I have been asked to run a nonprofit for a competition dance team. Owners recently sold their for-profit dance studio. They had a nonprofit that operates the dance team. The new owners of the studio also acquired control of the nonprofit and have asked me to be in charge. Can they do that without making me a board member or an executive director? And what does that mean for the new owners who want to know everything about the nonprofit?
The relationship between nonprofit competitive teams and for-profit organizations that teach and promote the sport is one fraught with potential legal issues. The IRS is very wary of for-profit entrepreneurs using the nonprofits for their own benefit. The nonprofits also have difficulty when they require “contributions” from the players and their families to participate in the competitive events. An organization can lose its exemption for doing so. (See Nonprofit Issues®, 7/16/13.) You should be careful about taking a leadership position in the organization unless you can be sure that it can remain on the right side of the thin line that separates a legitimate organization from one that is in big trouble. This is especially true where it appears that the new owners don’t know much about what they are getting in for.
They can obviously ask you to be in charge without giving you a position as an officer or director, but, equally obviously, you don’t have to take the job without getting the recognition and authority you think you need to get the work done properly.