I have a question about the conflict of interest issue. Three ladies and I would like to incorporate to teach classes together and form a homeschool co-op.
If we are the three board members, then does that mean we can not profit by also teaching? Do you have any article that clarifies that? Thank you!
You asked, “ If we are the three board members, then does that mean we can not profit by also teaching?“
Correct. Board members have a duty of loyalty to the nonprofit and cannot personally benefit from the organization. That is considered
Correct. Board members have a duty of loyalty to the nonprofit and cannot personally benefit from the organization. That is considered a conflict of interest, self-dealing, and possibly inurement. You are not an independent board; there is no one independent on the board to vote to hire the other members as teachers. You all have conflicts of interest.
In general, it is not a good practice for nonprofits to have paid staff also serve as board members. In some states it’s forbidden by law. For example in California a nonprofit cannot have more than 49% of its board be paid staff or related to paid staff.
Here are two articles on the duties of care and loyalty for nonprofit board members
Serving on a Nonprofit Board: What’s Required?
What are the legal responsibilities of homeschool leaders?
You have three choices:
1. Form a for-profit three person partnership. Then you all spit the profits of the partnership as your pay for operating and owning the partnership. You should talk to a small business lawyer and CPA to help you draw up a partnership agreement and understand the tax aspects.
2. The co-op operates as a nonprofit organization and would need to create an unrelated, independent board. Then the board can choose to hire you three as employees (teachers). You would relinquish the control of the group to this board.
3. The co-op operates as a nonprofit organization and you three can serve on the board as volunteers, but then the board must be larger than three people so it can have can vote (without you) on hiring any of you as paid teachers. This may work for one person with dual roles as a board member and teacher, but in general it is not a good practice for nonprofit to have paid staff also serve as board members.
Overall, without knowing more or having a consultation with you, I would recommend Option 2. You three relinquish the control of the group to an independent board who can decide to hire you. Or if that is not what you want, go with Option 3, but at most one of you can also serve as a paid teacher.
Board Training Video set
This video training set on nonprofit boards will help you understand how a board is set up and its duties to he nonprofit it serves.
The three-video set will to train your homeschool group’s board members. Many homeschool leaders have never served on a nonprofit board before so these videos explain the duties of a board, its structure, how to run a meeting, and more. For more details visit: Homeschool Board Training video set
Bonus: Buy before March 31, 2022
If you purchase video set before March 31, 2022 you will be invited to a live Zoom call in to ask for questions.
It’s like having a CPA (Carol) and experienced homeschool leader (BeckY0 for an a hour at no extra charge! The live session will be in early April 2022. It will be recorded and added to the set, so you get 3 videos!