Commercial Business VS Non-commercial Business – The Differences

Commercial Business VS Non-commercial Business

Commercial businesses provide services and sell products to consumers or other businesses to make a profit. They have shareholders and pay taxes on the profit made. Non-commercial businesses, on the other hand, are owned by National, State, or Local Governments, and they also provide services and sell products to consumers and other businesses.  Non-Commercial businesses make reserves and pay employees taxes.

Key Takeaways

  • A commercial business is any business that is engaged in business activities to make profit
  • A commercial business mainly focuses on delivering services and products for profits
  • Some common examples of non-commercial business are charitable corporations and membership corporations
  • Most nonprofit organizations serve the purpose of providing aid to charities and society
  • Usually, the operations of a non-commercial organization is supported by the funds or profit made by the organization

Commercial Business 

Commercial Business 

A commercial business is any business that relates to commerce activity. The word “commercial” itself means an entity engaged in business activities with the primary aim of making profits. Unlike non-commercial businesses that are operated by government, charities, non-profits agencies, commercial business focuses on delivering services and products for profits. It is an activity executed by organizations to deliver services and goods for an economic profit. This type of business includes the activity conducted by companies outside of manufacturing or producing goods and services. 

Commercial business can also incorporate the utilization of business or land for saleable purposes, such as retail stores. One can say that a commercial business is a for-profit activity that might include selling books and other writing materials in a bookshop or selling cooked food in a restaurant.  Besides, marketable activity can include the sales of goods, services, products, or raw materials.

What Is A Commercial Organization? 

A commercial organization is any group to make an economic profit with a set of prerogatives, aptitudes, and resources in place. Employees and shareholders are paid from the residual income left after removing expenses on capital and other costs. The residual income left after removing expenses can also be reinvested back into the company at the discretion of the administration. To collect federal taxes, there are about six categories of business organizations. A commercial business is either owned by a private individual or public/government. We can break this down into different classifications, including corporations, partnerships, limited liability companies, and many more.  

Classifying a commercial organization is expansive because the classification can include small businesses to private and public limited businesses. However, you should note that charitable organizations aren’t categorized under commercial business. Unlimited liability organizations, including general partnerships and sole proprietorships, will hold business owners responsible for any loss, debt, negligence, and any negative impact on the business. There’s a total and unlimited personal liability for each partner in a partnership business. However, limited liability entities are marketable corporations that limit the liability of business owners to their capital in the business. This classification includes LLCs, limited liability companies, and corporations. 

The table below contains the major differences between a commercial business and a non-commercial business. 

Parameters Commercial Business Non-Commercial Business 
ClassificationsCorporations, partnerships, limited liability companies, and many more. Charitable corporations and membership corporations
Examples Private restaurant, retail store, bookshop, sales of goods, services, products, or raw materialsChambers of commerce organizations, fraternal organizations, civic leagues, Howard Hughes Medical Foundation, and the Bill and Melinda Gates Foundation

Non-Commercial Business  (Otherwise Known As Non-Profit Organization) 

Non Commercial Business

A non-commercial business is any business organization that doesn’t have commercial objectives. Take, for example, a community radio station that doesn’t run advertisement and comprises of individuals volunteering their efforts to air a variety of radio programs that is advertising-free is a typical nonprofit organization. Such community radio station is accommodated in the United States specific grouping of NCE, non-commercial educational public radio stations.

Most nonprofit organizations serve the purpose of providing aid to charities and society. If they are colleges or universities, they will offer educational and academic guidance. And if they are churches or mosques, they may offer spiritual guidance. Working as an advocacy agency or a trade association, there is some nonprofit organization that serves a special group of people. One thing you should understand about nonprofit organizations is that they make use of their earnings to serve their immediate society.

They are not organized to make an economic profit which will be distributed among the employees and shareholders.  Instead of making a profit for the founders, owners, or shareholders of the organization as it is done in a commercial organization, these organizations are built for mutual or public benefit. Normally, a nonprofit organization takes any form from conventional charities of feeding the poor to labor unions, large universities, self-help groups or museums, and hospitals everyday neighborhood associations visiting orphanages, establishing and local churches. There are five common characteristics of non-profit organizations include; 

1. They are organized

2. Private (distinct from the government) 

3. Self-governing 

4. Non-profit-distributing

5. Voluntary

Non-commercial organizations or businesses generate profits, but the profits can’t be distributed among the employees, business owners, or shareholders. The operation of the organization must be supported by the funds or profit made by the organization. 

