Are there any restrictions on the types of investments a nonprofit corporation can make?

Yes, there are restrictions on the types of investments a nonprofit corporation can make in South Dakota. According to state law, a nonprofit corporation must invest its funds according to a ‘Prudent Investor Standard.’ This means that an investment must remain safe and be in the best interests of the nonprofit and its beneficiaries. To meet this standard, investments must be diversified and take into account the age and special circumstances of the beneficiaries. Additionally, a nonprofit cannot use its funds for investments that the organization will benefit from directly, such as bank accounts or stocks in a company in which a board member is an executive. Such investments are considered ‘self-dealing’ and prohibited by law. Nonprofits are also limited in how much they can invest in real estate and other tangible assets. South Dakota law states that such investments cannot exceed 15 percent of the organization’s total assets. Finally, nonprofits are also prohibited from making investments that involve significant risk or debt and from engaging in speculation. Taking on too much risk could put the organization in financial jeopardy and negatively affect its ability to fulfill its mission. Overall, South Dakota law restricts the types of investments a nonprofit corporation can make to ensure that the funds are safeguarded and used to further the organization’s cause.

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Are there any restrictions on the types of investments a nonprofit corporation can make?

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