Question

6. What are the benefits of being not for profit/tax-exempt? What are some of the benefits of being for profit?

Answer 1

Road Map

• Basic Introduction
• Difference Between Not fot Profit Organisation and Tax exempt
• Benefits of Being a Not for Profit Organisation and/or Tax exempt
• Benefits of being a Profit Organisation

BASIC INTRODCUTON

Generally, business concerns are established to earn profit(i.e. with profit motive) which though boost up the economic strength of a Nation, but at the same time the matters such as Social welfare, upliftment of backward areas, overcome from the situation of unemployed gets arises. Government of an economy takes various measures by way of providing grants, subsidies etc to the business concerns which are either already established or are likely to be established to cop with these problems.

Being a Not for Profit Organisation do not implies that the organisation can not earn any profit, the profit(if any) earned need to be reinvested in the organisation so as to fulfil the object for which these were incorporated. In nutshell, we can say that these organisations do not have any profit sharing among there members.

Difference between Not for Profit and Tax Exempt

Being incorporated or operating as a Not for Organisation is the primary process whereas to become Tax Exempt is the latter process by way of fulfilling various stipulated conditions.

Hence, Being a Not for Profit organisation and availing Tax Exemptions are though closely related but are still two different processes.

BENEFITS OF BEING A NOT FOR PROFIT AND/OR TAX EXEMPT

Serial Number	Not For Profit Organisation	Tax Exempt
1	Fiduciary responsibility for all the fund To contract Directly with the state you need to be incorporated as Not for Profit Organisation.	Can apply for grant funds directly Almost all foundation or government grants require evidence of federal tax exemption status, absence of such status will require some kind of fiscal condult so as make your application for grants considerable.
2	Reduced postal rates for many purposes	Your group will become More Independent free from potential control of fiscal agents or others
3	In order to avail tax exemption, an officially recognised Not For Profit Organisation can make an application	The independence you gain can be a psychological boost to your organization

BENEFITS OF BEING FOR PROFIT

There are numerous benefits of being a profit making organisation as almost every business is established keeping this(profit) as one of the core elements.

Some of the Benefits of Being for Profit are as follows:-

1. Increase in Shareholders wealth For Instance- Higher earnings will leads to higher shareholder funds(Share Capital + Reserves & Surplus)
2. Diversification(many products or services can be provided by one organisation) of their products or services
3. More Control over business.    For Instance- Shareholders with high value of shares in the business will have higher involvement in decision making as they will get large number of votes that can be casted.
4. Strategic Decision Making For Instance- as the stake of large number of people are considered, hence, experts are employed in the Board of Directors which are suitable to cop with the adverse situations.
5. Liquidity of assets For Instance- in case the business goes under the situation of winding up the assets of the business can be sold to pay off the liabilities(dues)