Organizations classified as nonprofits work to advance society rather than for financial or personal gain. They frequently follow a corporate structure with a board of directors and executives and are governed by state law. Subsidiaries are permissible for nonprofit organizations, but there are some limitations on how they can be set up and run.
Subsidiaries can be created by nonprofits for a variety of purposes, including the implementation of a particular program or activity, the provision of services in a new location, or the diversification of their revenue sources. It is possible for subsidiaries to be set up as independent legal entities, such as corporations or limited liability companies, or they may be unincorporated firms that are entirely owned by the parent nonprofit.
Nonprofits, however, must make sure that their subsidiaries adhere to their objectives and tax-exempt status. In order for the subsidiary to fulfill the parent organization’s tax-exempt purposes, the parent nonprofit must continue to have control over it. The parent nonprofit must also make sure that all money made by the subsidiary is used for charitable, not personal, purposes. Who Has Authority Over a Nonprofit Organization?
A board of directors oversees the day-to-day operations of nonprofit organizations and makes sure that the organization fulfills its objective. Typically, the board of directors is made up of unpaid volunteers who have a fiduciary responsibility to act in the organization’s best interests.
While it is not illegal, it is generally discouraged for spouses to serve on a nonprofit board of directors. Conflicts of interest between spouses could affect how the board decides to proceed. Additionally, having spouses on the board could give the impression that something is wrong. Can the President of a Nonprofit Organization Also Serve as Treasurer?
Although it is not illegal, it is generally discouraged when the president and treasurer of a nonprofit are the same person. The separation of the president’s and treasurer’s responsibilities promotes proper control and checks & balances. Furthermore, having one person do two duties could give the impression of improperness. Can the head of a nonprofit organization be paid?
A nonprofit president may receive pay, but it must be fair and appropriate given the services rendered. The Board of Directors must also consent to the salary, and it must be disclosed on the organization’s Form 990, a public record submitted to the IRS.
In conclusion, organizations are permitted to have subsidiaries, but they must make sure that these companies are consistent with their objective and tax-exempt status. There are no legal restrictions on spouses sitting on a nonprofit board of directors or the president also serving as treasurer. Nonprofits are managed by a board of directors. A nonprofit president may receive pay, but it must be fair and approved by the board of directors.