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A reasonable wage or salary isn’t usually considered “profit” in a legal sense. This is why nonprofits can still pay employees. Any money that is left over afte

A reasonable wage or salary isn’t usually considered “profit” in a legal sense. This is why nonprofits can still pay employees. Any money that is left over after costs (including wages/salaries) needs to be reinvested, spent on the organizational mission, or held for future use, not distributed through dividends or other distributions as in a for-profit enterprise.

JumpCrisscross 1y ago
> reasonable wage or salary isn’t usually considered “profit” in a legal sense This is a semantic punt to the word “reasonable.”
- iamnothere 1y ago
  The IRS has some guidelines that they use to decide what is “reasonable” but they don’t give out whatever actual formula or process they use to determine this. It’s supposed to be based on industry averages (more or less) but in reality it’s hard to determine what exactly that means. Generally you are “safe” paying in an industry average range, but if outside that range you need legal and accounting support to back up your own assessment.
  - JumpCrisscross 1y ago
    > you are “safe” paying in an industry average range, but if outside that range you need legal and accounting support to back up your own assessment What? The IRS doesn’t regulate wages. They just care about getting their money. If I pay you $10bn a year to yell at my cat, the IRS is fine so long as I pay payroll and you income taxes.
    - iamnothere 1y ago
      Actually as a nonprofit you are required to pay at or below a reasonable wage/salary or you may face sanctions: https://www.nolo.com/legal-encyclopedia/how-determine-reasonable-compensation-nonprofit-key-employees.html https://www.nolo.com/legal-encyclopedia/how-determine-reason... Similarly as an S Corp (maybe other corp types too) then officers must take at or above a reasonable wage/salary to limit the tax advantage: https://www.irs.gov/pub/irs-news/fs-08-25.pdf https://www.irs.gov/pub/irs-news/fs-08-25.pdf This is intended to prevent people from, for instance, setting up a “nonprofit” where they just funnel all gains into their pocket while gaining all the other tax benefits of being a nonprofit. You can’t overpay people, you can’t engage in transactions where you intentionally overpay a supplier for materials/services and then they compensate you for the extra amount, etc.
hibikir 1y ago
Have you spent much time looking inside non profits? A lot of hospitals in the US are non profits. Some are part of non profit universities too. This in no way leads to superior cost controls, or those universities being cheap. What it does mean is that they get some significant tax advantages (for instance, no property taxes), and that there's fewer optimization incentives. When you limit yourself to the US definition of a non profit company, it doesn't make care better or cheaper.
- iamnothere 1y ago
  Studies have shown both a decrease in care outcomes and higher costs for private hospitals: https://pmc.ncbi.nlm.nih.gov/articles/PMC419772/ https://pmc.ncbi.nlm.nih.gov/articles/PMC419772/ https://www.buffalo.edu/news/releases/2002/05/5712.html https://www.buffalo.edu/news/releases/2002/05/5712.html
philipallstar 1y ago
I'm not saying profit in that sense. I'm just saying that it's monetary profit all the way down when it comes to paid work. People work for profit. People invest for profit. People bet for profit.
- iamnothere 1y ago
  The person you were replying to seemed to be discussing profit in the sense of tax law, not whether or not people should be paid at all. I don’t think anyone here is saying that doctors should not be paid.

JumpCrisscross 1y ago

> reasonable wage or salary isn’t usually considered “profit” in a legal sense This is a semantic punt to the word “reasonable.”

iamnothere 1y ago
The IRS has some guidelines that they use to decide what is “reasonable” but they don’t give out whatever actual formula or process they use to determine this. It’s supposed to be based on industry averages (more or less) but in reality it’s hard to determine what exactly that means. Generally you are “safe” paying in an industry average range, but if outside that range you need legal and accounting support to back up your own assessment.
- JumpCrisscross 1y ago
  > you are “safe” paying in an industry average range, but if outside that range you need legal and accounting support to back up your own assessment What? The IRS doesn’t regulate wages. They just care about getting their money. If I pay you $10bn a year to yell at my cat, the IRS is fine so long as I pay payroll and you income taxes.
  - iamnothere 1y ago
    Actually as a nonprofit you are required to pay at or below a reasonable wage/salary or you may face sanctions: https://www.nolo.com/legal-encyclopedia/how-determine-reasonable-compensation-nonprofit-key-employees.html https://www.nolo.com/legal-encyclopedia/how-determine-reason... Similarly as an S Corp (maybe other corp types too) then officers must take at or above a reasonable wage/salary to limit the tax advantage: https://www.irs.gov/pub/irs-news/fs-08-25.pdf https://www.irs.gov/pub/irs-news/fs-08-25.pdf This is intended to prevent people from, for instance, setting up a “nonprofit” where they just funnel all gains into their pocket while gaining all the other tax benefits of being a nonprofit. You can’t overpay people, you can’t engage in transactions where you intentionally overpay a supplier for materials/services and then they compensate you for the extra amount, etc.

hibikir 1y ago

Have you spent much time looking inside non profits? A lot of hospitals in the US are non profits. Some are part of non profit universities too. This in no way leads to superior cost controls, or those universities being cheap. What it does mean is that they get some significant tax advantages (for instance, no property taxes), and that there's fewer optimization incentives. When you limit yourself to the US definition of a non profit company, it doesn't make care better or cheaper.

iamnothere 1y ago
Studies have shown both a decrease in care outcomes and higher costs for private hospitals: https://pmc.ncbi.nlm.nih.gov/articles/PMC419772/ https://pmc.ncbi.nlm.nih.gov/articles/PMC419772/ https://www.buffalo.edu/news/releases/2002/05/5712.html https://www.buffalo.edu/news/releases/2002/05/5712.html

philipallstar 1y ago

I'm not saying profit in that sense. I'm just saying that it's monetary profit all the way down when it comes to paid work. People work for profit. People invest for profit. People bet for profit.

iamnothere 1y ago
The person you were replying to seemed to be discussing profit in the sense of tax law, not whether or not people should be paid at all. I don’t think anyone here is saying that doctors should not be paid.