Nonprofit organizations address a wide variety of needs, including religion, science, the economy, health, arts, civil rights, education and the environment. Of course, nonprofits enlist the help of many others along the way. Corporations, foundations, governments and individuals donate to their worthy causes. Make sure to specify the board’s authority to terminate the executive director, including the number of votes needed to implement this decision. The nonprofit sector serves the public interest and plays an essential role in our economies.
Bring them to life and capitalize on them to increase your organization’s efficiency and reduce friction. Make sure to use your complete organization name as it appears on your Articles of Incorporation. They also help guide the actions and decision-making of the Board of Directors and help prevent and resolve conflicts or disagreements. Edward A. Haman is a freelance writer, who is the author of numerous self-help legal books.
Those distributions need to be legally allowable for a nonprofit, which usually means stating that your organization’s assets are to be distributed in other charitable ways if your nonprofit dissolves. A dissolution clause essentially outlines how your organization will distribute its assets in case of dissolution. Prescribe your voting procedures, including how many members must be present for a quorum, as well as how many votes are necessary for an initiative to pass. State how you’ll keep financial books and records of your meetings. This includes detailing where you’ll store these and how members or the public can access them. The solution allows for quick modification tracking, making it simple to recognize and comprehend changes made to the bylaws.
That means nonprofits and board members have to do their homework. Since nonprofit bylaws are legally binding, they should include only the fundamentals for your operation, like how frequently your board will meet and how membership will make decisions. You want to avoid including anything that is likely to change frequently, such as how many fundraisers you’ll hold each year or exact titles for staff positions you’ll hire. All nonprofit organizations need regulations that determine how they are governed. Bylaws are the legally binding rules that outline how the board of a nonprofit will operate. While they are unique to each organization, nonprofit bylaws generally have a similar structure and use.
- Review other nonprofits’ bylaws to get ideas for drafting your own, but always make sure yours are unique to your organization and, ultimately, reviewed by a lawyer before finalizing.
- For example, if your bylaws state that executive committee meetings will be held on the first Monday of each month, you can’t change to Tuesday without a change in the bylaws.
- With the risk of data breaches, it’s important for boards to communicate and share files securely.
- In many ways, nonprofit bylaws are similar to bylaws other for-profit boards, local church groups, or student governments might use to hold their meetings.
- For example, if you’re a nonprofit that shelters stray animals, the wording in your bylaws should prove that you exist for that purpose alone.
Proper use of an organization’s bylaws not only provides the necessary structure to effective governance, it eliminates the willy-nilly guesswork so common among ineffective nonprofits. Significant changes to a tax-exempt nonprofit’s articles and bylaws must be reported to the IRS on Form 990. In some circumstances, such as a name change, the organization may want to notify the IRS earlier by requesting an affirmation letter reflecting the new name. This might be a minimum of once a year, but check to see if your state requires more.
Nonprofits should closely review how members (if there are voting members) and directors are permitted to meet and vote under the relevant state law. The IRS generally will refer, among other things, to the purposes clause in a tax-exempt organization’s articles of incorporation to determine what is a related versus an unrelated activity. The two clauses should be fully consistent and, therefore, an organization might want to include a clause in the bylaws which simply refers to the purposes clause as written in the articles of incorporation. In addition, the purposes clause in the articles of incorporation should be reviewed, keeping in mind that a clause drafted 30 or more years ago may not accurately or fully reflect your organization today. Your bylaws should address only basic information about your organization and an overview of board procedures, and not the specifics of your day-to-day operations. For example, instead of stating the time and address of your board meetings, you can simply state that your board will meet once a month at an agreed-upon location.
What is the Purpose of Bylaws for Nonprofit Organizations?
All states have some form of nonprofit corporation act, which typically has various provisions relating to a nonprofit corporation’s bylaws. The concept of nonprofit bylaws best practices is not a rigid, one-size-fits-all set of rules as to what the bylaws should say. So train your board members on all the items outlined in the document. You may even consider making it a regular part of an annual meeting to review essential bylaws together and answer questions.
Why Are Nonprofit Bylaws Important?
