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Unveil the mystery of the 501(C)3 salary

2019-05-15 Business No comment

There seems to be some misunderstanding about the term "non-profit" and the federal tax-exempt status. I often hear people ask some questions. “Why do the heads of non-profit organizations receive a salary?” Egypt “Why can non-profit organizations collect money and pay employee compensation?” This is a tricky issue that doesn't need to stop on all wrong toes or be wrapped up in charity work, social work, paid and non-paid employees' political views. Therefore, for the sake of objectivity, let us analyze what it means to become a non-profit organization in the United States.

Although there are many different structures available for duty-free applications, the most common is 501c3. The establishment of the 501c3 non-profit organization can only be used for charitable activities and cannot benefit private shareholders. The US Internal Revenue Service [IRS] oversees and oversees the activities of the 501c3 organization to ensure that its activities are strictly used to advance charitable activities.

However, different perspectives on what constitutes a charitable activity lead to a broad definition of what is considered to be beneficial to society or that has the purpose of promoting social change. For this reason, the federally recognized 501c3 organization is limited in the scope and number of political participation it can undertake, also known as lobbying. The federal government has implemented these regulations to minimize political participation in order to maintain the integrity of charities, while also allowing the promotion of undue population; if not to support established and targeted non-profit initiatives, then The sound may be unheard of.

Successfully forming a non-profit organization and being recognized by the IRS as tax exempt is a process that usually takes up to fifteen months to complete. The application process is very rigorous and usually requires the assistance of a lawyer who specializes in non-profit law. Before an organization can apply for tax exempt status, it must meet certain criteria, including:

· Form an association, trust or company

· Identifiable charitable purpose [classified by the US Internal Revenue Service]

· Exist for at least 3 years

· Submit organizational and financial statements

· There are 5 volunteer board members who meet twice a year.

In addition to the need to commit to a range of long-term goals for achieving tax-free status, non-profit organizations must also adhere to other accountability standards. According to the Bureau of Business Improvement [BBB], the philanthropic accountability standard ensures that each non-profit organization accounts for at least 65% of all costs of the planned activities, no more than 35% of fundraising, and no more than 10 board members.

For the compensation of board members, board members who are paid any type of salary may not serve as the chairman of the board or the treasurer. However, what seems to be really interesting is why board members and planners are first compensated for charity work. The answer is simple – time is worth it. Even volunteer time is calculated at a specific rate and is considered an in-kind contribution. You may not like the fact that someone is paid to organize global efforts to treat cancer or treat poverty, but these are large projects that require a lot of resources to be effective. Without these resources, the reasons for advancing altruism would be very difficult.

Going back to the original question – "Why can non-profit organizations collect money and use the money to pay employees or directors?" – The best way to explain this is to treat non-profit organizations as a business. The overall goal of the business is not to generate profits, but rather to target the target population in a particular service environment. To achieve this goal, the organization must accomplish the goal of needing resources. Resources need money.

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