Must a non-profit organization have elected leadership?

[ready29003]

I am trying to understand my options for creating a non profit organization.

Does a non profit organization have to have a board running it?

How are leaders of a non profit organization selected? Do they have to be elected in some way? Do they have to have term limits?

I guess I am asking for the details regulating the structure a non profit organization must take in terms of how it's operations are controlled.

In other words, if I create a non profit organization, do i have to surrender ultimate control of that organization to a board or to the membership?

[Bill H.]

well, I wrote quite a disertation, but this crappy wannabe-board ate it.

In short:
* a non-profit is a corporation. it issues stock, which you can hold all of. this means that you have absolute control of it.
* like any other corp, it has officers, including mandatory roles (usually according to state): President, Treasurer, & Secretary. If desired, usually, this can be two physical people (President and Secretary), with Treasurer played by one of the other two.
* like any other corp, it will have a board of directors. I believe you can have a single director who is also the sole shareholder in most states for a non-profit, but I'm not certain about that.

If it's your desire to create a real charity which does real good, I suggest you take a different tack and go out of your way to give away control. Go find lots of people who will give time and money to your cause and give them a bit of control in return. Otherwise it'll never grow into anything.

-- Now copying this so I don't have to retype. --

[Bill H.]

Argh, I misspoke above: Most states allow a single person to be both the sole Director, the President and the Secretary for a non-profit.

And if you do involve other people, technically here's how it works: the shareholders elect the directors, the directors appoint the officers, and the officers run the non-profit.

As the sole shareholder, you'll initially recruit and assign roles as needed. And as the sole shareholder, you can add, remove or replace anyone at will.

[RealityChuck]

What?????? I've been on the board of several non-profits. None issued stock. Where did you get that?

It is usually a requirement that a non-profit have a board of directors of some sort. No one on the board can be paid a salary by the nonprofit.

The boards of directors are chosen in various way, but most commonly by a vote of membership. The rules of how they get elected and how they serve are laid out in the non-profit's bylaws.

Now, you can set up a nonprofit where you are the head of the Board of Directors, but they can outvote you, and you can't be paid a salary as part of the position. Ultimate control of the nonprofit lies with the Board of Directors.

[Munch]

Bill, no. Nonprofits most certainly do not issue stock. That's the point of being a non-profit. There are no shareholders to which a profit is given. All profits must be reinvested back into the organization or the organization's mission.

[moriah]

Originally posted by RealityChuck
No one on the board can be paid a salary by the nonprofit.

Clergy are often officers of the board of their churches which are incorporated as non-profits. And the clergy are paid by the non-profit.

At least, that's in NJ. Doesn't state law govern incorporation?

Peace.

[Walloon]

State law governs incorporation.

[Munch]

A quick look through www.guidestar.org shows a considerable amount of charities where board members are paid a salary. If you're wondering if a particular non-profit pays their board members, just ask for their 990s.

[Bill H.]

Gadzooks was I wrong! And I'm on the board of a couple of non-profits; you'd think I'd have known better. Non-profits do not issue stock almost by definition.

However the other stuff I said was correct: If you want to, you can set yourself up as the sole Director in the by-laws, and maintain control. Although again, I recommend you bring in strong people and give up some control.

Sorry about that.

[Munch]

Good form, Bill! I was ready to smack you around a bit!

But for the record, here's the IRS Exemption Requirements (http://www.irs.gov/charities/article/0,,id=96099,00.html).

Noteably:

To be tax-exempt as an organization described in IRC Section 501(c)(3) of the Code, an organization must be organized and operated exclusively for one or more of the purposes set forth in IRC Section 501(c)(3) and none of the earnings of the organization may inure to any private shareholder or individual. In addition, it may not attempt to influence legislation as a substantial part of its activities and it may not participate at all in campaign activity for or against political candidates.

<snip>

The exempt purposes set forth in IRC Section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the prevention of cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening the burdens of government; lessening of neighborhood tensions; elimination of prejudice and discrimination; defense of human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

[ready29003]

thanks everyone.

Could someone please give me the final staight dope on the question:

Can any board members receive a salary or income from the non profit organization?

A legal cite would be great!