Every individual, community and nation will always have opportunities for growth. That is why so many strive to make a difference in our community by establishing organizations where profit is not the primary focus. But what kind of organization should you establish – a non-profit, a foundation, a non-for-profit, a charitable. Is there really a difference?
A non-profit is an organization that furthers a social cause and/or provides a public benefit. These companies can also be called NPOS or 501(c)(3) organizations. When donations are made to these corporations they are typically tax-deductible. Non-profit organizations pay no tax on received donations or any other money earned. Their funding comes from revenues.
On the other hand, foundations support charitable activities. They make grants to unrelated organizations. Foundations also may have charitable activities or programs directly for their organization. Foundations can be public or private depending on where they receive their funding. Public foundations are those that raise their funds from the community. While private foundations collect money from families or corporations.
These organizations are different in many ways. If you are trying to decide on which organization to establish, think about who and how you want to serve. Nonprofits have a specific goal where the funding goes. Furthermore, a non-profit must serve the public in some way. Nonprofits don’t make grants while foundations do. A non-profit’s financial and operating information must be published. Finally, non-profits cannot be political in any way. In comparison, to be considered a foundation it must aid charitable needs. The foundation will need a board of directors to make the financial distribution decisions to include the creation and issuance of grants. Lastly, foundations have to promote a cause.
There are also other distinguishable types of organizations: a non-for-profit and a charity. Here are 3 keys to understanding them all.
- A non-for-profit does not need to have a social benefit or provide goods and services. They are also considered recreational organizations.
- Charities, like foundations, can make grants. They also provide and help raise money for those in need.
- In order to be a tax-exempt organization of any kind, you need to request such status. You also must fall into a specific category as defined by the Internal Revenue Service (IRS).
At Fields Law, we can help you start the right organization to support the cause you are passionate about. Remember, Fields Law is more than just legal professionals, it’s a partner in your future.