Guidelines for Paying Yourself in a Nonprofit
The IRS allows founders to pay themselves a salary from their charity or non-profit. However, the IRS expects reasonable pay based on comparable salaries.
Some states refer to nonprofits as non-stock corporations. If a nonprofit dissolves, assets then go to tax-exempt purposes after paying debts. Your structure affects staff salaries and grant eligibility. The IRS wants to avoid conflicts of interest. Paid people can’t be directors/officers.
For full-timers, “How much can I pay myself?” gets asked. The law requires reasonableness, not percentage. But even if reasonable legally, donor opinions matter.
Determining Reasonable Compensation
Sanderson of the Wildlife Conservation Society received the highest CEO salary. The IRS judges reasonableness on the basis of comparable organizations. From product sales to fundraising events, charities can make revenue. Volunteers make the margins better for non-profits. You can pay yourself reasonable compensation for services rendered.
Can You Pay Yourself if You Run a Nonprofit?
When you create a nonprofit, you can put yourself in any position you want within the company, with a salary you set. The IRS expects that you’ll pay yourself reasonable compensation for the services you provide.
You’ll need income to live. Paying yourself can seem like a lot when looking at finances. It’s a big step; fundraising becomes higher stakes.