The term \u201cnonprofit\u201d conveys the impression that a so-named company cannot \/ should not \/ will not make profits.<\/p>\n
This is not true.<\/p>\n
A nonprofit company can very well make and sell a product or service for a price that exceeds its costs. But it must plow back the excess of revenue over cost – aka profits – back into the company for furtherance of its mission. It cannot disburse the profits to its shareholders via dividends.<\/p>\n
Ergo investors in a nonprofit company can\u2019t get any \u201cprofits\u201d – aka dividends – for the shares they own in the company.<\/p>\n
To that extent, the term \u201cnonprofit\u201d is a misnomer.<\/p>\n
Some people use the alternative expressions \u201cnot for profit\u201d or \u201cnonprofit organization\u201d to convey the true mission of such a company. But, IMHO, even the alternatives\u00a0are ambiguous. I hope someone coins a truly crystal clear term for this class of companies.<\/p>\n
As we can see, the classification is more relevant to investors than customers, suppliers or employees of an NFP \/ NPO.<\/p>\n
If one runs a not-for-profit company as an employee, they can make money via salary.\u00a0Many NFPs pay top dollar to their staff in order to attract top talent. In some jurisdictions, they can also make money via bonus.<\/p>\n
Shareholders normally don\u2019t \u201crun\u201d a company. Therefore, I\u2019m guessing you didn’t think of them when you asked this question. Accordingly, I’ll refrain from the rather murky topic of whether and how they make money.<\/p>\n
\n"Not-for-profit" is a great example of obfuscation. Contrary to what the term suggests, a not-for-profit \/ nonprofit org can jolly well make profits, just that it can't distribute them to its owners. Exhibit A: Kaiser Permanente. https:\/\/t.co\/xLOw3UapwF<\/a> pic.twitter.com\/amS4h52Cq4<\/a><\/p>\n
— Ketharaman Swaminathan (@s_ketharaman) January 28, 2021<\/a><\/p><\/blockquote>\n