Should I Start A NonProfit or For Profit Business?

When you think about starting a business for profit or nonprofit organizations you need to think about the main purpose of the organization. Are you building something that is for profit businesses that are going to help your stakeholders generally expect returns or are you going to focus on government grants that will help your organization grow?

There are many ways to slice up a nonprofit corporation with direct financial ownership or if you’re thinking like a business owner you may really just be thinking about the paid employees.

I always recommend thinking about the leadership responsibilities and what you’re trying to accomplish in your business. The key difference between the two types of organizations is the mission statement and whether you’re thinking about venture capitalists or the people that you’re serving. It’s very important to really think about the mission first and then move into the other pieces of why you’re doing what you’re doing.


What is the purpose of the organization you’re starting. The key differences between a for profit business vs. a non profit organization is the purpose. Is it for financial gain and/or financial success or are you really just looking to help a specific set of people. If you want to have one of the many for profit businesses you can do any number of things that would work out for you. At that point it’s just about the money to sustain and build a lifestyle you want – it’s not about the mission. At the end of the day if you’re going to build a business to just earn money – you’re going to have to focus on a company’s product, certain benefits for employees, think about intellectual property and generate revenue from that product. It’s a lot of work and many pieces go into building a financial position that allow you to step away from it all.

What are the advantages and disadvantages of a non-profit business?

Advantages of a Non Profit are

  • Can be very rewarding
  • There is a great sense of community
  • You get to help people or causes you care about
  • There are many opportunities for networking
  • You can learn new skills

Disadvantages of a Non Profit are:

  • Can be very stressful
  • Competition for funding is intense
  • You’re never going to stop thinking about fundraising which goes back to being stressful

What is a nonprofit organization?

A nonprofit organization is an entity that uses its surplus revenue to help achieve its main goals. Nonprofit organizations are typically registered with the state in which they operate, and they are also typically exempt from paying federal and state income taxes. nonprofits are also 501(c)(3) organizations, which means that they have been the IRS as being organized and operated for religious, charitable, scientific, literary, or educational purposes.

What is a for-profit organization?

For profit organizations operate to make cash. Often businesses are for-profit companies which sell products. The owners make a profit through the for-profit business and can pay the shareholders and investor profits. When it comes to starting your own company it is important to take all of the necessary steps. Start filing an entity in the state where it will be operating. Typically as a small business you’re going to setup a LLC or Limited Liability Company and you can check out our guide on how to setup a LLC where we can walk you through the details and make sure you’re one of the local businesses that succeed in your area.


Executive leadership in a for profit or non profit is one in the same. They will both need to raise money and think about income statements while making sure there are educational resources for employees. This goes for nonprofit organizations too – it’s not just about the for profit businesses so when you’re looking for tax exempt status it’s important to realize you’re still going to need to work through building a great leadership team that knows how to have a positive outcome in the end.


If you’re a nonprofit organization it is true that you should have someone on the board that has a sole function of making sure you’re raising funds to make the tax exempt organizations you’re working with feel like they are going to have enough funds to operate. One of the key differences is that you may have a lot more funding from fundraising activities in a for profit business vs. a nonprofit organization.

How can a non-profit get tax exemptions?

Nonprofit organizations can apply for tax exemption from the IRS by filing a Form 1023 or 1024. These forms are used to request recognition of exemption from federal income tax under section 501(c)(3) of the Internal Revenue Code.

To be tax-exempt, a nonprofit must be organized and operated for religious, charitable, educational, scientific, or literary purposes. The organization must also meet certain other requirements, such as having a definite exempt purpose, not being organized for profit, and not engaging in political or lobbying activities.

Applying for tax-exempt status is a lengthy and complex process, so it’s important to seek the help of an experienced tax attorney or accountant. I also recommend just using Northwest Registered Agent who can help you through this process and make sure you’re getting the right status and going through the right process for your organization.


What’s involved in starting a non-profit business?

The steps to start a nonprofit company are the same. You must come up with a great idea, develop a strategy and get funding. A nonprofit business needs to establish a strong vision, incorporate an organization, and file exemption tax forms. Unlike for-profits, a nonprofit is very important for its success. It helps influence public opinion, as well as attract donors. Non Profit companies have to keep an eye out for revenue to maintain accountability for their operations.

What is a nonprofit business?

Nonprofits are companies which focus solely on providing charitable services to the community. Instead of taking profits and giving these to business stakeholders the profit from this business is reinvested in its nonprofit to help its mission.

What is a for-profit business?

A for-profit is a company that has the primary aim of making money and profit. Upon payment to various corporate shareholders, the business distributes its profits as a percentage of all profits.

Can you change your legal entity?

Some businesses begin as legal entities and then decide to switch to another. This is a complicated process and you should really build the organizational culture from the start as one of the non profit organizations or you should focus on being a for profit business. It’s important to start the right way from the beginning and not worry about changing course in the middle of this.

Should I make my business for-profit or nonprofit?

A for-profit could obtain funding from private investors. The investor should give shareholders the equity or dividends and the end result is expected. A non-profit, however, can seek donations from individual donors or from corporate sponsors. If you want to build a new organization you’ll need to think through the sole purpose of what you’re building to determine what you should do next.

Should I turn my business into a nonprofit?

You need to explain to the board that you want to change it. Unless your organization is dedicated to achieving a charitable or social purpose, a conversion to non-profit may be a suitable option for your organization.