November 30, 2020

What You Should Know About Nonprofits

By Yorachel

Corporate social responsibility is a proven enakbet strategy that engages both employees and customer base. By choosing brands and organizations that align with their values, consumers are voting with their wallets.

A 2020 global study showed that consumers are four to six times more likely to trust, buy and protect a purpose-driven company. This consumer behavior encourages companies to make a difference in highly competitive markets.

However, business owners are conflicted about how to make contributions and how it correlates to their profit. Should you start your business as a for profit or nonprofit? For a better understanding, read on to learn what’s considered a nonprofit charitable organization.

For profit vs. nonprofit
For profit and nonprofit have different structures and desired outcomes. Here we’ll compare and contrast these two business models.

Funds
While both aim to increase profitability, what differs is where the funds come from and how they are distributed. A for profit attracts investors who are interested in a return. Any revenue made will, in turn, go to said investors, as well as the owners and executives of the for-profit organization.

In a nonprofit, the revenue is geared toward the public and the organization’s mission. Obtaining loans and investors is more of a challenge since it doesn’t align with their goal. That is why nonprofits receive funding in the form of grants, sponsorships and donations.

Paperwork
Each business model has its fair share of paperwork. The standard corporate taxes and statements apply to a for profit, but nonprofits undergo public scrutiny and tax exemptions. Nonprofits are registered as a 501(c)3 organization, which allows them to provide services without being taxed. Any contributions made to the nonprofit are considered tax-deductible.

Due to public scrutiny, there’s more pressure for nonprofits to disclose transactions and activities. Not only would it have to generate enough revenue to accomplish its mission and keep the organization running, but it has to exceed expenses when serving the public.