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Use of Assets
A nonprofit is more restricted in its use of assets or money generated by the corporation than a for-profit corporation. Money made by a nonprofit must remain in the nonprofit sector and be used to further the charitable purpose of the organization. Assets, and money generated from the assets, cannot be used to benefit private individuals. When an insider, such as a board member or executive, personally benefits from the assets of a nonprofit it is called “private inurement” and is illegal.
Money made by a for-profit corporation, on the other hand, can be distributed to stockholders or private owners as dividends, can be invested back in the for-profit venture, or can be paid out in executive compensation. The prohibition against private inurement does not apply to a for-profit corporation.
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