How much can I pay myself if I start a 501(c)(3)? (2024)

You can pay yourself a reasonable compensation for services actually rendered. The IRS judges reasonableness on the basis of comparable salaries for comparable organizations, not on the percentage of income of the employer organization that goes toward salaries. There is obviously a vast disparity in types and sizes of organizations that affects the percentage of organizational income that goes to the salaries of the top officers. It is hard to compare organizations on that basis, but relatively more possible to compare the compensation for similar jobs in similar organizations. You ought to follow the “safe harbor” procedures to assure yourself that the compensation is reasonable so that you don’t face a possible claim for excess benefit taxes if you are paid “too much” for your work. (See Ready Reference Page: “Charities Must Avoid Excess Benefit Transactions”) But it does not sound like that will be a real problem in the immediate future.

The language you quote is directed to the prohibition on private inurement or private benefit for the “insiders” of the charity. But founders have to be paid if they work for the organization. The IRS is concerned that any benefit they personally receive is “quantitatively and qualitatively” incidental to the public benefit of the organization’s activities. (See Ready Reference Page: “Charities May Not Confer Private Benefits”) Your reasonable compensation would not seem to cross the line.

Readers thinking of starting their own nonprofit may want to review our Ready Reference Page: "Sole Member Bylaws Can Protect Founder of Nonprofit"

excess benefit transactions

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