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Can I Pay Myself If I Start a Nonprofit Organization?
As an executive director of your nonprofit organization, the funds you are able to raise can determine the budget that is available for salaries. Nonprofit organizations often have tight budgets, making it challenging to pay executive staff for their hard work while often taking on multiple roles. A strong executive team with vision and skill strives to strategically create sufficient resources for the satisfaction of the organization, its founders and its executive team.
Average Executive Salary
Executives with nonprofit organizations can receive salaries. Organizations sometimes ask themselves how much is an appropriate salary for a nonprofit executive, with the concern that they are not paying executives enough. On the other hand, the media has been known to mention that nonprofit salaries are excessive. According to SimplyHired.com, the average salary of an executive director is $60,000. Ultimately, each nonprofit organization and its executive director will need to determine whether or not the executive director's salary is acceptable.
An executive director can be hired to work on a volunteer basis without a salary. As an executive director of a nonprofit organization, perhaps you feel awkward about discussing a salary knowing the organization's budget. If this is your situation, keep in mind that without an appropriate salary for an executive director, you may not be focusing your maximum efforts on the nonprofit and may be depriving the organization of growth potential. It may be worth having a discussion on the matter. Salaries for nonprofit executives can be an inspiration for youths, who may be encouraged to seek leadership positions in the future.
Nonprofit vs. No Profit
The word "nonprofit" can be misunderstood to mean that the organization cannot profit and, therefore, cannot afford salaries. In fact, a "nonprofit" structure means that the business is organized under rules in which profits cannot be distributed to owners. In other words, the organization can profit, but those profits are for the organization itself, not the individuals. Individuals are compensated through salaries.
If you are a director with a nonprofit organization, you can earn a salary as long as it is disclosed to the IRS on Form 990. The organization is required to report the total amount of money spent in the areas of program, administration and fund-raising. The five highest-paid employees and any contracts receiving over $50,000 are also disclosed on this form.
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