Community Theater Green Room Discussion Board: Husband-Wife non-profit?

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   I've been reading past posts about pros and cons of for-profit vs. non-profit. My husband and I want to start our own theater company. Short term goals are to produce 2-3 touring productions and/or rented venue productions a year while still maintaining our full-time jobs. Long term goals are to rent/buy theater space and run the real thing.
My husband would be the artistic director, directing all of the shows and making the show choices, hiring stage managers, musical directors, etc. I would be the business manager, handling the financial and marketing aspects of the company. (Both of these jobs fit perfectly with our current skills and experience.)
If we were to (eventually) pay ourselves a salary for performing these duties, can we still be considered a non-profit if we follow all of the other NP rules and regulations? I wasn't sure if we were getting paid by the company that we started as a non-profit, if that would go against 501(c)3 regulations. Thanks!
dangerlucy

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dangerlucy Walk-On Joined: 7/31/06 Location: United States Online Status: Offline Posts: 0	Topic: Husband-Wife non-profit? Posted: 7/31/06 at 3:07pm
	I've been reading past posts about pros and cons of for-profit vs. non-profit. My husband and I want to start our own theater company. Short term goals are to produce 2-3 touring productions and/or rented venue productions a year while still maintaining our full-time jobs. Long term goals are to rent/buy theater space and run the real thing. My husband would be the artistic director, directing all of the shows and making the show choices, hiring stage managers, musical directors, etc. I would be the business manager, handling the financial and marketing aspects of the company. (Both of these jobs fit perfectly with our current skills and experience.) If we were to (eventually) pay ourselves a salary for performing these duties, can we still be considered a non-profit if we follow all of the other NP rules and regulations? I wasn't sure if we were getting paid by the company that we started as a non-profit, if that would go against 501(c)3 regulations. Thanks! dangerlucy

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tristanrobin Celebrity Joined: 4/25/05 Location: United States Online Status: Offline Posts: 704	Posted: 7/31/06 at 6:32pm
	of course you pay salaries and still be not for profit. there are many not for profit businesses that have paid employees - LOL - think Salvation Army! we have two not for profit theatres here in New Haven (Yale Rep and Long Wharf Theatre) which have NO volunteers, except ushers. Not only are they all paid positions - they're all union jobs, including actors and crews. And they're non-profit. Good luck on your venture!
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jphock Lead Joined: 10/21/05 Location: United States Online Status: Offline Posts: 35	Posted: 8/01/06 at 7:53am
	I'm sure someone will correct me if I'm wrong.....but... You're talking about 'owning' the theater company. You can't 'own' something AND be non-profit. If you are going to own it, it will have to be a for-profit business. A non-profit would be run by a board of directors. That board of directors could elect to pay you both a salary. Ultimately, as a non-profit, the company would never technically be 'yours.' It would exist as it's own entity.
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tristanrobin Celebrity Joined: 4/25/05 Location: United States Online Status: Offline Posts: 704	Posted: 8/01/06 at 8:55am
	jphock is correct however, you can always be two of the board of directors.
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dangerlucy Walk-On Joined: 7/31/06 Location: United States Online Status: Offline Posts: 0	Posted: 8/01/06 at 11:08am
	Yep, we want it to be our livelihood, so perhaps keeping it for-profit would be the way to go. We also wouldn't want to gather a board of directors and have the slight chance that they could eventually vote us out, even if we did start the whole thing! Sounds like if we want to own the company and pay ourselves out of it, we need to be for-profit. It seems if we founded the non-profit, were two of the board of directors and the only two paid positions, the IRS might be a bit questioning... Thanks for the responses!
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dougb Celebrity Joined: 3/30/04 Location: United States Online Status: Offline Posts: 148	Posted: 8/02/06 at 10:57am
	You can't own a non profit company. Period. Ownership presumes the right to any profits it makes and that can not happen in a non profit. Not because you can't make a profit but because the profits must go to further the charitable purpose. I'm not even sure if Non profits can have stock. They can have members but I don't think they can have stockholders. The problem is not that only two board members are being paid, it is the reasonableness of the pay. If your non profit looks like a machine to generate money to pay someone you will have IRS problems. If you and your husband get paid for running the company, directing the shows and on and on and the total employee costs are, for example, 10% of the total income, there probably won't be a problem. If the pay is 50% of the total income, you probably will have IRS problems. (Those numbers are just guesses to show my point.) Even more important is where your money is coming from. You need to be supported by the public (thus the phrase "public charity"). If a significant amount of the money comes from a few people, you might be classified as a "private charity" (like the Bill and Melinda Gates Foundation). That raises all sorts of IRS oversight. If you want to solicit donations or grants, you really need to be a non-profit. If those two sources of income are not important to you (if, for example, you plan to make most of your money throught training programs and ticket sales) consider a for-profit company. That will better meet the rest of your needs. As your own company, you can pay yourselves whatever you want and make sure your company don't have enough left over to have to pay taxes on your profits. But that opens up the hobby loss provisions and that is a topic for another day.
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