Non profit and profit organization free essay sample

A nonprofit organization is formed for the common good of the public. Nonprofit organizations are usually formed for some specific religious, charitable or educational purpose. A for-profit organization may be formed to conduct any number of lawful business activities. The primary reason to form a for-profit organization is to earn a profit for the owners of the company. We will write a custom essay sample on Non profit and profit organization or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Use of Profits Since a not-for-profit organization is formed to accomplish a specific task, the profits raised by the organization must be recirculated back into the organization so it is able to fulfill its mission. This means that all the money raised by the not-for-profit organization will be retained in the organization. However, funds raised by a not-for-profit organization can be used to pay salaries to employees and to address any other administrative needs. In the case of a for-profit organization, the profits of the company may be distributed to the owners of the company. Establishing a for-profit organization allows a business owner to realize gains from the organization if the business becomes successful. Tax Exemption A not-for-profit organization may qualify for state and federal tax exemptions. The determination is made by the Internal Revenue Service (IRS) as to whether an organization qualifies as a 501(c)(3). A not-for-profit organization in Texas must apply with the Texas Comptroller of Public Accounts in order to be exempt from Texas state taxes. Designation as a 501(c)(3) may provide a not-for-profit organization with an exemption from paying sales and use tax and an exemption from paying property taxes on real estate owned by the not-for-profit organization. A for-profit organization will not be granted a federal or state tax exemption. Furthermore, for-profit organizations are required to pay taxes on property owned by the company. Donations made to a not-for-profit organization with a 501(c)(3) designation are tax deductible for the donor, whereas donations made to a for-profit organization are not tax deductible for the donor. Asset Distribution The assets of a not-for-profit organization legally belong to the organization, while the assets of a for-profit organization belong to the owners of the business. Entrepreneurs that are focused on earning money would be unlikely to invest in a not-for-profit organization due to the restrictive nature of how the company must handle its assets. For example, if a not-for-profit organization dissolves, the assets of the organization will be donated to another not-for-profit entity. If a for-profit organization dissolves, the assets of the company are distributed to the owners of the business according to their ownership interest. Raising Capital For-profit businesses may raise money by offering investors a percentage of ownership in the company. In the case of a for-profit corporation, investors can provide property, services and cash in exchange for shares of the companys stock. Rarely will for-profit organizations raise capital as a result of grants or other solicitations. Not-for-profit organizations raise capital by soliciting donations from businesses and individuals. Government and private grants may be used to fund the operation of a nonprofit organization. A not-for-profit organization may have an easier time getting the public to donate capital in comparison to a for-profit organization due to the perception that the organization is formed to help humanity, according to the SCORE website. Attracting Employees Nonprofit organizations may find it difficult to attract and retain key employees in comparison to a for-profit organization. Not-for-profit organizations typically have fewer resources than a for-profit organization and can not offer the bonuses and high salaries that are witnessed in a for-profit companies. Furthermore, an incorporated for-profit company may attract employees by offering equity in the company, whereas a not-for-profit organization does not have stock options to offer its employees. EXAMPLE: Lets take an example of two hospitals one for non-profit and other profit. Most people don’t think about whether the hospital that they are going to visit is a for-profit or a nonprofit medical institution. However, there are distinct differences between for-profit and nonprofit hospitals, in both business and financial terms. Some of these differences may potentially affect the care you receive and how much you are required to pay for it. Thus, you should understand the differences between a for-profit and a nonprofit hospital. Accepting Patients Nonprofit hospitals are typically considered to accept everyone who comes in the doors, regardless of their ability to pay. Therefore, nonprofit hospitals receive a tax exemption. It is also possible that a nonprofit hospital, especially in a large city, may be busier at any given time than a for-profit hospital. To get an idea of what a large city’s nonprofit hospital is like, you can recall the television show â€Å"ER,† which was set in a nonprofit hospital. By treating everyone regardless of ability to pay, nonprofits provide a needed service. Community Benefits Both types of hospitals provide so-called community benefits, which can include preventative health education, smoking cessation programs, ongoing medical education for staff and college students entering the medical profession, clinical services for low-income families and others, and urgent care/emergency room services. A study by the U.S. GAO showed that there were similar types and levels of community benefit services offered by both for-profit and nonprofit hospitals in the United States; however, nonprofit hospitals may make these events available more frequently and on a larger scale. Monetary Payments One difference is somewhat surprising–nonprofit hospitals may actually pay their doctors and nurses higher wages than a for-profit hospital. A study by the Bureau of Labor Statistics found that almost universally in the United States, workers at nonprofit hospitals were paid slightly higher wages than their equivalent counterparts at for-profit hospitals. This may not translate directly into noticeable differences in your care, but it is  interesting to note–the man or woman checking your blood pressure at a nonprofit hospital may be a little bit happier with the salary than someone working at a for-profit hospital.