To get you started on your draft, check out the following sample bylaws. LegalZoom provides access to independent attorneys and self-service tools. LegalZoom is not a law firm and does not provide legal advice, except where authorized through its subsidiary law firm LZ Legal Services, LLC. Use of our products and services is governed by our Terms of Use and Privacy Policy.
Once you draft your bylaws, you’ll be ready to file for 501(c)(3) status and launch your organization. Legal advice can only be provided in response to a specific fact situation. Then, include a more specific statement of your nonprofit’s mission and goals.
Tailor the bylaws to the needs of your organization
Again, some states have requirements for board structure, so follow the state regulations when designing your bylaws. When deciding on bylaws for nonprofit organizations, there are numerous factors to consider. To make these considerations easier for you, we’ve listed some nonprofit bylaws’ best practices below. Once authorized, a specific timetable for implementation indicates when the new rules take effect and regulate the organization’s activities. In essence, this structured approval process ensures that the bylaws align with the organization’s mission and legal obligations.
However, it is advisable to review the bylaws once every two years to ensure you’re putting correct information while filing IRS form 990. Each employee/board member of the nonprofit organization is legally accountable to follow its bylaws earnestly. If there seems to be a non-compliance, the first step is to double-check the bylaws. Usually, nonprofits must have a dissolution clause unless otherwise specified by law. In cases when your state law requires dissolution clauses, they generally must specify that the organization’s assets will be distributed for tax-exempt purposes.
You’ll also need to define when the board of directors, chairperson, or executive committee can call a special meeting for emergencies or anything that can’t wait until the next meeting. Nonprofit bylaws establish procedures, structures, requirements, and guidelines for how it operates. In other words, it keeps everyone accountable for their actions and prevents conflict and confusion. If they do not adhere to certain provisions (think deadlines), you are better off omitting the bylaw altogether. Make room in your bylaws for prospective modifications by including a section on amendments and a charter for a committee.
When the public has access to these documents, the organization seems more transparent and reputable. A systematic strategy for periodic evaluation and necessary revisions is required to manage nonprofit bylaws effectively. If the organization has a membership structure, the roles and rights of its members must be defined. Addressing the membership structure https://simple-accounting.org/ in the bylaws ensures clarity on the organization’s members’ expectations and contributions. The board president should sign the bylaws and have the secretary attest to the signature or have all board members sign the bylaws. A nonprofit’s charter outlines the processes for deciding on and enforcing the rules that establish the structure of the nonprofit.
Nonprofit bylaws should provide all the basic guidelines for operating your nonprofit corporation without becoming overly detailed and inflexible. You also need to be sure that the bylaws don’t conflict with either nonprofit legal requirements or the articles of incorporation. You may find it advantageous to engage the services of an online services provider to help ensure that your nonprofit is properly set up and registered. The nonprofit board of directors is responsible for compiling your nonprofit’s bylaws.
“Indemnification clause” is a fancy, needlessly intimidating phrase that simply means your nonprofit will limit the personal liability of your board members should a legal issue occur. Consider how often you’ll review them, who will do the review, and how you’ll vote on any changes. For example, maybe your board secretary is responsible for reviewing your bylaws once every two years and any suggested changes to them require a supermajority vote.
In many ways, nonprofit bylaws are similar to bylaws other for-profit boards, local church groups, or student governments might use to hold their meetings. They offer agreement on the parliamentary procedure of a meeting, including rules, ethics, and customs. However, they should also be specific to your nonprofit’s goals and requirements. nonprofit bylaws best practices The most effective bylaws provide a realistic picture of what your organization is doing now, not what you expected it to do when you first started. The important tool here is to ensure that the language is consistent with the legally binding nature of the bylaws. The following practices guide you on how to write nonprofit bylaws.
Therefore, it’s best practice to seek professional legal advice when forming yours. These regulations describe the board member election procedure, conflict of interest policy, nonprofit risk management plan, and norms of executive committee meetings. It also includes remuneration disclosures, board members’ indemnification, and other topics. In other words, it’s a how-to guide for running your organization. A good tip for nonprofits is to create bylaws with the long term in mind.
