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Does founder own nonprofit?

Your Legal Questions Answered

Does founder own nonprofit?

Can a nonprofit (501(c)) organization have an owner? I started my organization, selected a board, and run the organization, but I am never sure how to answer the question: “Are you the owner?”

No. Nobody owns a nonprofit.  Somebody may control it, but nobody owns it.  Nobody gets dividends from surplus revenue.  Nobody can sell it for personal gain.  Some nonprofits such as social clubs can divide the assets among the members on dissolution, but federal tax law requires that 501(c)(3) charities distribute any remaining net assets for charitable purposes upon dissolution.  (See Ready Reference Page:  What Do We Mean When We Say ‘Nonprofit’?”

Because nonprofits don’t have owners, they usually fail to qualify for governmental small business loans or minority contractor set-asides.  That may not make a lot of sense economically, but those programs are mostly based on ownership.  Commercial bank loans are not so restrictive, but when an application asks about ownership, you have to answer: N/A.

Wednesday, December 15, 2010

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