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Roger, Attorney
Category: Business Law
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Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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Can a Board Member of a 501(c)(3) organization do private business

Customer Question

Can a Board Member of a 501(c)(3) organization do private business for profit within that organization without the Board's knowledge?
Submitted: 5 years ago.
Category: Business Law
Expert:  Roger replied 5 years ago.

Hi - my name is Kirk and I'm a Business litigation attorney here to assist you.


Non-profits can make money/profits just as a regular business can. However, the difference between a non-profit and for-profit company is how the profit is treated.


For-profit businesses distributes its gains to the owners or shareholders. On the other hand, non-profits reinvest the profits back into the organization for use under its tax-exempt purpose.


Thus, the non-profit making money is not the problem. However, if the board member is conducting the business without the non-profit's knowledge and if the board member is not turning over the money from the business to the non-profit, that is illegal and even potentially criminal.



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