What’s the difference between a nonprofit vs. a charity, and how do foundations fit in? Sometimes it’s hard to intuitively know the difference between these organizations. In our video from last year, we went over the difference between a nonprofit and a not-for-profit organization. As a refresher, the two terms are essentially the same thing. Nonprofit refers to the organization, while not-for-profit refers to the activities of that organization. But what about the other subsets of nonprofits specializing in the art of giving? Below, we’ll go over the basic nonprofit, and then distinguish foundations from charities.
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Nonprofits
The extra money a nonprofit makes doesn’t go to the employees. Rather, it fuels the organization’s mission. Employees of a nonprofit still get a salary (excluding the volunteers), but they don’t benefit from run-over profits if the organization turns out to be successful. The money goes toward what that organization set out to do. If their mission is to feed the homeless, then the extra revenue will go toward buying more food, setting up events, operating soup kitchens, etc., instead of going into the pockets of those running it.
Foundations
Foundations are organizations that do not qualify as public charities. They are very similar to nonprofits, except money for a foundation usually comes from a family or a corporate entity, whereas nonprofit money often comes from their revenues.
It’s technically possible to donate money to private foundations, but many foundations won’t accept it. As an alternative, they’ll take the money they started out with, invest it, and then distribute the money made from those investments. Foundations will also donate these funds to other nonprofits in the form of gifts or grants.
There are subsets of private foundations: operating and nonoperating. A private nonoperating foundation grants money to other charitable organizations and is the more common form. Foundations don’t directly perform charitable programs or services either. A private operating foundation distributes funds to its own programs that exist for charitable purposes.
Public Charities
A public charity (versus a nonprofit) is a charitable organization defined by one of the following:
- Is supported by the public
- Exists to support a separate charity
- Exists to measure public safety features
Charities range from hospitals to universities to churches, and they exist to further the advancement of science, public health, helping the homeless, etc. Donations to these organizations are completely tax-deductible.
Free Nonprofit Startup Kit for Church or Nonprofit Leaders and Administrators
If you wonder what takes to start a nonprofit, check out our free Nonprofit Startup Kit. It includes:
- A checklist for your nonprofit status to be approved
- Sample Articles of Incorporation
- A checklist with all documents you’ll need
Looking to learn more? Read about nonprofit donations and how to track them.
23 comments
Clay,
Thanks for sharing. This has been helpful! I’d like to talk to you about a couple things if you have a minute tomorrow 4/22/2020
We are hoping to put together a nonprofit foundation whose purpose is to traina dn equip spiritual leadership for the 21st century.
That’s great, Deborah! Hope the kit is helpful for you!
– Janie
I am considering creating a network for Light workers to have their services in their local communities so that we can all get better exposure. More importantly, that we all shepherd the “masses” away from all these distractions and get back to oneness on this earth like one global community… Be well, both of you.
Hope you find the kit helpful, Justin!
I am in the process of getting my 501C3. I already have my Articles of Incorporation and my Bylaws. My Nonprofit is called Ethnic Uplift and I help Black & Brown youth who are at risk of homelessness or trauma due to loss of a parent due to the police or incarnation and help them to find Ethnic Mentors. My target mentors are Police and HBCU’s.
That’s awesome that you are already working through the process, Melinda. Keep it up!
I wish to start a foundation to help allegiate poverty among the ophans, widows and less priviledged
We wish you well, Dorothy. A great cause!
I have been working with Child Soldiers, Children Accused of Witchcraft and Street Children in the Democratic Republic of the Congo (DRC) for the past 20 years. I worked in the DRC for three years with the United Nations. The 14-year civil war killed many parents and left children in the streets. I have paid for the schooling of 7 young people; they graduated from college and now have their own business. I have an additional 11children in school, and I am providing them with housing, food and schooling.
But I just turned 70, and will stop working soon.
I need assistance with future financial responsibilities by receiving donations. A nonprofit can continue sending the children to school and eventually technical school, for them to become productive members of society. The 501(c)3 was created last November 2020, so I need your guidance to make it a success. The website was created and now needs to be populated with information on the lives of my kids. As far as they are concerned, I am their mother.
Kindly contact me.
Regards,
Haydee Britton
Hi Haydee,
Best of luck on moving forward with your organization! Selecting the members of your board will be an important part of helping your cause be successful. Here is is a recorded webinar on creating a board that may be helpful: https://www.aplos.com/academy/webinars/webinar-find-recruit-train-board-members/.
Hello, I’m a mental health nurse practitioner planning to form a nonprofit organization to provide mental health
and other charitable services on weekdays to the less privileged population. Please advise me on how to start. Thanks
Hi Taiye,
Great! The kit is a good place to start and will provide you with next steps. We hope it helps!
– Janie
I established a nursery and primary school about 15 years ago,we have experienced children losing either of the parents or parents losing source of livelihood which affects the education of the children as they become helpless, hence the desire for an NGO.
Love that you are in a position to help. Keep up the good work!
how do you mix family trust with npo
Hi!
In certain situations, a family trust may be able to apply for 501(c)(3) status, but you will want to speak with an advisor with experience in establishing a trust or foundation. There are restrictions on how funds are used and on management responsibilities, so you would want to make sure those fit with your goals.
I/We have registered Cultural Transformation and Social Justice Center foundation to help community in the following;
1. promote community cohesion
2. A sense of belonging among the community that have lived in conflict prone region. Where ADF & NALU have created fear and disorient some jobless youth hence,
3. To work with professional teachers & volunteers in the community to curb down school absenteeism and dropout rate
4. To lay down mechanism of addressing effects of covid-19 pandemic on education and community business.
5. To support democratic and transparent governance
6. To document community histories for posterity
7. Promote the establishment of community museum
8. to support rural women community self-help projects
9. promote scientific research agriculture and environment conservation.
We therefore need people & Organizations to support us in community mobilization and ideological orientation to have mindset that is global not self-contentedness.
We wish you well in your endeavor!
Hi, I am looking to start a non profit organization to help children and families affected by autism. Any help would be greatly appreciated.
That sounds great! The kit is a good place to start. Hope it is helpful for you as you start the process.
My frlends and I want to start a Foundation to helping a community that struggles .
That’s wonderful! Hopefully the kit will be helpful for you as you get it off the ground.