Nonprofit Terminology

(Ed. Note: This entry is devoted to clarification of terminology. For more detailed information on any of the topics mentioned, see the individual entries.)

The terms Nonprofit, Not-for-Profit, Voluntary and Independent as well as the term Third are used in differing contexts and countries as modifiers to describe what appear to be very similar or related phenomena. These modifiers are used together with words like organizations, sectors, boards, corporations, committees, associations and numerous other objects to describe third sector various forms of uncoerced or independent collective action or cooperation outside markets, states, or households.

The term Nonprofit is most widely used in the United States, Canada, Australia and New Zealand, while Voluntary (as in voluntary organizations) serves the same purpose in Great Britain, and nongovernmental (as in nongovernmental organizations) is preferred in much of the rest of English-language usage throughout the world.

Nonprofit generally alludes to issues of motivation or legal constraint. In some cases, uses of the term intend absence of profit or of profit seeking intent. In the state-level incorporation statutes of most of the United States as well as U.S. federal tax code (Section 501), a distinction is made between profit seeking and profit distribution to owners or shareholders, with legal emphasis solely on the latter. (The widespread public perception that nonprofit organizations cannot "make a profit" is upon close examination a largely meaningless notion, since most nonprofits do not have the accounting procedures ordinarily used in businesses to determine profits, and in most nonprofit settings any surpluses of revenues over operating expenses are simply rolled forward into the next accounting period.)

For a variety of reasons, many contemporary writers and speakers on the subject use the term not-for-profit instead; the middle term for seemingly placing emphasis on collective intent or individual motive rather than legal constraints. Although a few attempts have been made to systematically differentiate the term not-for-profit from nonprofit (Evers and Laville, 2004), in most cases the two terms are interchangeable.

In parts of the world outside the United States (and in particular, continental European countries), the "profit-centered" approach to defining the third sector provokes significant dissent. (Evers and Laville, 2004) United Nations agencies, other international bodies and numerous non-U.S. researchers, theorists and practitioners make more frequent use of the term nongovernmental organizations.

In most cases, nonprofit and nongovernmental describe the same phenomena, differing primarily in the dichotomous contrasts they name: nonprofit entities are set over against market, profit-making or "for-profit" entities, while nongovernmental entities are differentiated from governmental, or public entities.

Bibliography

Evers, Adalbert and Jean-Louis Laville. 2004. The third sector in europe. Northampton, Mass.: Edward Elgar Publishing.