The difference between for-profit and non-profit organizations

The difference between for-profit and non-profit organizations

For-profit organizations aim to maximize capital for the company’s owners and stakeholders. The stakeholders are people who own a portion of the company, referred to as shares. Whereas a non-profit organization is set up to meet the needs of society. Whilst they are also companies who often need to pay staff and run successfully, their main aim is not to make money. Their main aim is to provide a needed service. 

Sometimes the lines become blurred, such as with medical care or nursing homes. So, are nursing homes non-profit organizations? The answer is that some are, and some are not. This might be a big factor for you when choosing a nursing home. It may depend on your financial situation but it is helpful for you to know about the fundamental differences between for-profit and non-profit organizations. 

One of the most significant differences is that for-profit organizations are required to pay taxes based on their income, whereas non-profit organizations are exempt from taxes. A non-profit organization promises to spend its money on servicing people or the planet and so they are allowed to use any money they make towards that purpose; they can also claim back the tax that they spend on any purchases. However, although they do not pay tax on their income there are still some taxes they do have to pay, such as property and state tax. 

Another difference is that a for-profit will need to provide an income statement each quarter which assesses how well they are doing financially. Whereas a non-profit will likely provide the public with what they have achieved, any activities they have been doing and what they plan on doing in the future. 

When it comes to nursing homes, 68 percent of all nursing homes in the US are for-profit. For-profit nursing homes are run by corporations and have stakeholders. This can cause a conflict of interest. That being said, sometimes it means that they have more income at their disposal and a better a home is the more likely they are to get new residents- which is good news for stakeholders.

When it comes to hospitals, around 21% are government-owned, 21% are for-profit and owned by businesses and 58% are non-profit. Noticeable differences might be that for-profit or government-owned hospitals can advertise; some may argue that this is a waste of money. However, in the long run, it may bring them more money to spend on patients. 

There is no clear indication of which is better, non-profit or profit for hospitals. Both have been noted as being the best or worst hospitals in the country.

When it comes to businesses such as hospitals and nursing homes the lines are blurred. As even if they are for-profit it is still in their interest to do the best they can for the people they serve. Furthermore, both need to have a clear set of values and missions and should be working towards the health of their residents or patients. When it comes to choosing what is best, it should be looked at on a case-by-case basis.

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