Sunday, November 30, 2008

Reader Question: Can the Executive Director be an independent contractor?

The answer is: Probably not.

I would err on the side of caution and say no, an executive director should not be an independent contractor. This is because they would likely fail multiple questions of the IRS's 20 Factor Test. The most obvious one that comes to mind is #3 on the 20 Factor Test- Integration. The IRS says that if the services that someone is providing for an organization are vital and ongoing for the organization's success (i.e. they are providing continuing day-to-day work) then they are probably not an independent contractor.

The only circumstance that they might be able to be an independent contractor is when they are serving as an acting or interim executive director.

To understand more about the difference between independent contractors and employees, read Independent Contractor vs. Employee Part I.

To learn about the process of transitioning an independent contractor to an employee, read Independent Contractor vs. Employee Part II.


Suzanne said...

Can a management company serve a non-profit as the executive director?

Nonprofit SOS said...

Having a management company run a nonprofit is not unusual for the short-term. It wouldn't be a good idea for the organization to have a management company be the long-term executive director though. Often we see management companies, or org dev consultants step in to take the helm and help a nonprofit through transition, repositioning, etc and they then help them hire the new ED. Look at Headwaters, they hired a org dev consultant to step in for almost a year and help them hire their new ED, Trista Harris.