What is the legality behind a non-profit owner or director earning money?

I’m in the midst of starting a non-profit business and im aware that the company will be able to pay “employees” but is there a way i could act similarly to an employee in this scenario. I will be the only one working with our project initially and although i do have a job with steady income, I would foresee it beneficial in the future to rely solely on the non-profit business to support my lifestyle.

Asked on September 7, 2011 under Business Law, Kansas

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

For an entity to qualify as a tax exempt non-profit organization it must comply with existing Internal Revenue Service requirements for such. Primarily the organization must be for charitable purposes and typically must be a corporation.

Employees of the tax exempt organization that has been qualified as such are entitled to be paid under IRS guidlines and regulations. Otherwise there would really be no tax exempt charitable organizations.

If you want to create a tax exempt organization, you should consult with an experienced tax attorney and/or certified public accountant for its creation and requirements. From what you have written, you can act as an employee for pay for the tax exempt organization. The organization would pay no income taxes, but you would based upon what you receive as an employee of it.


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