The Simple Guide to For-Profit vs. Non-Profit

One of the main classifications of an organization or corporation is whether it is for-profit or non-profit. These two terms are used so often that many people are unsure of the differences in operation and purpose of the companies. Even many people involved in for-profit and non-profit work may be uncertain of all the implications for each. You may be in this situation, or maybe you’re quite familiar in the area where you work but considering starting the other type of business and feeling a bit lost.

It All Comes Down to Profit

Or, it all comes down to what companies do with their profit. In simplified terms, profit is the amount of money a company takes in, minus operating expenses, taxes, and other required payments. In a for-profit agency, this profit is redistributed to owners and shareholders. In a non-profit, that money is reinvested in helping the company meet its goals. For example, a community service organization might invest it in a project improving local parks or an educational group might buy more books to put into area schools.

Another essential difference is in taxation. For-profits are taxed, while non-profits are exempt from paying taxes on the income they bring in. This allowance lets many important but under-funded non-profits continue operating, and it is considered fair due to limited opportunities these groups have to make money.

Contact Us

If you would like more in-depth information or need assistance forming or running a for-profit or non-profit entity, contact the Austin business attorneys of Slater, Kennon & Pugh, LLP, by calling 512-472-2431 today.