# Not-for-Profit vs Nonprofit: What Is the Difference? *Published 2026-06-02* **Direct answer:** In everyday American usage the terms mean the same thing, but nonprofit usually describes an organization serving the public (a charity, foundation, or church), while not-for-profit often describes one serving its own members, like a sports or social club. Some states, notably New York, use not-for-profit as the formal statutory name for every nonprofit corporation, which is why the terms blur. > The two terms get used interchangeably, but they carry different shades of meaning, and the IRS uses neither one the way most people expect. Ask whether an organization is a nonprofit or a not-for-profit and most people will treat the question as a coin flip. In everyday American usage the two terms mean the same thing: an organization that exists for a purpose other than making money for owners. But the terms do carry different shades of meaning, and neither one is actually a federal tax status. What "nonprofit" usually means A nonprofit organization is typically a corporation formed under a state nonprofit statute for a public purpose: charity, education, religion, science, or similar. The defining legal feature is the nondistribution constraint. A nonprofit can earn revenue, hold reserves, and pay reasonable salaries, but no part of its net earnings may be distributed to insiders the way a business distributes profit to shareholders. Charities, foundations, churches, and most of the organizations people donate to are nonprofits in this sense. What "not-for-profit" usually means "Not-for-profit" is often used for organizations that serve their own members rather than the public: a recreational sports club, a hobby association, a social club. Some state statutes, notably New York's Not-for-Profit Corporation Law, use "not-for-profit" as the formal name for every nonprofit corporation, which is a large part of why the terms blur. The practical distinction most commentators draw is public benefit (nonprofit) versus member benefit (not-for-profit), and it affects which federal exemption category fits. What the IRS recognizes The IRS does not grant "nonprofit status" at all. Incorporation happens at the state level; the IRS grants federal tax exemption under section 501(c). Public charities and foundations qualify under 501(c)(3), which also makes donations tax deductible. Social clubs fall under 501(c)(7), civic leagues under 501(c)(4), business leagues under 501(c)(6), and so on. A member-serving "not-for-profit" club is usually exempt, but donations to it are usually not deductible. Our post on what 501(c)(3) means covers the charitable category in depth. Which one is your organization? If you are forming an organization that will serve the public and seek deductible donations, you are building a nonprofit public charity: a state nonprofit corporation plus IRS 501(c)(3) recognition plus charitable solicitation registration in the states where you fundraise. The full sequence is in our guide on how to start a nonprofit, and the state-by-state fundraising rules live in our charitable registration hub. If you are forming a member-serving club, the state incorporation step looks the same, but the federal category and the fundraising rules differ, and getting the category right at the start avoids an amended application later. --- ## How to cite this page Cite as: "Not-for-Profit vs Nonprofit: What Is the Difference?." Cornerstone Licensing. https://cornerstonelicensing.com/blog/not-for-profit-vs-nonprofit Published by Cornerstone Licensing. When quoting figures or legal requirements, link the canonical URL above and note the last-updated date (2026-07-31). The full content index for this site is at https://cornerstonelicensing.com/llms.txt.