What is the difference between a not-for-profit and a non-profit organisation?
Published: August 19, 2013
Read Time: 2 minutes
There is no difference between a non-profit organisation and a not-for-profit organisation. These two terms are simply different ways of describing the same type of entity.
There are several more terms that are sometimes used to describe these types of organisations and the sector they constitute, these include: for-purpose, third sector, community business, civil society, non-governmental, social-benefit. The abbreviations for these terms are also used, including: NFPs (not-for-profits), NGOs (non-governmental organisations), NPOs (non-profit organisations), NPIs (non-profit institutes). The term non-profit is sometimes also used without the hyphen, as in nonprofit.
Some of these variations in terminology signify a slight difference in the type of organisation; for example, “non-governmental organisation” is frequently used to denote international aid organisations. However, in most cases these terms are used interchangeably.
The above terms should not however be confused with, or considered interchangeable with, legal terms and definitions that when used to describe an organisation connote a specific legal status and consequent approval from a particular government body such as the Australian Taxation Office. These terms include but are not limited to Public Benevolent Institute (PBI), Deductible Gift Recipient (DGR) and charity (see our fact sheet on the difference between charities and other non-profit organisations). These terms should not be used to describe an organisation unless that organisation is legally registered or condoned as such.
Non-profit and not-for-profit are by far the most commonly used terms. There is, however, very little consensus about which is the correct term and many people and organisations are inconsistent in their use. Different Commonwealth Government departments favour each of the terms and some even use both terms interchangeably.
At Better Boards we prefer to use the term non-profit, however, we allow for the terminology preferences of our contributors and hence the term not-for-profit does appear in some articles on our website.
Other terms used refer to a specific type of organisation, rather than to the sector as a whole and speak to the significant size and variety of the non-profit sectors in Australia and New Zealand.
This fact sheet is intended as a simple overview. Non-profit law is incredibly complex and there are many components, allowances, restrictions, exceptions and important qualifications that are not described above. Dedicated legal advice should be sought from a legal practitioner before taking action.
Share this Article
Better Boards connects the leaders of Australasian non-profit organisations to the knowledge and networks necessary to grow and develop their leadership skills and build a strong governance framework for their organisation.
Found this article useful or informative?
Join 5,000+ not-for-profit & for-purpose directors receiving the latest insights on governance and leadership.
Receive a free e-book on improving your board decisions when you subscribe.