Can a Nonprofit Founder Take a Salary?

Starting a nonprofit takes grit, determination, and a whole lot of your time, money, and effort. So, I get the question all the time:

Can I make the nonprofit my paid, full-time job?

I wish I didn't have to give you the typical lawyer answer here, but… it depends. Many founders end up in a paid role with the nonprofit, but it's not the right move for every nonprofit or every founder.

Quick Summary

Nonprofit founders CAN earn a salary, but only if the board hires them as a staff person. Unlike a business, the founder doesn't “own” a nonprofit and doesn't have any right to the revenue from the nonprofit.

• Board membership is unpaid volunteer work
• Getting paid means being hired as an employee
• The board has authority over staff, including the Executive Director
• Many founders start unpaid and transition to paid staff as the org grows

Nonprofit Founder versus Business Owner

Here's one important thing to understand – being the founder of a nonprofit is NOT the same as starting a business.

In the for-profit world, when you start a business, it's yours. You own it and all the assets, you have control, and you get to keep any leftover profits. But in the nonprofit world, no one (not even the founder) is the "owner."

Learn about why you need more than one person to start a nonprofit at Founder's Syndrome: How to Avoid the Trap of Doing it All

Being the founder doesn't get you any special perks or powers. In fact, "founder" isn't even a real role in a nonprofit! Founders are usually in leadership positions like President or Executive Director, but the nonprofit isn't yours. No assets or revenue flow back to you as the founder. If you get paid, it's because you are an employee of the nonprofit.

Explore the relationship between the founder and the board in Is There a Nonprofit Founder Veto Power? 

Two Common Paths for Nonprofit Founders

Option 1: Serve on the Board of Directors

Whether your title is President or Director, board service is unpaid volunteer work. Nonprofit board members cannot be paid for their board service. Founders on the board often have another job and do their nonprofit work on their own time.

Option 2: Get Hired as Paid Staff

If you're hired as staff, you'll typically be the Executive Director or have a similar leadership role. You'll be paid for your work, but you answer to the board of directors. The board has authority over staff members, including hiring and firing power over the Executive Director.

Making Your Decision

Can you see why I said "it depends?!" The circumstances matter a lot when you're planning out your role. You'll need to consider things like:

• Who is going to carry out the day-to-day work of the organization?
• Can the nonprofit be run only by volunteers, or will you need staff to function?
• Where are the funds to pay staff going to come from?
• Is it in the best interest of the mission to hire staff, or is there a better use of funds?
• How is this going to work right away? What about in 1 year? 3 years?

Start by getting crystal clear on what your organization actually needs to accomplish its mission. Many founders begin as unpaid board members and transition into paid staff positions once the organization is stable and generating consistent revenue.

No one starts a nonprofit to make millions - unless you're a scammer, but I'm guessing you didn't make it to the end of this article But you DO need to keep the lights on. The key is knowing what's possible, so you can make an informed decision about your role from the beginning.

Learn more about funding as a founder at How to Fund a Nonprofit Startup and Pay Yourself the Right Way as a Nonprofit Founder

FAQ

Can the board pay itself?

No. Nonprofit board members must be volunteers to maintain their limited liability. This is one area that's different from the for-profit world!

How does the board decide what to pay an executive director?

The board must approve the compensation and ensure it’s “reasonable" (aka, similar to what other orgs pay). Overpaying key staff can mean trouble for a nonprofit's IRS status.

What if we can’t afford to pay?

Many brand new organizations are run by all volunteers at first. You can't pay staff (the founder or otherwise!) until there are the funds to do it. Often, founders who ultimately want to be the paid executive director will begin that role when it's financially feasible for the nonprofit.

Let's Get Started!

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