Legal Question in Business Law in California

Anyone otherwise qualified to hold a position in a non-profit can do so. You and family are not automatically disqualified. Anyone serving should know and follow the rules and regulations to avoid creating personal or organizational liability for errors, omissions, taxes, penalties, or even crimes. Such organizations generally are formed with the assistance of attorneys to ensure correct set up and operation. It is simply a cost of doing business, so to speak. If serious about doing so, feel free to contact me.

Nonprofits generally fall into two main categories, nonprofit corporations and nonprofit associations. These further subdivide into public benefit corporations, mutual benefit corporations, religious corporations, and medical/legal/hospital corporations. There are a few oddball categories as well.

The main limitation on directors is exemplified by Corporations Code section 5227, in the context of nonprofit public benefit corporations. It provides that not more than 49% of the persons serving on the board may be "interested persons." An interested person includes anyone on the nonprofit's payroll, or otherwise being comensated by the nonprofit as a consultant, idependent contractor, etc., and anyone who is a brother, sister, ancestor, descendant, or in-law of a person being compensated. There are probably parallel restrictions affecting board membership in other kinds of nonprofit.

So, there are indeed restrictions on who can be on your board.....if anyone is getting money from or through or because of the nonprofit, they cannot be a majority of the board.

This is looking at the question narrowly. A broader answer would advise you that setting up a family-and-friends nonprofit can be perfectly legal, but there is room for abuse of the nonprofit concept when it is set up and run more for the monetary benefit of the insiders rather than for its ostensible charitable, mutual-benefit, or public-benefit purpose.