I have a few questions regarding a 501(c)'s, more specifically, how to structure one and how to compensate for one.
3 friends and I want to start a non profit, so 4 people total. I can't seem to figure out how to split up Executive Director, board members, and FTE's. I was reading on 501c3.org's website that they recommend less than 50% of paid employees be board members, so that would roughly leave 1ED, 2 BM, and 1 FTE. Does that sound about right? could I get away with 1ED and 3 BM's? If the ED controls the board members salary and the BM's control the executive salary, then the arm's length rule would still apply wouldn't it? (Also as a side question, everyone would be a W-2 right?).
The last question, and definitely the more sticky question. Compensation. The non-profit's revenue will be generated from donations, events, and membership dues. I'm very hesitant to put a linear salary on the positions like 501c3's website recommends as I have no idea how many members we will garner in the first year, or the amount that the events will generate. I know 501c's website specifically calls out % based salaries, but i really do not see any other way to do it.
What if we paid quarterly, but set caps as to how much each person can earn. I just don't want to promise people $3-5k a year in compensation and then that kills the non profit as it can't cover its own expenses in the first year. I know the rules say, that as long as the employee's compensation does not affect the normal operation's of the NPO, it should be ok, but I definitely wanted to talk to you guys (I imagine a few of you have set one of these up) before I went any further.