The IRS says people who have a personal and private interest in a non-profit cannot benefit from the organization. So does that mean you cannot get paid?
Most people never question their ability to get paid by a non-profit organization. However, people who are interested in starting a non-profit and are careful readers sometimes break out in a cold sweat because, according to the IRS, a tax-exempt organization:
“must not be organized or operated for the benefit of private interests, such as the creator or the creator's family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization.”
If anyone ever had “a personal and private interest in the activities of the organization”, surely it is the organization’s founder. But think about it: lots of people can have a personal interest in non-profits-- such as the organization client’s. The IRS did not intend the benefit rue to apply to “reasonable salaries” (nor to services provided as part of the organization’s legitimate tax-exempt function). Note that the paragraph above says “no part of … [an] organization’s net earnings”… meaning earnings after business costs, such as employee salaries.
So, yes, you can absolutely receive a salary from a non-profit, whether you founded it or not – as long as your pay is reasonable. If your salary is substantially higher than it would be at some other similarly-sized nonprofit, you may run into problems with excess benefit transactions.
