Who owns a nonprofit?

Carol,

I have a couple of questions for you.

Ownership of the group: Do I structure this some way like 51% me, 49% between other directors. How to do this and make sure I’m the boss.

Christee

(whose homeschool group is applying for 501c3  tax exempt status with the IRS)

 

Christee,

No one “owns” a nonprofit. The board runs the organization, but a nonprofit does not split up the ownership to individuals/shareholders like a for-profit corporation. In order for you to be the boss, you must be appointed by the board as its president/executive director. The rules for electing the leadership are in the bylaws, including things like how leaders are elected and how long a leader can serve.

Here’s an explanation from The Foundation Group, a nonprofit consulting and advisory business.

Who Really Owns a Nonprofit?

The concept of who owns a nonprofit organization can be hard for some to grasp, especially given that the answer is, “No one…and everyone!”  We encounter this confusion with new clients on a fairly regular basis.  And, given people’s understanding of how basic business operates, it is understandable.

The most popular business entity for nonprofits is the nonprofit corporation.  This type of corporation is different from a typical for-profit corporation or S-Corporation.  Those have shareholders (owners).  A nonprofit corporation has no owners whatsoever, only stakeholders.  A stakeholder is not an owner, but rather someone who has a stake in the successful operation of the organization.  Stakeholders could be members of the nonprofit, or even beneficiaries of the nonprofit’s activities.  One thing stakeholders have in common:  they have no legal ability to profit personally…hence, nonprofit.  A nonprofit corporation is formed to carry out a public purpose, whether that be religious, educational, charitable, scientific or whatever.  It is prohibited from acting in a manner that results in private inurement (profit) to individuals.

Carol Topp, CPA

 

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