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Comment by nickjj | Hacker News Reader

Serious question.

In the article it writes "all whilst operating as an independent non-profit organisation releasing open source software.".

But this is right before talking about generating $5,000,000 in customer revenue and giving away 0% of the business.

So when you're a non-profit, what happens with that $5,000,000 of business generated revenue? How much of a salary do you give yourself? Can you even give yourself a salary if you label yourself as a non-profit? What makes paying yourself a salary as a non-profit different than a regular business?

Whenever I read sentences like that, it makes me very suspicious. Whenever I see a Ghost blog post talking about the product it always feels like they try to bring maximum attention to being a non-profit in a way that is supposed to be less evil than a profitable business but then you talk about millions of dollars of "business revenue" and I never understood how it works.

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https://en.wikipedia.org/wiki/Nonprofit_organization

"A nonprofit organization, also known as a non-business entity,[1] not-for-profit organization,[2] or nonprofit institution,[3] is dedicated to furthering a particular social cause or advocating for a shared point of view. In economic terms, it is an organization that uses its surplus of the revenues to further achieve its ultimate objective, rather than distributing its income to the organization's shareholders, leaders, or members. Nonprofits are tax exempt or charitable, meaning they do not pay income tax on the money that they receive for their organization. They can operate in religious, scientific, research, or educational settings.""

That's still very confusing.

Surplus sounds like anything beyond hosting costs to run the service, but the hosting costs is likely no where near 5 million dollars so a majority of it is surplus.

Does that mean no one gets a salary or is a salary part of the costs to run the business instead of being a "member"? If salaries are included who dictates what the income tax exempt salary is?

I'm not trolling either. What you're describing sounds like a way to run a business where you can avoid paying income tax while still getting a salary because realistically I doubt the creator of Ghost is living in a homeless shelter and working off public library computers.

Non profit means no payday for the shareholders. Yes there's a salary and it can be decent but there'll never be a billion dollar ipo or buyout. The major benefit to running a business is not getting the salary but from the wealth created from OWNING the business. The capitalist class doesn't get to benefit in this instance, only the workers.

Salaries at a nonprofit can be tiny or enormous, depending on how the organization operates.

My guess is that Ghost pays competitive salaries to its rank and file, a generous salary to its CEO, and uses the rest of the money to either fund exploratory work, educate its target industry, and/or lobby politicians. That's how most nonprofits appear to work.

Some Business 101 for you: Salaries are separate from profits. Salaries are a cost to the business just like rent and hosting costs. Profits come after all the costs. (Salaries are also taxed as personal income just like at any other business.)

The $5m over 6 years is $833k in revenue per year. Not a lot, and salaries/benefits probably take up the biggest part of that, leaving very little profit. Which is the way it should be everywhere in my opinion.

I applied to work at Ghost a while back and still would love to work for them. Not only do they get salaries, they have amazing benefits (by US standards). Being a non-profit means two things: a) profits are reinvested in the business rather than distributed to owners, and b) Ghost isn’t, and can never be, an acquisition target by other companies or investors. That kind of stability is a huge appeal for me, both as a user and a worker.

I feel like this comment would be totally complete without the first 5 words, which serve to make it condescending.

Part of the goal of this community is for its participants to learn things they don’t know; the tone implied by the intro to your comment makes it seem offensive that somebody wouldn’t realize US non-profit status still allows for salaries and benefits for their staff.

https://xkcd.com/1053/

Point taken.

I think that to a point this is caused by the attitude in OP’s own comments. While it would be nice if it was possible to completely ignore it, I don’t think that’s realistically possible.

Perhaps I’m overly optimistic. I’m also optimistic enough to believe that the comment I responded to wasn’t aiming to be condescending; the phrasing was the kind of thing that could very well have sounded jovial in speech among friends. I tend to think that’s the more common failing here: people type the way they’d speak if they were having a chat at the pub after work, and a lot of nuance burns off in the speech-to-text conversion.

In any case, the site guidelines ask us to counteract this by assuming good faith, and responding to the strongest interpretation: https://news.ycombinator.com/newsguidelines.html

I think you underestimate salaries. They are allowed to pay themselves. Extra money can be used to pay future salaries, fund other projects etc. They can probably even accumulate it to use as an endowment, I'm not sure about that though.

