Q: I am the founder of a new organization and I have a couple questions. I recruited six board members. The officers are the president, vice-president, and secretary/treasurer. The others are trustees. We currently have no paid staff, although as the president I am fulfilling the duties of an executive director and, according to the bylaws, will be paid once the organization has sufficient funds.
I have learned that the board members that I recruited hire and fire. My first question is, do they need to officially hire me if I am to be paid? And, if so, how do we reflect in the minutes that I am not the board chair, but staff? I prefer to continue using the title of president since that is the title that was submitted with all my original paperwork. Also, at what point should my salary be set? Can that be done now, or do we have to wait until there is more money in the bank? Finally, our 501(c)3 application states that there are no paid staff or paid board members. How do I amend that with IRS?
A: The board should definitely vote – not only on a resolution to have you serve in a staff role but whether to pay you and at what rate. The vote(s) should be recorded in the minutes.
Since your paperwork already lists your title as president, you may retain that without doing anything further. However, it wouldn’t hurt to reference in the minutes your title with the vote acclaiming your staff position. To avoid confusion I would call your board officers “chairman” and “vice-chairman.” This brings up the point that you should have a chief volunteer officer (a board chair) with whom you, as Chief Executive Officer, can partner. And, while there is precedent for your maintaining a vote, I strongly suggest you be a non-voting member of the board. This will help minimize real and perceived conflict of interest (e.g., you shouldn’t be voting on your salary or benefits package or even recruiting board members who will serve as your boss) as well as the degree to which the board abdicates its responsibilities to you as the founder.
While you didn’t ask, I would call the others on the board (the non-officers) “directors.” “Trustee” has a legal denotation that involves more liability than “director.” You should amend your bylaws to reflect all these changes.
As to the issue of pay, I suggest that the board set a salary now. It will help you not only develop a realistic budget for the future but make clear when the organization is ready to start paying you. That point in time will be when the organization has sufficient funds to pay all its programming and operational costs, have at least a minimal reserve to handle the unexpected and still be able to pay you each month. There are a number of sources to which you can go for salary comparables based on the type of organization (e.g., human services, health, arts), its budget and geographical location. These include GuideStar.org, the NonProfit Times and many of the state associations affiliated with the National Council of Nonprofit Associations. Setting the salary rate now also makes it easier to create and implement a plan to raise the money you need.
Finally, with regards to the fact that your 501(c)3 application states that there is no paid staff, this is simply remedied. Merely amend your bylaws in accordance with your bylaws (e.g., adhere to the percentage of “aye” votes required to make bylaws changes) and send a letter to the IRS Exempt Organizations Determination Office with the changes or make note of these on your annual 990.