No individual, founder, or group owns a nonprofit organization. Instead, a nonprofit is a public benefit entity that belongs to the community it serves. Legal, operational control rests with a Board of Directors (or trustees) who hold assets in trust for the public, ensuring the mission is carried out.
Unlike for-profit businesses with clear ownership, nonprofits are technically owned by no one—but that doesn't mean responsibility is absent. In reality, the community is the true owner, and the board of directors serves as its steward.
The board is responsible for policymaking, while employees (and to a certain extent, officers) are responsible for executing day-to-day management to implement board-made policy. However, the ultimate legal responsibility for the actions (and inactions) of the nonprofit rests with the board.
Because no individual or group “owns” a nonprofit, it cannot be sold like a for-profit business. Instead, a nonprofit's assets are considered public assets and must be used to further the organization's mission.
Under IRS rules, for 501(c)(3) organizations, revenue from the nonprofit cannot inure to the benefit of a shareholder or individual. There is an exception, however, that allows the nonprofit to pay reasonable compensation to staff members and others who provide services to the nonprofit.
The "33% rule" for nonprofits refers to the IRS Public Support Test, requiring most 501(c)(3) public charities to show that at least one-third (33.3%) of their total financial support comes from the general public or government over a rolling five-year period to maintain their public charity status, preventing reclassification as a private foundation. This support must come from diverse sources, not heavily concentrated in a few large donations, with individual gifts generally limited to 2% of total support.
What should a nonprofit pay its chief executive? The board of directors is responsible for hiring and establishing compensation (salary and benefits) for the executive director/CEO that is “reasonable and not excessive,” but is also enough to attract and retain the best possible talent to lead the organization.
The answer to this question is unequivocally yes! You are doing work, and workers should get paid! When your nonprofit is brand new, you often cannot afford to hand out salaries to anyone, even yourself. But at some point this has to change - at the least so you do not jeopardize your own financial situation.
The 80/20 rule (Pareto Principle) for nonprofits suggests that roughly 80% of results come from 20% of causes, most commonly meaning 20% of donors provide 80% of donations, but it also applies to programs, volunteers, and marketing efforts, guiding organizations to focus resources on high-impact areas like major donors or effective programs for greater efficiency and fundraising success. It emphasizes donor stewardship, program evaluation, and targeted communications to maximize impact, though some argue for diversifying away from over-reliance on a small donor base.
A nonprofit treasurer is a team member who provides financial oversight for an organization. In most cases (although not all), the treasurer is a member of the board of directors and serves as the financial liaison between the nonprofit's board and staff.
No one person or group of people own a nonprofit organization. Ownership is the major difference between a for-profit business and a nonprofit organization.
Nonprofits face many of the same threats as for-profit businesses, including the potential for lawsuits. If the nonprofit is sued and lacks the proper planning and protection, you could lose your savings, your home and other assets.
A nonprofit can have a president/CEO and an executive director if the organization maintains a specific structure. For example: President/CEO who has full authority for operations. Board with a volunteer chairperson.
Founders Can Be Fired: While founders often hold leadership positions, they serve at the pleasure of the board. The board can replace the founder if they feel it's in the best interest of the organization.
A nonprofit organization is not “owned” by the people who start it, nor their successors in leadership. These individuals operate in a position of trust and accountability for the public at large, who, via government, allow nonprofits to operate exempt from the taxes that for-profit businesses must pay.
The executive director has to answer to the board, making them the highest authority in the nonprofit, even if they aren't directly on the payroll.
What are the most common mistakes nonprofits make? Some of the most common mistakes include unclear missions, weak board engagement, poor donor communication, lack of financial transparency, and neglecting compliance requirements. Many of these issues are fixable with the right tools and support.
So how much money can nonprofits keep? The short answer is that there is no limit to the amount of money nonprofits can keep in reserves. As long as it can be proved that funds are being used to advance the nonprofits' mission, then the money can be directed as the nonprofit wishes.
Although the truth is, nonprofit CEOs can pay themselves a fair salary for the work they do running the organization. While there is no clear answer as to how much you can pay your CEO, it's generally a good idea to have your board of directors conduct an annual review.
The lowest-paid leaders were Dave Kendall, chief officer of the Church of Scotland (£95,000); Saleh Saeed, chief executive of the Disasters Emergency Committee (£99,666); and Khusbu Patel, acting executive director of the International Rescue Committee, UK (£107,000).
A non-profit founder may pay themselves a fair salary for the work they do running the organization. Likewise, they can compensate full-time and part-time employees for the work they do. Non-profit founders earn money for running the organizations they founded.