The Nonprofit Myths That Risk Your Status

Starting a nonprofit sounds noble — but the IRS doesn’t grade you on passion, it grades you on compliance. The fastest way to lose 501(c)(3) status is by buying into myths.

Here are the most common:

1. “Once approved, I’m good forever.”
   Nope. Annual Form 990s are mandatory — miss them and you lose your exemption.
   
   

2. “Board members can be family.”
   Technically yes, strategically no. Too much overlap looks shady.
   
   

3. “I can pay myself whatever I want.”
   Compensation must be reasonable or it’s called private inurement.
   
   

4. “Donations can be spent however I like.”
   Restricted funds must be used exactly as promised, or it’s a violation.
   
   

5. “The IRS won’t check.”
   They do — and states check too. Penalties stack fast.
   
   

The Fix?
Treat your nonprofit like a business with stricter rules. Follow compliance, keep clean books, and protect the mission you set out to serve.

📘 Want to set up or safeguard your nonprofit? [Book a nonprofit strategy session.]