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Who Owns a Non-Profit Organization?

By August 12, 2021No Comments

I receive calls and emails from many individuals who want to start a nonprofit.  Frequently, these individuals tell me that they want to “be the boss,” or that they don’t want to have to answer to anyone. Nonprofits, according to the IRS, operate to benefit the public good; this means that they do not belong to an individual.  

It is important for anyone starting a nonprofit to understand that they may be the organizational founder, but they do not “own” the nonprofit. It is the view of the IRS that the public owns the organization in exchange for the tax benefits received by the nonprofit. The IRS gives the board of directors the responsibility of ensuring that the nonprofit is being operated in an ethical manner and fulfilling its mission.

I have seen many nonprofits formed with a board of directors that are friends of the founder. While this may be a good starting point for the organization the board needs to be able to separate board responsibilities from friendship.  Often, not an easy task. As the nonprofit grows, it will be important to recruit and attract additional board members who can act in the best interest of the organization.

In addition, the leader of the nonprofit is accountable to those who provide funding for the organization. Grant funds and individual donations are given to an organization for a specific purpose and they must be used for that purpose. If they aren’t, the misuse or misappropriation of funds can actually be a criminal offense.

When starting a nonprofit, founders need to remember that the ultimate purpose for a nonprofit organization is not for their personal benefit but instead is for the benefit of the public. The board of directors is responsible for ensuring that the public’s trust is held.

Questions? Contact us, we’ll be happy to guide you. We have  a short 30 minute training to prepare your board for board service, we would love to provide for your organization.

Sweet blessings, my friend!

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