Ilma Ibrisevic Updated
The nonprofit sector serves the public interest and plays an essential role in our economies. Working hard to strengthen communities and address a variety of issues and challenges, nonprofits enrich our lives in a variety of ways. They benefit our society in fields such as religion, science, economy, health, arts and culture, civil rights, environment and education, and more.
Individuals, corporations, foundations, and governments all help make that happen by investing time, resources, and funds in nonprofit organizations.
Nonprofit bylaws raise the level of accountability, transparency, and effectiveness of all nonprofit organizations to foster excellence in their service and inspire trust.
How do we remove a board member? How often should the board meet? These are some of the many common questions that arise in nonprofit meetings, all of which can and should be answered in nonprofit bylaws. A nonprofit’s bylaws should answer these and other questions while following all applicable state laws.
Table of Contents:
- What are Nonprofit Bylaws?
- What is the Purpose of Bylaws for Nonprofits?
- Nonprofit Bylaws Tips and Best Practices
- Checklist For Nonprofit Bylaws: Common Provisions
- Frequently Asked Questions (FAQs)
What are Nonprofit Bylaws?
Nonprofit bylaws are a nonprofit’s operating manual. Nonprofit bylaws (or Bylaws and Articles of Organization) are the main governing document for a nonprofit organization. They are the main official documents of an organization, nonprofit or for-profit.
The board creates bylaws when the organization is established. Bylaws supplement the rules already defined by the state corporations code and will guide how your nonprofit will be run. It’s important to obtain the applicable state laws and make sure that your nonprofit’s bylaws are in compliance. Furthermore, some cities have further regulations for nonprofits.
What is the Purpose of Bylaws for Nonprofits?
The purpose of the bylaws is to guide the nonprofit board’s actions and decisions. They are helpful in preventing or resolving conflicts and disagreements. They can protect the organization from potential problems by clearly outlining rules around authority levels, rights, and expectations.
Nonprofit Bylaws Tips and Best Practices
1. Get help.
It’s important to note that bylaws are legal documents. This means that there are legal requirements for what should be included. These requirements vary depending on the state in which your nonprofit operates. For example, some state laws require membership, board selection, and other issues to be stated in the articles of incorporation. To be sure your bylaws are in accordance with state laws, get assistance in drafting or amending your bylaws from a qualified professional experienced in nonprofit matters. Not every attorney understands nonprofit issues. And even when you get help, it’s still the board’s responsibility to provide input throughout the process and to vote to adopt the final product.
We have an excellent webinar by social impact architect and attorney, Erin McClarty talking about the 5 big compliance obligations you need to know. Your nonprofit has financial, legal, and general compliance requirements that must be taken into account while creating your nonprofit bylaws. Do give it a watch –
2. Make them public.
Although bylaws are not considered public documents, making them public and easily available increases the organization’s accountability and transparency — ensuring the trust of donors, supporters, and beneficiaries.
3. Don’t include information that changes frequently.
The Bylaws should include only fundamental rules governing the nonprofit. Information that is likely to change frequently (e.g. staff job descriptions, fundraising or marketing guidelines, charters, etc.) should not be included. These are better suited for procedures manuals or policy manuals.
Also, don’t be too specific. For example, it is better to say that board meetings will be held monthly, rather than to specify they are to be held the first Thursday of each month at 7:30 p.m.
Quick Guide: Step-by-Step Guide about How to Fill Out a W-9 for Nonprofits
4. Tailor them.
Bylaws are like skeletons. They determine how the entity should “move” and operate, but “the muscles and organs” will vary – since every nonprofit has its own unique needs. Good bylaws, thus, match the organization’s mission, particular goals for governance, operational needs, and more.
A church nonprofit bylaws, for example, will look different to a school’s nonprofit bylaws. Bylaws should also take into consideration the culture of the organization, the number of people involved in managing the organization, and the expectations and attitudes of the members and directors.
5. Know the difference between “shall” and “may”.
When writing your nonprofit bylaws, the difference between the words “shall” and “may” is crucial. Use the word “shall” when it’s something board members are required to do. Use “may” when the task is optional.
6. Don’t be too ambitious.
Only include provisions that are realistic. For example, don’t require a 2/3 approval of every member eligible to vote if, in practice, you haven’t even been able to get 2/3 of members to vote. Furthermore, if the Board is not going to carefully adhere to specific provisions (e.g. deadlines), it’s far better to omit them.
7. Review them regularly.
Make sure your bylaws are reviewed approximately every two years. Because board officer terms make it hard for the board to keep track of bylaw revisions, have this duty included as a responsibility of the executive director. Bylaws should accurately reflect how the organization works and remain relevant.
