What is the difference between nonprofit and for-profit companies?

Compiled and Written By TopManagementDegrees.com Staff

As their names indicate, nonprofit and for-profit businesses vary greatly in some aspects of their operation and most definitely in the overall purpose of their existence. As the Houston Chronicle's James Green writes, "While the aim of for-profit organizations is to maximize profits and forward these profits to the company's owners and shareholders, nonprofit organizations aim to provide society's needs. Non-profit organizations have no owners. Instead of maximizing profits, which means maximizing revenues while minimizing costs, they are more concerned with ensuring the revenue is greater than costs. This ensures that the nonprofit can still provide society's needs." Another key element that makes a nonprofit organization different than a for-profit is that the company's income is never to be distributed to any owners "but is to be recycled back into the nonprofit corporation's public benefit mission and activities."

Besides these basic differences in organization and purpose, there are several more technical areas worth mentioning when discussing the differences between nonprofits and their for-profit counterparts. While for-profit organizations are responsible for paying taxes based on their net income, nonprofit organizations are exempt from paying income tax. Since a nonprofit's goal is to make the world a better place and invest time, resources, and funds into the community, the government credits nonprofits with benefits in this way. While nonprofits are not required to pay taxes on net income, they are responsible for state and property taxes.

Another difference between a nonprofit and for-profit organization is that a for-profit will put together an income statement each quarter. Income statements are prepared in order to assess a company's financial performance four times each year. Instead of income statements, nonprofit organizations will typically provide its donors and the general public a statement of activities which will include all revenues, expenses, and plus net assets. The other resource a nonprofit depends on is a quarterly balance sheet listing the owner's equity. Since nonprofit organizations do not operate with owners at the helm, they will typically produce a document which shows the organization's liabilities and assets known as a statement of financial position.

Business professionals desiring to make a difference in the world will often take positions in nonprofit organizations, and many times find the best way to influence and direct meaningful work is pursuing a career in nonprofit management. With so many of the best business schools in the country now offering online Master's in Nonprofit Management, it has never been easier to find a degree that offers convenience and excellent training in this field. The College of Humanities and Sciences at the University of Montana now delivers an impressive 36-credit hour online Master's of Public Administration with a Nonprofit Administration Track. This program has been designed to "prepare students for administrative careers in nonprofit agencies by satisfying the knowledge and skill requirements of both pre-career and mid-career students." Electives within this high-quality degree include Introduction to Nonprofit Administration, Advocacy and Public Policy, Nonprofit Board Management, Nonprofit Grant-writing, and Nonprofit Marketing and Social Media.


This is just one example of a stellar online graduate degree with a focus in nonprofit work. Business leaders desiring to make a difference will find that working for a nonprofit organization can be a satisfying career move.