For Profit vs. Not for Profit Organizations

Topics: Non-profit organization, Taxation in the United States, Management Pages: 2 (479 words) Published: May 16, 2013
For Profit Vs. Not For Profit organizations:
I would like to start with the more interesting type of organizations to discuss and that is not for profit organization (NPO). The first advantage to NPO is simply tax exemption (IRS, 2012), once an organization meets certain criteria and is approved as a NPO, it doesn’t pay tax on its income. It is very important to understand here that the money saved from not paying tax is reinvested in such organization to either continue providing the type of services it does, or possibly expand to include additional services(“ Costs, Commitment and Locality”, 2004). Yet it is just as important to see the disadvantage behind being an NPO that doesn’t pay taxes and that is the limitations of the investments and expansions such organizations may seek.

Another benefit to NPOs is the fact that they are supported by charities, and to encourage people to donate to these organizations the government treats donations as deductibles, in which the amount donated is not subject to taxation (Cleverley, 2011). I couldn’t find any opposing disadvantage to this one so I guess NPO is winning one to nothing! One the other hand NPO’s employees may not receive high reimbursements regardless how much effort they invest or how much of high income their organization gains (Zhao & Castillo, 2010).

The other type of organizations is for profit ones and we all know that most companies in this time fall into this category. Their structure is fairly simple as whatever the richer the company the wealthier its owners and vice versa (Holly & Shrader, 2004). Of course there is not tax exemption here yet no limitations to what they can invest in. In general I believe both types of organization must exist in every society to provide balance in the economy. I haven’t worked in a NPO but I don’t mind the idea, as once I graduate from medical school and get into a stable life style I wouldn’t mind at all working for one. References,...

References: Cleverley, W., Song, P., Cleverley, J., (2011) Essentials of Health Care and Finance. Jones and Bartlett Learning. Sudbury, N.J.
Costs, commitment and locality: A comparison of for-profit and not-for-profit health plans. (2004). Inquiry - Excellus Health Plan, 41(2), 116-129. http://search.proquest.com/docview/221002298?accountid=40195
IRS. (2012). Exemption requirements - section 501(c)(3) organizations. Retrieved from http://www.irs.gov/charities/charitable/article/0,,id=96099,00.html
Holly, H. B., & Shrader, C. B. (2004). Moral reasoning and ethical climate: Not-for-profit vs. for-profit boards of directors. Journal of Business Ethics, 26(2), 147-167. http://search.proquest.com/docview/198127211?accountid=40195
Zhao, X., Niu, R. H., & Castillo, I. (2010). Selecting distribution channel strategies for non-profit organizations. European Journal of Marketing, 44(7), 972-996. doi:10.1108/03090561011047481
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