank accounts; own
productive assets of all kinds; receive income from sales and other forms of
activity, including donations and grants if they are successful at finding
that sort of support; make and hold passive investments; employ staff; enter
into contracts of all sorts; etc. *
GEM provides care for people with dementia and this is considered by our
current healthcare system as "Custodial Care" and is not recognized as a
"Covered Health Care Need." In our current medical system if one doesn't
need on-going medical services there is NO financial support for either
families or GEM for providing this care!
Nursing homes, assisted living centers, companies providing in-home may be,
"For Profit" organizations that allow the distribution of profits to owners
and shareholders at the full discretion of the owners. For Profit
corporations operate under IRS guidelines as a business and file annual tax
statements.
Section 501 of the Internal Revenue Code lists several circumstances under
which corporations [or unincorporated nonprofits!] are exempt from these
taxes. Section 501(c)(3) -- the famous one -- describes [nonprofit!] (1)
Serving charitable, religious, scientific or educational purposes (2) no
part of the income of which "inures to the benefit of" anyone. *
There are some specialized tax rules and accounting practices that apply to
nonprofit organizations. If they are of a certain size, they are required to
disclose many details of their operations to the general public and to state
regulators and watchdog agencies using IRS form 990. This form shows any
salaries paid to officers or directors [for incorporated nonprofits!] and to
the five highest-paid employees and contracts if any receive over $150,000
in the tax year. The form also requires the organization to divide its
expenses into "functional categories" -- program, administration and
fund-raising -- and report the totals for each along with the amounts
expended on each program activity.* The 990 reports are public documents and
can be located at the IRS website and by going to www.guidestar.org.
Basic Overview of Nonprofit Organizations *The underlined sections of this
article were written by Carter McNamara, MBA, PhD, Authenticity Consulting,
LLC. Copyright 1997-2008.
Adapted from the Field Guide to Leadership and Supervision.
