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Not-for-Profit vs. Non-Profit
Answer by John Burnett, BOL Guru
Guru BIOS

Question: We are trying to institute difference between not-for-profit accounts (club, association, leagues, groups) and non-profit accounts (churches, boy scouts, girl scouts, etc). How do we differentiate between these two types. Some organizations are filed at the Secretary of State as non-profits and we thought they would fall into our "not-for-profit" account. We would appreciate some help.

Answer: The terms "not-for-profit" and "non-profit" are generally used interchangeably. The "bright line" you are looking for here is whether or not the group has a legal existence separate from its membership -- whether it has a charter. The first group you've listed is generally non-chartered. It's a bunch of groups of people who get together without formal legal action.

The second list is typically a group of organizations that have received charters nationally or at the state level. They have separate legal existences from their members.

In many states there are laws permitting the chartering of non-corporate associations (almost universally non-profits). In those states, these non-corporate associations are separate legal entities, too.

Groups from either list can obtain non-profit status under the Internal Revenue Code. Whether they qualify for NOW account status will depend upon the paragraph of the IRS under which they receive their letter of determination from the IRS.

First published on BankersOnline.com 4/18/05









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