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Differences between For-Profit and Not-For-Profit Business Sectors

May 16, 2020

Differencesbetween For-Profit and Not-For-Profit Business Sectors

Differences

HumanResources Considerations

Thereis a difference between the workforces of not-for-profit andfor-profit businesses. Those for non-profit firms are usually smallwith the majority of workers being volunteers. The procedures forhiring and firing employees, communication and employee motivationvary between the employed staff and volunteers. On the other hand,the workforce for for-profit organizations is mainly composed ofsalaried and hourly employees, and unpaid interns.

Tax

For-profitbusinesses are taxed depending on their organizational form and size.For example, income from proprietorships and partnerships is treatedby the IRS as personal income. Furthermore, the owners of thebusinesses are held responsible for all the business debts.Not-for-profit firms are allowed by the law, under section 501(c) 3of the tax code to apply for tax exemption (Kaldor, 2014).Individuals and firms that provide contributions to these companiesare also offered tax incentives. Not-for-Profit corporations aretreated as legal entities, and therefore the owners are not liablefor organizational debts.

Similarities

Inboth the not-for-profit and for-profit businesses, the boards selectthe CEOs. They are also responsible for replacing the former if theyare not performing as expected. In addition, the boards ensure thatthe CEO and other senior executives are compensated and rewardedaccordingly to foster high ethical behavior levels. Anothersimilarity is that both for-profit and not-for-profit organizationshave well-outlined bylaws and a set of policies that govern fiduciaryduties of the board of directors. The documents are structurallysimilar for both types of firms. During meetings, both not-for-profitand for-profit boards follow the guidelines provided by theguidelines. Similar board policies cover confidentiality,expectations, indemnification and conflict of interest.

References

Kaldor,N. (2014).&nbspExpendituretax.Routledge.

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