Note: If you made major structural or authority changes, you need to report them in your next Form 990.
Checklist For Nonprofit Bylaws: Common Provisions
I. Name and purpose
You can state the name in the title, such as “Bylaws of XYZ Corporation”. To emphasize, since the purpose is stated in the Articles of Incorporation, it’s not necessary to restate it in the bylaws. If you do include a purpose section in your bylaws, it should repeat exactly what’s written in the Articles of Incorporation.
II. Election, roles, and terms of board members and officers
Bylaws should summarize the board members’ duties to act in good faith, in the best interests of the organization.
Most nonprofits include a president, vice president, secretary, and treasurer. Describe the qualifications and duties, as well as details on election and termination (resignation and removal). For example, you might specify that resignation from the board must be in writing and that a board member may be removed by a 75% vote of the remaining directors if sufficient cause exists for removal.
Include a provision specifying term limits. For example, a term could be three years, with term limits of two consecutive terms.
III. Membership issues (categories, responsibilities)
Membership of your nonprofit could be limited to the members of the Board of Directors. If you have members, you would list criteria for membership eligibility, dues, rights of members, voting rights, and termination of membership.
IV. Meeting guidelines (frequency, quorum)
A quorum is the minimum number of board members who must be present for official decisions to be made. For example, if an organization currently has thirty members, and the bylaws state that one-third of the members constitute a quorum, then official decisions can only be made at board meetings where ten or more members are present.
Note: Many states specify the minimum required for a quorum, so make sure you check the rules and regulations in your state.
V. Board structure (size, standing committees, if any)
Specify the minimum and the maximum number of board members (e.g. a minimum of three and a maximum of twenty board members). Some states specify a minimum, and some specify a formula for a minimum and maximum.
Name the standing committees, such as the finance committee or an executive committee. Additionally, this article should outline how a special or emergency board meeting may be convened. You may also choose to give the board the ability to create committees and task forces instead of naming specific committees in the bylaws.
VI. Compensation and indemnification of board members
Indemnification is a statement that limits the personal liability of board members. In some cases, nonprofits are required to indemnify directors and officers, that is, protect and defend them from loss or harm resulting from risk. In other cases, they are prohibited from doing so.
Outline compensation arrangements for directors, officers, and employees. Use the IRS Form 1023 to understand the language you may use for the approval of compensation arrangements.
VII. Role of chief executive
The board hires the executive director. He/She holds day-to-day responsibility for the organization. Make sure to specify the board’s authority to terminate the executive director, including the number of votes needed to implement this decision.
VIII. Conflict of interest policy
Include a provision for handling conflicts of interest. Use the language recommended by the IRS. Forguidance, check IRSForm 1023.
You can include the conflict of interest policy in your nonprofit bylaws. Otherwise, simply state in the bylaws that the conflict of interest policy is to be developed as a separate document.
IX. Amendment of bylaws
To avoid cumbersome procedures, make your bylaws not too difficult to amend. Consider allowing an amendment to pass by a majority vote at a regularly scheduled board meeting.
X. Dissolution of the organization
Usually, nonprofits must have a dissolution clause unless otherwise specified by law. When dissolution clauses are required by law, they generally must specify that the organization’s assets will be distributed for tax-exempt purposes.
Hence, a charity’s dissolution clause might state that the charity’s assets will be distributed for other charitable purposes if the charity dissolves. Whether your organization is required to have a dissolution clause depends on the type of organization you create and your state’s laws.
Frequently Asked Questions (FAQs)
In this section, we answer some common and important questions regarding nonprofit bylaws.
1. What to do when nonprofit bylaws are not followed?
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.
Once you’re sure, reach out to the concerned person to understand if this was an innocent mistake. Most cases are resolved at this stage. If not, it is advisable to seek legal help and proceed accordingly. If your nonprofit is part of a bigger organization, you may also discuss the matter with a higher authority before taking any action.
2. What is the difference between charter and bylaws for nonprofits?
A nonprofit’s charter outlines the processes by which its rules are decided and enforced that establishes the structure of the nonprofit. The chartering process varies according to different states and it’s mostly written by the nonprofit’s attorney.
On the other hand, bylaws comprise the rules on which the nonprofit functions. Bylaws can be written by the board of directors. It can be very detailed or general, depending on the size and scope of the organization.
3. How often should a nonprofit review its bylaws?
Nonprofit bylaws are often called the evergreen documents of the organization. You seldom want to make a change once the IRS has accepted it. However, it is advisable to review the bylaws once every 2 years to ensure you’re putting correct information while filing IRS form 990.
