Compensation and Legalities
When you create a nonprofit, you can put yourself in any position within the company. You can set your own salary. The IRS expects reasonable pay based on comparable salaries.
The rules for founder salaries are the same as for other nonprofits. There’s no guidance on amount. Excessive pay gets penalized.
Your structure affects paying staff and yourself, plus grant eligibility. Paid people can’t be directors/officers.
Steps to Start a Nonprofit
About 1.2 million nonprofits are registered in the USA. Here are six steps to register a nonprofit:
- Identify an important problem to solve.
- Check if a similar organization already exists.
- Register your nonprofit with state and federal governments.
- Understand the difference between nonprofits and tax-exempt groups.
- Prepare your application for 501(c)(3) status.
- Take actions like volunteering to gain experience.
Costs depend on the state, lawyer fees, and whether you qualify for the 1023-EZ form, likely totaling $1000-$2000 for nonprofit status.
Nonprofit Leadership and Structure
The journey to start a nonprofit alone is undeniably ambitious. There are over 10 million nonprofits in the world.
Nonprofit corporations are not designed to make money for owners or shareholders. They are sometimes referred to as non-stock corporations, or 501(c)(3) organizations—depending on their tax status.
How many board of directors do you need for a nonprofit? Three board members are typically required.
Starting a 501(c)(3)
Starting a 501(c)(3) involves a two-step process:
- Incorporating a nonprofit organization at the state level.
- Applying to the IRS for recognition of tax-exemption.
All nonprofits are governed by a board of directors, which is responsible for ensuring the organization’s mission and operations remain in the public interest. A nonprofit corporation also has officers, usually appointed by the board of directors.