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Do we need officers for new nonprofit and do we need to pay them?

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Do we need officers for new nonprofit and do we need to pay them?

I want to start a nonprofit while I can’t work during the pandemic and I need to figure out which positions are paid and which are not. I have been told that I need to have a president, treasurer, and secretary. Would these positions be the mandatory board members? If so, will the rest of the positions be considered paid positions? Everyone keeps saying it depends and some are paid and some are not but they don't give me which ones are and which ones are not. I just need someone to tell me so I can get started.

You don’t have to pay anyone to serve as an officer or director of a nonprofit corporation. In fact, something close to 90% of public charities report that their officers and directors are all volunteers. State nonprofit corporation laws don’t say anything about who has to be paid or how much, although California requires a majority of the board of a charity to be “disinterested,” i.e. not related by family or business ties or paid by the corporation.

It is a matter of state law on the issue of what officers you need. It is not unusual for state nonprofit corporation laws to require a president, secretary and treasurer, or persons serving in those roles with different titles. You can call them the Grand Poobah, Exalter Recorder, and Supreme Miser if you wish, but someone has to serve as the leader of the corporation, someone has to be in charge of the corporate records, and someone has to be responsible for the money.

In smaller nonprofits, the officers are usually members of the board. Our standard form of nonprofit bylaws requires them to be members of the board and allows the board to select additional officers, such as an assistant secretary or assistant treasurer, without regard to whether they are directors or not. (See Ready Reference Page: “Bylaws Function as ‘Constitution’ of Nonprofit Corporations”) We generally believe that the governing body should include the key responsible leaders.

In larger organizations, it is not unusual to have a full-time President who serves as the chief executive officer and who may or may not be on the Board. With a full-time CEO, there is usually a Chair of the Board who runs the board meetings and leads the directors. It is also possible to have a paid chief financial officer serve as treasurer. Under some state laws, a bank can serve as treasurer, although I don’t think I have ever seen it done in practice.

All of this is a long way of saying that as incorporator you can basically set it up any way you want and provide compensation where necessary or appropriate (and economically feasible). But you ought to get professional help when you launch your venture.  “Everyone” may be well intentioned but can’t be much help if they don’t have the right experience.

Thursday, April 16, 2020

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