What Is the Difference Between Nonprofits and Empowerment Groups?

By Cindy Hill

Nonprofit organizations and empowerment groups can both be effective resources for personal growth and small business development, but there are important differences between the two. The term 'nonprofit' refers to a certain type of government-approved organization structure. 'Empowerment group' is not a legal term, but is used by businesses to indicate their goal of helping participants build tools to face life's challenges.

Nonprofit organizations and empowerment groups can both be effective resources for personal growth and small business development, but there are important differences between the two. The term 'nonprofit' refers to a certain type of government-approved organization structure. 'Empowerment group' is not a legal term, but is used by businesses to indicate their goal of helping participants build tools to face life's challenges.

Nonprofit Organizations

A nonprofit organization is an entity that has applied for recognition as a nonprofit and meets the guidelines and requirements for such organizations set by law in the state in which the organization operates. Nonprofit regulations vary from state to state, but in most jurisdictions, nonprofits can be formed and operated for a wide variety of public-benefit purposes including recreation, education and business or professional societies. Nonprofit organizations may be entitled to certain state tax benefits including exemption from state sales tax on supplies purchased or exemption from property tax on real estate. Consumers often have an opportunity to review information about the nonprofit organization through publicly available annual reports required to be filed with state agencies.

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Tax Exempt Organizations

Some state-recognized nonprofit organizations are also federal tax-exempt entities. These are often called "501(c)(3)" organizations in reference to the section of the Internal Revenue Code that grants tax-exempt status to qualifying organizations. Federal requirements for tax-exempt status are stringent, and consumers can access information about tax-exempt organization finances through required IRS filings. This helps to enhance public confidence about the legitimacy of the organization's dealings and management. Donations made to tax-exempt organizations are tax-deductible. The costs of applying for federal tax-exempt status and keeping up with required annual filings can be steep for smaller, state-recognized nonprofit organizations, and federal requirements such as the prohibition on lobbying prevent some nonprofits from seeking tax-exempt status.

Empowerment Groups

The term "empowerment group," unlike the terms "nonprofit" or "tax-exempt," does not have any legal meaning. Rather, it is a self-descriptive term that a wide variety of entities use to declare their intention of facilitating their clients in developing skills and abilities rather than selling a specific package of goods and services. Empowerment groups may or may not be organized as nonprofit entities, depending on their purposes and business structure. Many empowerment groups, such as the aptly named Empowerment Group in Philadelphia, are nonprofit organizations designed to help small businesses in start-up and development. Other for-profit entities such as mental health counseling services and business consultants help form small groups of clients who can aid one another in their personal or business development and refer to these ongoing meetings as "empowerment groups."

Fees and Services

Nonprofit organizations of any type, including nonprofit empowerment groups, may charge fees for their services just like for-profit entities do. In many cases, business advice from a nonprofit organization or nonprofit empowerment group may be less expensive than that from a for-profit consultancy because a nonprofit does not need to generate profit for shareholders and may have the advantage of lower taxation. Individuals who join together to support one another in reaching their business or personal goals may refer to themselves as 'empowerment groups' and may provide many of the same services as a nonprofit empowerment group; however, the group cannot call itself a nonprofit unless it applies for and receives state nonprofit organization status.

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501(c)(3) Types

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