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? What’s the difference between a nonprofit versus a charity, and how do foundations fit in? Sometimes it’s hard to intuitively know the difference between these organizations. Below, we’ll go over the basic nonprofit, and then distinguish foundations from charities.
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 are organizations that did 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.
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 eBook For Church Or Nonprofit Leaders And Administrators
Some of the largest capital investments nonprofits and churches have is their investment in their property, furniture, vehicles, and other equipment, like computers. These are known as fixed assets. When it comes to managing, tracking and depreciating them, you want to be sure you are doing all that correctly.
Fill out the form below to get your free copy of the Fixed Assets Management for Churches & Nonprofits eBook. It will guide you through what a fixed asset is, and how you and your organization can track, manage, and depreciate it throughout the course of its useful life.
Learn how to:
- Calculate and compare different methods of depreciation
- Allocate fixed asset costs according to GAAP
- Maintain a record of depreciation for each fixed asset
Looking to learn more? Read about nonprofit donations and how to track them.