I'm not exactly sure what happens if the founders decide their salaries will be $1m/year. I'm not aware of anything explicitly stopping that - some charities pay their CEOs hundreds of thousands.

Non-profits can draw large salaries:

https://www.erieri.com/blog/post/top-10-highest-paid-ceos-at...

These are all medical, so that is the right comparison, but charities can also have high salaries:

https://www.charitywatch.org/top-charity-salaries

And, I am not taking a position here, but if you feel strongly that this should not be the case, there is this video for the counter-argument:

https://www.ted.com/talks/dan_pallotta_the_way_we_think_abou...

Such as the Susan Kamen Foundation. Huge salaries, no funding of research, events to promote "awareness." A scam.

You can still receive a salary, and as far as I know there are no limits on what you can pay yourself. However, you must have a predefined salary and you are audited regularly to ensure there isn't fraud. However, outside of the overhead (salaries, office, servers, etc) any further profits have to be reinvested into the business. This means that if they get 5 million dollars and only spend 4 million, no one gets to take home the extra million. It has to go back into the business.

This is in contrast to for-profit companies where that money can go to the owner (private company), or to shareholders (public company).

The Wikipedia link posted above probably has a better explanation, this is just my understanding due to my SO working at one.

> This means that if they get 5 million dollars and only spend 4 million, no one gets to take home the extra million. It has to go back into the business.

I wonder where the line is drawn on that.

For example, can the CEO buy a house to live in and then claim it's investing in the business because that's where he works remotely once in a while?

Also on the salary itself, do you pay regular income tax on that (separate from the company, but as an individual receiving a salary)?

Yes, you pay income tax.

Yes, each salary is taxed normally. Then, there are laws against non-profit executives enriching themselves[0]. The government watches this very closely.

Also, public non-profits must release regular reports on their finances. So, contributors can decide for themselves whether the funds are being used appropriately. That's the basis for sites like https://www.charitynavigator.org [1] and https://www.guidestar.org

One particularly important metric is how much the organization spends on overhead vs how much is spent directly furthering their cause.

[0] Religious organizations seem to play by a different set of rules, but thats neither here nor there.

[1] A non-profit is not necessarily a charity, but this gives you an idea of how both can be evaluated.

Look at the wikipedia salaries for example: https://meta.wikimedia.org/wiki/Wikimedia_Foundation_salarie...

Wow those are some pretty high salaries for what I expected in a non-profit business. My Wife works in a non-profit agency and makes significantly less money than I do, but then again she is a social worker. She also gets far more time off than I do so there are perks I suppose.

Think of non-profits as any other business - except there are no owners. No shares, no voting. Nobody can say they own 50% of this company and so are worth X on paper because of the value.

Everything else operates the same. People have jobs and get salaries. The company sells things and makes revenue. It can make profits if it makes more than it spends. Nonprofits can have millions sitting in their account but that money doesn't belong to any person because there's no ownership, and usually the bylaws and govt regulations mandate they reinvest it into the business aggressively.

>what happens with that $5,000,000 of business generated revenue?

You operate it like a normal business and pay competitive salaries? I don't get why people working at non-profit should work for free. $5M/6 years is roughly 7 people making 120k/yr.

Just because it’s ‘not-for-profit’ does not mean the employees can live on air. That would definitely be nice, but in practice they still need to be paid a salary.

But all of the profits go right back into the company (e.g. no profit for the founders), which is a powerful thing.

Typically a for profit business has three main stakeholders: Customers, Employees, and Share Holders.

And they have to balance things like salaries, price of the product, dividends to share holders (though no one really pays dividends anymore, but that's beside the point.)

A non-profit skips the share holders, and is more like a direct exchange of cash for services better two parties, without a third party taking a cut.

Actually, usually there are taxes, so the government is going to take a cut.

So share holders kind of end up acting as a tax, a tax on not having capital, but instead of the money going to the government, it goes to people who happen to have capital.

Not that there's anything wrong with that.

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