Nonprofit vs. Charity: What’s The Difference?

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Alisha John

Nonprofit organizations are born to extend aid to those in need, often through fundraising. The essence of a not-for-profit comes from its commitment to public service and not profit-making. Based on regulations by the IRS, nonprofit and charity organizations have a common aim of giving interest-free support to people in need but differ in terms of missions, target population and services they provide.

Definition of Nonprofit

This has been a controversial issue in the nonprofit field due to the usage of these two words, which have become almost synonymous. Still, nonprofits try hard enough to sacrifice themselves for others’ sake by operating with social goals or setting them as their primary goal. We refer to it as a moral compulsion, differentiating nonprofit activities from charity work.

Nonprofits are defined as entities that do not generate income from their actions. Centred on supporting people experiencing poverty who cannot afford them, these groups provide various assistance such as health care, housing, education and legal aid; the nonprofit sector is a collective term that means many associations are dedicated to public welfare instead of wealth maximization.

For example, it can be mentioned that well-known associations like the Red Cross Association, the American Red Cross Association, and the American Cancer Society exist more for charitable purposes than for money matters.

Definition of Charity

On the other hand, charity is about giving without waiting for anything in return, including the donation of time, knowledge, skills, and resources.

This arrangement applies specifically to charities pushing nonfinancial interests such as hunger eradication and advocacy against any form of homelessness, including human rights violations.

This extensive global network includes over 27K NPOs who often engage in acts of generosity like providing foodstuff, clothes, and other necessities.

Main Difference Between Nonprofit And Charity

Not accepting payment for services, nonprofit boards overseeing operations, lacklustre training, papering volunteers running charities – these features differentiate charitable institutions from NPOs. Nonprofits usually go through a legal incorporation process, unlike charities that may not get this recognition.

Comparison Table Nonprofit vs charity

Nonprofit and Charity Organizations: Main Differences

  • Legal Structure: Nonprofits are usually officially recognized entities whose primary objective is to serve the public. Charities, however, are a subset of nonprofit organizations and concentrate on aiding those in need.
  • Revenue Generation: Nonprofits may generate funds from different sources, such as donations, grants, and program fees, but cannot share among individuals or shareholders. However, charities mainly depend on charitable contributions and fundraising for their missions.
  • Scope of Activities: The activities that nonprofit organizations involve go beyond charity work; they include advocacy, education, research, cultural initiatives, etc. Yet charities focus primarily on direct assistance and support for needy individuals or communities.
  • Tax Treatment: According to IRS regulations, nonprofit and charity outfits have been granted tax-exempt status. Nevertheless, for a charity to enjoy section 501(c)(3) tax-exempt status under the Internal Revenue Code, it must meet additional conditions like providing a public benefit and operating exclusively for charitable purposes.
  • Regulatory Oversight: Regarding regulatory oversight, state and federal agencies govern nonprofit organizations depending on their legal structure and activities. Also, due to their focus on charitable activities and fundraising efforts, charities face greater scrutiny and reporting requirements.

Nonprofit versus Charity Organizations Similarities

  • Mission-driven: Both non-profit organizations and charity groups are committed to fulfilling specific purposes, eventually leading to social change. They aim to improve healthcare services access points, educational attainment levels, provision of social welfare services, or responding effectively towards emergencies within their communities.
  • Volunteerism: Volunteers play a crucial role in running not-for-profit or charitable organizations. They spend some time organizing events so that money can be raised through these events, working directly with beneficiaries, sitting on organizational boards, and being responsible for decision-making processes, thus moving the organization forward.
  • Donor Support: Non-profit organizations and charities generally depend on donors to finance their programs and initiatives. These charitable contributions may come from individual donors, corporate sponsors, or grant-making foundations, which are very important for the sustainability of their operations and the expansion of their impact.
  • Accountability and Transparency: Non-profitable organizations and charity outfits must account for their stakeholders, such as donors, beneficiaries and the general public. They should be transparent and operate with fiscal integrity, which is required since funds have been entrusted to them by public members so that they can be used effectively in realizing organizational objectives and measurable impact.
  • Impact: In conclusion, nonprofit and charity organizations are evaluated based on their effects on specific communities. It could be improving health outcomes, removing poverty, addressing social injustices, preserving the natural environment, etc.; hence, positive change in people’s lives and society constitutes success.


In conclusion, the nonprofit sector faces unique challenges despite the widespread prevalence of organizations dedicated to public service. Nonprofit organizations play an essential role in the public’s well-being by depending on volunteers and prioritizing public service.

Notably, individual and corporate taxpayers contribute generously towards nonprofit firms, indicating that this sector heavily relies on donations, as exemplified by established organizations like the Red Cross Association American Red Cross Association or American Cancer Society; there are also businesses such as Girl Scouts and Boy Scouts, which can be nonprofits, meaning they blend fundraising campaigns and provide invaluable services without a hitch.



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