For people new to the world of nonprofits, there is often significant confusion about the use of the terms “nonprofit” and “nonprofit.” Many organizations insist on referring to themselves as one or the other, and even some legal and accounting professionals try to draw a clear line between organizations that fall under these terms. Although there are some technical differences between the two, they are generally used interchangeably.
Some argue that “non-profit” should refer to organizations that operate with the intention of never making a profit – every penny that comes in is used for the organization’s primary purpose. Essentially, this encompasses all charities, NGOs, civil societies, private voluntary organizations, and any other type of non-profit organization. Often the aim is to make it clear that the business is only asking for what it needs to survive – an attempt to reassure potential members and donors that no one is benefiting from the money coming in.
Some attempt to distinguish nonprofits as unauthorized groups, such as social clubs, civil societies, professional organizations, and the like, while placing publicly supported charities under the nonprofit umbrella. While this distinction may make sense, the inconsistency of the definition makes it difficult to apply. Often the end result is the group’s intention to emphasize its inherent definition: an organization that, by design, does not distribute a profit to people at the end of the year.
Legal statutes (both federal and state) actually make it clear that “not-for-profit” and “not-for-profit” are synonymous. However, the IRS offers a practical distinction in its own definitions. According to the Infernal Revenue Service, “non-profit” refers to a specific activity, such as a hobby. “Non-profit” refers to an organization established for purposes other than profit making. This definition does not necessarily mean charity, but encompasses any organization that has no intention of making a profit. Amateur athletic leagues, quilt guilds, social clubs, and charities are included in this definition.
Beyond the IRS, a distinction between terms can also be found in the backgrounds of the people who use them. Lawyers, accountants, and academics tend to prefer the term nonprofit, while seasoned fundraisers (and many people involved in the nonprofit arena) prefer to use the term nonprofit. Again, fundraisers are likely to prefer nonprofits because it more clearly denotes the fact that no one is benefiting from fundraising efforts. However, it could just be an exclusion tactic that helps those in the know to identify outsiders … but it is unlikely to be an organized conspiracy!
The last question that generates an unreasonable disagreement is whether the nonprofit should have a script or not. Nonprofit does not have an inherently different meaning than nonprofit, but the hyphen is often used in nonprofit references. Active philanthropists tend to skip the script. Technically, the hyphen denotes one adjective that modifies another. Here, “not” is modifying “for profit” … not that this clarification provides any particularly helpful insights, except that the word not for profit is a noun, while not for profit would technically be a modified adjective , so an additional noun would be needed to attach, such as a non-profit organization.
Whatever term you intend to use for your nonprofit, make sure you have a well-developed argument ready. Someone will ask about it … probably several people. As long as it sounds like it knows what you’re talking about, your argument will repeat itself when they they are asked about the difference.
