Managing a Nonprofit Corporation

Managing a Nonprofit Corporation

Directors are responsible for the management and operation of a nonprofit corporation. Nonprofit directors can serve with or without compensation. If you decide to compensate directors, remember that compensation must be deemed "reasonable" by the IRS. Directors are under the same constraints of duty and care for a nonprofit corporation as they are for a "profit" corporation.

Most states require three directors. Some states only require one, including:

California
Colorado
Delaware
Georgia
Iowa
Kansas

Michigan
Mississippi
Nevada
New Hampshire
North Carolina
Oklahoma

Oregon
Pennsylvania
Virginia
Washington

When submitting a 501(c)(3) application or other exempt application, keep in mind the IRS generally likes to see an independent, financially disinterested board. This is why the IRS usually requires at least three distinct individuals to serve on the board of directors. It also helps if the directors are experienced in nonprofit or business affairs. But don't worry if you only initially have one director. You'll have the chance to add more directors later.

The officers of a nonprofit corporation run the day-to-day activities. Different states have different requirements for officers, but generally a nonprofit corporation should have a president, treasurer and secretary. In some states, one person can hold every office. In others, one person can hold up to two offices, but cannot be both the president and the secretary. The states where one person may hold every office include:

 

Arkansas
Delaware
Florida
Georgia
Iowa
Illinois
Hawaii
Kansas
Kentucky
Maine

Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Nevada
New Hampshire
New Jersey
North Carolina
Ohio

Oklahoma
Oregon
Pennsylvania
South Carolina
Texas
Utah
Virginia
Wyoming

 

 
  • Definition of a Nonprofit Corporation
    A Nonprofit corporation is a special type of corporation that has been organized to meet specific tax-exempt purposes. To qualify for Nonprofit status, your corporation must be formed to benefit: (1) the public, (2) a specific group of individuals, or (3) the membership of the Nonprofit. Examples...
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  • Reasons to Form a Nonprofit Corporation
    As someone involved with a charitable cause, you might be weighing the benefits of formally organizing your nonprofit. While it might take a little extra work, only with a state-recognized nonprofit corporation can you obtain private and public grants, low-cost postage rates and be exempt from...
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  • Comparing a Nonprofit to an LLC or Corporation
    Nonprofit corporations enjoy the same liability protection as regular corporations and limited liability companies. In other words, your directors, trustees, members, and employees are not generally responsible for corporate debts and liabilities. There are also significant federal and state tax...
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  • Tax Exemption for Nonprofits
    Forming a nonprofit corporation with your state does not automatically qualify you for federal tax exemption with the IRS. Once you have created your nonprofit by filing the necessary documents with your state, if you want federal tax exemption, you must file a separate application with the IRS....
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  • Commercial Rights of Nonprofits
    The fact that a corporation is a nonprofit does NOT mean the corporation cannot sell goods or services for money. In fact, many nonprofits make money selling everything from clothing to medical services. A nonprofit can pay salaries to officers and employees. But, in order to maintain nonprofit...
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  • Managing a Nonprofit Corporation
    Directors are responsible for the management and operation of a nonprofit corporation. Nonprofit directors can serve with or without compensation. If you decide to compensate directors, remember that compensation must be deemed "reasonable" by the IRS. Directors are under the same constraints of...
    read more