The Internal Revenue Code distinguishes two main categories of the legal form of nonprofit organizations, even though they can vary as well. The two major types include; the 501 (c) (3) and the 501 (c) (4) organizations. The 501 (c) (3)s otherwise known as public benefit organizations are qualified for tax-deductible contributions from in-house members or associations even though the two major legal forms are exempted from paying taxes. 501 (c) (4)s includes organizations like advocacy organizations, social welfare organizations, and many civic leagues that have social and political objectives. One typical example of a nonprofit organization with the incorporation of both types of 501 (c) organizations is Planned Parenthood. 

Using the field of interest, you can categorize nonprofit organizations. There is a classification of 10 groups by National Taxonomy of Exempt Entities Core Codes. They include; arts, culture, and humanities as group one,  education as group two, environment and animals as group three, health as group four, human services as group five, international, foreign affairs as group six, public, societal benefit as group seven, religion-related as group eight, mutual/membership benefit as group nine, and the tenth group is unknown, unclassified (Ott and Dicke 2016).

Non-Commercial/Non-profits Organizations In The United States

In the United States, there are more than 1.5 million registered nonprofit organizations according to the stats from NCCS) the National Center for Charitable Statistics. These organizations include public charities, private foundations, and many other types of nonprofit organizations. Chambers of commerce organizations, fraternal organizations, and civic leagues are the other types of nonprofit/non-commercial organizations that are included. Furthermore, we found out that there are more than 11.4 million workers in the nonprofit workforce of the United States. Lastly, a quarter of all adults volunteer to offer monetary and non-monetary support to any type of nonprofit organization in the country. 

Successful Non-Commercial/Non-Profit Business Examples

The United States has the largest and most successful nonprofit organizations in the world. For example, the Howard Hughes Medical Foundation with an endowment of $11 billion, and the Bill and Melinda Gates Foundation with an endorsement of $27 billion are the most successful nonprofit organizations in the world and they are both located in the United States. The British Welcome Trust, known as a “charity” n British is located in the United Kingdom, and it is the third-largest and most successful nonprofit organization in the world. 

The three organizations listed above do not have Universities included. They are formed to help society as a nonprofit organization. For a better understanding of non-commercial/non-profit businesses, we’ve listed some of the well-respected, nonprofit corporations in the world today. They include Amnesty International, GlobalGiving, GGIP, The Nature Conservancy, PBS, Better Business Bureau, ChildVoice International, Red Cross, The Rotary Foundation,  Big Brothers Big Sisters of America, Women’s Voices, Women VoteWorld Wildlife Fund (WWF), YMCA, Boy Scouts of America, Cato Institute, Special Olympics, and UNESCO. 

Types Of Nonprofit Organizations

There are two major types of non-commercial business and they include charitable corporations and member corporations. These two types of non-commercial businesses have distinct responsibilities, so it will be nice to understand their differences. A charitable corporation is organized mainly to conduct activities that are meant for the benefit of the public. Generally, this type of non-commercial business seeks contributions from the surrounding society and be granted by the government some percentage of its yearly income. Besides, a charitable corporation can register as a charity within the meaning of the Income Tax Act.

On the other hand, a membership corporation is organized to conduct activities that are meant for the benefit of its in-house members. Unlike a charitable corporation, in-house members support the organization through fees, donations, loans, and many more. Typical examples of membership corporations are golf clubs, social clubs, special interest organizations, daycares. Please note that there are in-house members in the two types of corporations. You can say that having a member makes a corporation a membership corporation because there are also members in charitable corporations. 

The Bottom Line

Commercial businesses relate to anything that has to do with commerce or business. They are mainly organized for selling goods and services to consumers and other businesses for profit which is shared among the employees, business owners, or the shareholders. Non-commercial/non-profit organization, on the other hand, doesn’t have the objective of selling goods and services for profit. They make a profit, but it can’t be shared among each member of the organization. We’ve concluded this article. We hope you now know the difference between non-commercial and commercial business. 

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Last Updated on October 19, 2022 by Magalie D.

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