When businesses and nonprofit organizations join forces, everyone benefits together. Businesses see greater success, and positive change is enacted in the community. The advantages are clear, but it can often be confusing to know which type of nonprofit organization is right for your business partnerships.

When a nonprofit is truly a fit for your business, it will be in alignment with your goals, values, and vision. The challenge is in the selection process: how can you narrow down which relationships will advance your mutual goals?

Often, we distinguish nonprofits by either being a funder or a charitable organization in the nonprofit space. In some unique instances, nonprofits can be both. But understanding the difference between the two is essential. 

Let's first look at what a nonprofit organization is all about. Then we will review how to distinguish between a funding organization and a charitable organization, and when you might approach one versus the other when looking to build relationships for your business.

What is a nonprofit organization?

A nonprofit organization, also known as a non-business entity, not-for-profit organization, is a legal entity organized and operated for a collective, public, or social benefit. The most common type of nonprofit is called a 501(c)3. The IRS states, "to be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual." In summary, revenue from the nonprofit operations funnels right back into the nonprofit operations. 

There are other types of classified nonprofits, like a 501(c)4 or (c)5, but these have different rules and regulations attached to their tax-exempt status. The important thing to remember is, in most cases, when you volunteer or donate to a nonprofit, you are working with a 501(c)3. Both funders and charitable organizations fall under the context of a (c)3. And the next time you hear someone say, "I just partnered with a local (c)3 on food insecurity," you can step away knowing that it is the same thing as saying they partnered with a nonprofit.

What is a funding organization?

Funding organizations provide grants, scholarships, or other forms of support to programs, projects, and individuals in a specific area. These types of organizations could be a private foundation, corporate or community foundation, a hybrid of a charitable organization and a funding organization, or even a government agency.  

An example of a funding organization is the Bill & Melinda Gates Foundation. It is a private foundation working alongside various nonprofits, businesses, and government partners to aid different communities and cultures worldwide. They use their investments to make grants that support multiple partners who can move the needle forward in areas like human health. Likewise, they use the Foundation monies to lead program work in developing countries, where the Foundation focuses on improving people's health and lifting them out of extreme poverty. The Foundation emphasizes education in the US and offers access and opportunities to the most under-resourced communities. 

While you are likely not going to pick up the phone and call the Bill & Melinda Gates Foundation to ask about partnering together on a shared project, if you are interested in their specific grantmaking areas, you could use the Foundation's resources and grantmaking history as a guide for your own process.

Perhaps a more accessible funding organization is your local Community Foundation, like the Community Foundation for Palm Beach and Martin Counties. Community Foundations often have a grantmaking department, and they work with individuals, families, and businesses on their own grantmaking through vehicles like Donor Advised Funds (DAFs). If your business opens a DAF at your local Community Foundation (or other DAF sponsoring organization), not only can you use that vehicle for your charitable giving, but you will also be in a perfect position to find like-minded donors who want to pool funds together on similar projects.

Approach a funding organization to build a relationship for your business.

Often, the challenges in our environment and society cannot be fixed with one project and one funder. Small changes can happen; however, catalytic change takes time and lots of funding power. Depending on your business goals and values, it might make sense to leverage your resources with other funding organizations interested in supporting the same causes. Finding the right partners is, of course, key. So, take your time. 

The first step would be to get clear -- set your own goals and targets for what you want to impact – as this will guide everything from your funding partners to charitable program partners. Once you have a clear vision, you can research different funders in your area. I conduct a mix of research from various sources: people, businesses I know, and online resources like GuideStar (aka Candid). From these resources, you can usually infer who the players are in a focus area and who might be a good funding organization with which to partner.

What is a charitable organization or program?

A charitable organization or program is a nonprofit organization advancing and supporting some area for public benefit. They are the ones "doing the work" in the community. These types of organizations have boots-on-the-ground, and they are often working with local community leaders, advocates, businesses, and residents to provide services to the public. 

These organizations have a vast range of programs supporting different causes. Some examples include: animal welfare, arts & culture, climate change, cancer research, education, environment, human health, human trafficking, homelessness, religion, scientific research, social services, veteran support, and youth development – the list goes on. The area of program support can be broad, like the environment, or more narrowed, like conservation. When looking for a partnership with a program, it is wise to start with your own goals and then lean into researching charitable organizations that work in that same context.

An example of a charitable organization is the American Red Cross. The organization is a very large nonprofit that mobilizes to help alleviate human suffering. During emergencies, you often see American Red Cross volunteers and staff deployed to those areas in greatest need. From hurricanes to wartime, the Red Cross has used the power of volunteers and the kindness of its donors to provide relief to humans around the world during disasters.

Approach a charitable organization to build relationships for your business.

A charitable organization is likely the first area individuals and businesses start looking when they want to "help the community," whether locally or globally. Say, for example, your business wanted to respond to COVID-19. You could do that through food assistance and emergency supplies programs with partners like Feeding South Florida. Or you could aid in closing the education gap or helping children with mental wellness due to COVID-19 impacts on education with partners like Boca Helping Hands and Center for Trauma Counseling.

Just as we discussed researching funding organizations, you can use those same resources here to partner with a charitable organization. Whether you want to partner with another funding organization or not, knowing what you will and will not support are the most valuable pieces of information to a program. It will not only ensure you make a difference in the area you want to impact, but it will also steer you clear of charitable organizations that do not align with your goals.

There are also some unique nonprofit models that are sometimes a hybrid - both a funder and program. Look at the different United Way chapters across the nation. With over 1800 US affiliations, each entity focuses on fundraising, grantmaking, advocacy, and leveraging volunteer commitments to push systematic change in their communities and beyond. Jewish Federations are another example of these larger unique nonprofit models. Often, these organizations are awarding grants or disseminating support to programs at the front lines of the work, and they may also have volunteers or staff working at the front lines. 

Depending on your business goals, partnerships with these types of organizations could create greater leverage for your business while getting your brand in front of more members of your community, as these nonprofits are often well-networked throughout a city, county, or state. Furthermore, it might be worthwhile to partner with these entities on more significant issues that are perhaps more foreign to us both in content and location. For example, if you want to support the people of the Ukraine, you could look at programs like Jewish Federation of Palm Beach County or United Way Worldwide.

We cannot achieve our goals on our own. As you grow your business, think about how you want to help the community and what impact you want your brand to have. Chances are, your business needs a nonprofit partnership or two to solidify and grow its legacy. Each of us plays a specific role in accelerating progress; we need each other. Together, the for-profit and nonprofit worlds can build lasting positive impact.