Legal Question in Business Law in California

1. Yes.

2. They make tons of money.

3. Lots of directors of "non-profits" make oodles of money in salaries. That's how they avoid making a profit.

Mr. Stone is a cynic, which I generally like, but not very well versed in non-profit law, it seems. First off, non-profits can lose their non-profit status if a majority of the directors are interested persons, meaning anyone who themselves or through a family member, receives pay from or does business with the non-profit. Second, non-profits lose their non-profit status if the IRS finds that they are being run for private benefit, meaning you cannot make yourself non-profit just by paying out the profits in salaries. That is called a partnership or S-Corp. Third, the IRS is VERY good at sniffing out fake non-profits. And lastly, the officers of non-profits that make a lot of money are managing huge non-profits. The average mid-level non-profit (around $1-5 million annual budget) even in the high cost of living S.F. Bay Area, pays it's highest paid officer (usually the Executive Director) considerably less than $100,000/yr.