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Nonprofit compensation

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Nonprofit organizations have one common feature, regardless of their type: No board member, staff member, or other interested party can benefit from the earnings of a nonprofit. Instead, assets are forever dedicated to the purpose of the organization. If the organization dissolves, the nonprofit must transfer the assets to another organization that performs a similar function. Keep in mind that board members cannot be compensated by the nonprofit they govern. This would be considered a conflict of interest and could result in the nonprofit losing its tax-exempt status.

Just because assets are dedicated to fulfilling an organizational mission doesn’t mean that staff are required to work for nonprofit organizations for free. Nonprofits can and should pay reasonable salaries to their staff members, if they have any. But keep in mind the difference between paying a salary and splitting the profits at the end of the year.

Nonprofit Kit For Dummies

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