The phrases “charity” and “nonprofit” are sometimes used synonymously. But there is a distinction between the two that must be recognized. A charity is simply a specific kind of nonprofit organization; however, not all nonprofits are charities. Nonprofits are businesses with a clear mission who do not give their revenues to owners or shareholders. On the other hand, charities exist to serve the general public and are given tax exemptions by the government.
The objective of a charity versus a nonprofit organization is one of the key distinctions. Missions for nonprofit organizations can range widely, from advancing the arts to offering services in education or healthcare. However, charities have a clear focus on serving the public good. This can involve providing food for the hungry, a place to stay for the homeless, or funding for medical research.
Their tax situations are another important distinction between the two. The government grants charities tax-exempt status, which exempts them from paying federal income tax on donations or other income. Even while nonprofits may qualify for tax exemption, this status is not given to them by default. To be accepted, they must submit an application and fulfill specific standards.
There are various ways to raise money to launch a nonprofit organization if you’re interested in doing so. One typical strategy is to ask people or groups that support your cause for donations. You can also submit a grant application to foundations or government organizations. Holding fundraising activities, such a concert or charity auction, is an additional choice.
You can search on the IRS website or a third-party website like Guidestar for an organization’s 990 form, which is a tax report submitted by nonprofits. You can ask for a copy of your organization’s 501(c)(3) determination letter—the record that certifies tax-exempt status—from the IRS by submitting Form 4506-A.
In conclusion, despite the fact that the terms charity and nonprofit organization are frequently used interchangeably, they have significant distinctions. Governmental tax-exempt status is given to charities, a particular category of nonprofit organization that exists to serve the general public. Nonprofits must qualify for tax-exempt status and may have a variety of missions. You can ask for donations, submit grant applications, or organize fundraising activities to raise money to launch a nonprofit. You can ask the IRS for a copy of your 501(c)(3) determination letter or to see an organization’s 990 form.