Nonprofit and not-for-profit mean the same thing in almost every practical sense. Both describe an organization formed under state law that cannot hand its earnings to owners or shareholders. Neither word is a federal tax category. The distinction that actually governs your organization sits one level up: whether the IRS has recognized it as tax-exempt, and under which subsection of the code.
If you run a small organization and someone tells you that you have used the wrong word on your website, they are wrong. You can go back to the filings that do matter.
The two words, and who uses which
In everyday American usage the terms get swapped freely. Newspapers, state agencies, attorneys and accountants each have a house preference, and none of them is making a legal claim when they use it.
Where a difference is drawn at all, it is grammatical rather than statutory. Nonprofit usually names an entity: the organization itself. Not-for-profit more often describes an activity carried out without the aim of private gain, which is why a church rummage sale can be a not-for-profit activity whether or not anything is incorporated. By habit, nonprofit attaches to charities, foundations, schools and community organizations, while not-for-profit turns up around clubs, associations and member-run recreational groups. That is a convention, not a rule, and plenty of organizations break it.
Kansas is a useful example of how little the wording settles. The state’s own business guidance and its incorporation forms speak of a not-for-profit corporation. Almost everyone working in the sector here says nonprofit. Both phrases point at the same filing with the Kansas Secretary of State.
The question also surfaces on a schedule. Every August 17 is National Nonprofit Day, and the run-up produces a wave of explainers treating the two words as opposing legal categories. An organization that spends that week rewriting its About page has spent the week badly.
The line that does matter: state formation, then federal exemption
Two separate things have to happen before your organization can accept a tax-deductible gift, and skipping the gap between them is the most common mistake new boards make.
- Formation. You incorporate with the state, adopt bylaws and seat a board. At that point you are a nonprofit corporation under state law. You are not tax-exempt, and nothing about incorporation makes a donation deductible.
- Federal exemption. You apply to the IRS, on Form 1023 or the shorter Form 1023-EZ, and the agency issues a determination letter recognizing you under a subsection of section 501(c). Charitable, religious and educational organizations land in 501(c)(3). Social welfare groups, business leagues and social clubs land in other subsections, and gifts to those are generally not deductible as charitable contributions.
- State charitable registration. Kansas moved charitable organization registration to the Attorney General’s office in 2021. Organizations soliciting contributions in the state register there under the Kansas Charitable Organizations and Solicitations Act, with the exemptions listed at K.S.A. 17-1762. Being small does not automatically put you outside the requirement. Check it before your first appeal letter, not after.
Which subsection you hold, and whether the IRS treats you as a public charity or a private foundation, changes what your donors can deduct and how much of their income they can offset. That is a subject of its own, and it is covered in the guide to 50 percent and 30 percent limit organizations.
How do nonprofits make money?
Nonprofit describes what happens to a surplus, not whether one exists. A tax-exempt organization can charge for services, sign contracts, hold investments, employ people, own a building and end the year with more money than it started with. What it cannot do is distribute those earnings for the private benefit of insiders. That single constraint, not a vow of poverty, is what makes an organization a nonprofit.
Revenue arrives from a handful of recognizable places, and most organizations depend on two or three of them rather than all seven.
| Revenue source | What it looks like | What it demands of you |
|---|---|---|
| Individual contributions | Appeals, memorial gifts, recurring donors, bequests | Donor records, acknowledgment letters, a way to take money online |
| Earned revenue | Program fees, tuition, ticket sales, thrift sales, contracted services | Pricing that covers cost; unrelated business income tracked separately |
| Government grants and contracts | Federal, state, county or school district agreements | Reimbursement timing, indirect cost recovery, audit readiness |
| Foundation and community foundation funds | Program grants, designated funds, agency funds | Written proposals, reporting on how the money was used |
| Events and sponsorships | Dinners, tournaments, walks, business sponsorships | Cash outlay before income; volunteer capacity; insurance |
| Investment and endowment income | Earnings on reserves or a permanent fund | A spending policy and someone accountable for it |
| In-kind gifts and volunteer labor | Donated goods, space, professional services, time | Valuation rules and a record of what was received |
Two figures are worth knowing before you build a plan around any one column. Urban Institute research on the sector found that government agencies supplied roughly 29 percent of nonprofit revenue in 2022, which makes public money the largest single stream in the sector and the one most exposed to a budget cycle. And an analysis published by Candid in May 2025, drawn from the 2023 IRS Business Master Files, found that nearly 60 percent of United States nonprofits operate on annual budgets under $50,000. The sector’s typical organization is not a hospital system. It is a handful of people, a checking account and a lot of donated hours.
Surpluses are legal and reserves are prudent. What gets an organization in trouble is private inurement: paying an insider more than the work is worth, or letting a board member’s business quietly benefit from a contract nobody bid. How you record and report all of this is a separate discipline, and it is covered in the guide to nonprofit accounting and the ratios that matter.
How the money moves through a community foundation in Paola
Miami County Community Foundation is a 501(c)(3) community foundation, established in 2007 and based at 702 Baptiste Dr in Paola. It does not run a general grant program for Miami County nonprofits, and no amount of proposal writing will produce one. What it does is hold and manage charitable funds, and that is a revenue channel a local organization can actually use.
An individual, a family, a business or a church can open a fund at the Foundation, and organizations already do. An expendable fund starts at $1,000 and can be spent down to zero, at which point it closes. An endowed fund starts at $10,000, and the balance cannot fall below what was put in; only the earnings are spendable, under a 5 percent spending policy, so a $10,000 endowed fund makes roughly $500 available. The Foundation charges a total fee of 2 percent, split between a 1 percent administrative fee and a 1 percent community support fee that pays for its own operations. Setting a fund up takes seven to ten business days.
Funds held here already carry the names of local causes and organizations, among them the Osawatomie Ministerial Association, the Miami County Sheriff’s Fund, Teammates of Louisburg, Summer Blessings of Louisburg and the Osawatomie Memorial Hall Restoration fund. Once a fund exists, supporters have two routes: the Donate Now button on the Foundation’s site, which opens a drop-down of available funds, or a check made payable to the Miami County Community Foundation with the fund name in the memo line. The Foundation’s funds are held care of First Option Bank. You can see the current list on the Foundation’s funds page.
The Foundation also runs an eCommunity program, a NetWork Kansas designated program operating since 2019, which makes local business loans with the lending decisions made locally and funding of up to 60 percent.
If you are still at the paperwork stage, the nonprofit startup checklist goes step by step, and the fundraising efficiency ratio is a number funders will ask about. The Foundation’s grants for schools, churches and youth groups list who can apply.
So what should you call your organization?
Whatever your articles of incorporation already call it. Match your website, your letterhead and your acknowledgment letters to that name and move on. Nobody who matters is grading the prefix.
What funders, donors and auditors do check is concrete: your determination letter, the subsection you hold, your most recent Form 990, your state registration, and whether the money you raised last year did what you told people it would. Those are the documents that make an organization credible, and none of them care which of two interchangeable words is on your homepage.
If your organization serves Miami County and you would rather hold a fund locally than build your own investment and gift-processing apparatus, the Foundation’s number is (913) 404-7287, and the ways to give page sets out how funds are established. If you are still working out what a community foundation is and how it differs from the foundations that publish grant deadlines, start with how community foundations work.
