For-Profit and Nonprofit Organizations

There are several differences between for-profit and nonprofit organizations. While the aim of for-profit
organizations is to maximize profits and forward these profits to the company's owners and
shareholders, nonprofit organizations aim to provide society's needs. Non-profit organizations have no
owners. Instead of maximizing profits, which means maximizing revenues while minimizing costs, they
are more concerned with ensuring the revenue is greater than costs. This ensures that the nonprofit
can still provide society's needs.

Tax Exemption
For-profit organizations must pay taxes on their net income, but this is not true for nonprofits if they
are exempt from taxes. If a nonprofit's goal is to increase the welfare of society, governments tend to
help this cause by minimizing the nonprofit's costs as much as possible. It is these differences between
the two types of organizations that have an impact on each type's accounting methods. When a tax-
exempt nonprofit submits their accounts to the IRS, they are only assessed for taxes that are
secondary to