Difference Between Non-profit and Foundation (With Table)

The organization is a much-heard word nowadays. In simple words, it is an organized group of people which aims to help people.

Its main aim is to help less fortunate ones. Based on how they are formed and governed, organizations are further divided into various groups. Non- profit and foundation being two of those groups.

Non-profit vs Foundation

The difference between non-profit and foundation is that non-profit organizations aim to help a social cause and is funded by the government, foundations, etc. Foundation is a charitable organization.

As the name suggests, non-profit organizations are legal groups that are organized and operated for helping out people. To further a social cause. The profit used is solely used for the benefit of others.

Foundation, on the other hand, is a charitable organization that gets its funds from its founders. It also grants funds to the non-profit organization.

Comparison Table Between Non-profit and Foundation

Parameters of ComparisonNon-profitFoundation
DefinitionNon-profit refers to an organization with a social goal. The surplus and revenues generated are used to fund its organization.It is a charitable organization that gets its funds from the ones who had formed it. It could be a business entity or a family etc.
Sources of FundsFunds derived from government, foundations, individuals, etcFunds derived from its founders. It could be a business firm, family, etc.
Private foundations have to rely on private foundations or funds.
GrantsDoes not make grants to other foundations or charities.Make grants to other charities and non-profit organizations.
TaxationExempted from most of the individual and corporate taxes.Private/family foundations are supposed to pay an excise tax of 1-2%.
Financial InformationNPOs share some basic but limited financial information.Since it is self-funded, it solely depends on them. If they want to share the information.
Employee benefitsMost of the staff at NPOs are volunteers. They don’t get paid. They are employed to work together for a good cause.Employees are paid reasonable salaries.
ChallengesIt mostly has to depend on other organizations for funds and donations.They receive funds from the founders themselves.
Board Of DirectorsGoverned by a board of directors for proper functioning.Governed mainly by its donors or a board consisting of family or other individuals.

What Is a Non-Profit Organization?

A non-profit organization, also known as a non-profit institution is a legal entity. It is aimed to work for a social cause and public benefit. They work under various category some of which are- human services, art, culture, public and social benefits, etc.

These organizations require no government council but receive their funds from governments, various institutions, and individuals, etc. The surplus received is mainly funded in its operations. None of the members or employees get the benefit from surplus.

Some major aspects of non-profits are accountability, trust, openness, etc. These are the building blocks for an organization. Every person who has invested his money, time, and faith should get to know about the work. Isn’t it?

What is a Foundation?

Foundation is a charitable organization. It aims to fulfill their purposes by funding or mostly support individuals and other organizations by providing them funds as grants or gifts. The funds received are from the founder itself. Be it some business entity or family, etc.

Types of Foundations-

  1. Operating foundations– It deals with all sorts of charitable work on its own. Distributes funds to its existing programs.
  2. Private Foundations– Owned and managed by the owners of the foundation, be it family or a group of individuals.
  3. Public Foundations– They have to rely upon private foundations and corporations for funding.
  4. Non-operating Foundation– Foundation’s main task is to see after grants and funds for other charitable foundations.

Main Differences Between Non-Profit and Foundation

  1. The main difference between non-profit and foundation lies in the definition. Non-profit is associated with social causes and purposes. Foundation, on the other hand, refers to a charitable organization whose founders are some corporate group, family, or individual.
  2. Non-profit organizations do not make grants to other charities. The surplus received by non-profits is used to fund its operation. Foundations usually make grants to other charities and working organizations.
  3. Employees of non-profit organizations are most probably volunteer. They usually don’t get paid for the work. Employees of the foundations get paid for their work.
  4. The taxation process is quite different in both cases. In the case of non-profit organizations, there is an exemption of tax. Be it individual or corporate taxes. Foundations on the other hand are supposed to pay a tax of 1-2%.
  5. As mentioned in the table, non-profit organizations release some basic financial information to show and verify the substantial support received from the public. Foundations may choose whether they want to give the details of finances etc. this is because they are self-funded.
  6. Funding emerges out to be an issue for non-profits They depend mostly on grants offered by the government, foundations, and various other incorporation. A delay in funds turns out to be a problem. For funds, they don’t have to rely on others. They are self-funded.
  7. For the proper functioning of an organization, non-profits constitute a board of directors. In the case of a foundation, the board constitutes mainly of founders and family members.

Conclusion

Organizations are a major part of society. Also, they make our work easier and helpful to us in various walks of life.

In our daily activities, words like non-profits and foundations are often heard. But most of the time people confuse them. They end up using the terms inaccurately and interchangeably.

No doubt, non-profit and foundations are important charitable organizations, they are much different from each other.

Non-profit organizations have social goals and the surplus is used as a fund rather than benefiting the employees. Foundations, on the other hand, are a different set of a charitable organization whose main aim is to fund and offer grants to other charities and non-profit organizations.

References

  1. https://learning.candid.org/resources/knowledge-base/what-is-a-foundation/