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Most people are familiar with the terms nonprofits, not-for-profits, and for-profits—but do you know how each type of organization operates? While their differences may seem straightforward, each structure has distinct governance, revenue generation, and profit usage requirements.

Below, we break down the three organizational structures, exploring their operational, legal, and financial differences to help you determine which is right for your small business.

What is a nonprofit organization?

A nonprofit organization has a legally approved purpose or social cause beyond profit generation. Its income is not dispersed to any shareholders but is instead invested back into the organization. These IRS tax-exempt organizations include