Also, if you’re planning to bring about a fundamental change to the structure of your nonprofit, you will essentially need to review your bylaws.
Drafting good nonprofit bylaws is an art that requires careful attention to legal and regulatory requirements. It calls for a balancing act between precision and flexibility, best practices, and careful tailoring to the nonprofit.
We hope that this article will help your nonprofit practice reflecting accountability and transparency, legal, ethical, and responsible fundraising, and effective governance. Reinforcing these with sound practices demonstrates that your nonprofit deserves the public’s trust. Above all, this shows that you are serious about advancing your mission and striving towards excellence.
Nothing stated or implied in this article should be construed to be legal, tax, or professional advice. Donorbox is not a law firm. For questions regarding your specific situation, please consult a qualified attorney
AtDonorbox, we strive to make your nonprofit experience as productive as possible, whether throughour onlinedonation systemor through resources on ournonprofit blog. We also have dedicated articles for starting a nonprofit in different states in the US, including Texas, Minnesota, Oregon, Arizona, Illinois, and more. This should come in handy if you’re planning to start one and need insights into the process.
Ilma Ibrisevic is a content creator and nonprofit writer. She’s passionate about meaningful work, sustainability, and social movements. If she’s not working, she’s obsessing over coffee or cooking. You can connect with her on Linkedin.
Filed Under: Nonprofit Tips , Resources
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Avoid using strange punctuation or unusual alternative spellings of words. Focus on making the name easy to spell and easy to remember. Come up with a list of nonprofit names that are clear and presentable — then, pick one that best describes your mission and that donors would be happy to support and write a check for.
- Make it clear.
- Make it concise. A well-crafted mission statement should also be brief and to the point. ...
- Make it informative. A mission statement should, above all, inform others about what you do and guide your team members and stakeholders. ...
- Welcome participation. ...
- Stay open. ...
- Keep the balance. ...
- Review it frequently.
A charitable organization should establish an annual operational plan that identifies goals, objectives, actions and responsibility for implementation. 12. Operational plans should support the nonprofit's strategic goals and objectives in order to advance the mission of the organization.
Choose the initial directors for your nonprofit
In Ohio, you must have at least three directors on your board.
Broadly speaking, a foundation is a nonprofit corporation or a charitable trust that makes grants to organizations, institutions, or individuals for charitable purposes such as science, education, culture, and religion. There are two foundation types: private foundations and grantmaking public charities.
You cannot use a name that's been trademarked. It's also illegal to use another nonprofit's name in the same state. You will have to do thorough research on the possible names you've thought of. Some state government sites have their database of nonprofit/business names made public for reference.
- The Key Market – Who is your target audience? ...
- Your Contribution – The next component to a successful mission statement is outlining your contribution. ...
- Distinction – The next component to a highly effective mission statement is distinction.
The first is a statement of vision. It provides a destination for the organization. Next is a statement of mission. This is a guiding light of how to get to the destination.
- “To inspire humanity — both in the air and on the ground.”
- “To accelerate the world's transition to sustainable energy.”
- “Spread ideas.”
- “To connect the world's professionals to make them more productive and successful.”
A nonprofit strategic plan is the formal process an organization creates to accomplish their goals and objectives for the year. It's often a guiding document that is used to turn goals into actions.
ORGANIZATIONS IN TRANSITION
The organizations remain legally independent from each other, final legal authority remains with their separate boards of directors. Organizations continue to remain independent, but may have overlapping board or shared staffing arrangements.
Role of a Nonprofit Board of Directors
As governing body, nonprofit boards of directors focus on the organization's mission. Their primary duties are working on strategy, setting goals and objectives, overseeing programs and activities, and actively managing risks.
The code specifically lists sales of tangible personal property or services to churches, organizations under 501 (c)(3) of the internal Revenue Code, and any other nonprofit organizations operated exclusively for charitable purposes in this state are exempt.
The most important one of these is control. Unlike public charities, which are governed by diversified boards of directors, private foundations are independent legal entities controlled exclusively by their donors.
501(c)(3) Public Charity vs Private Foundation
A 501(c)(3) is a public charity, meaning that at least one third of its income must come from public donations. A private foundation is usually funded by a single individual or a small pool of individuals, such as the Bill and Melinda Gates Foundation.
Definition. A nonprofit is an organization that uses its income and profits for the organization's main goal that supports the mission. On the other hand, a charity is a type of nonprofit that engages in activities aimed at improving lives in the communities.
Yes, a limited liability company (LLC) can be a nonprofit. However, forming a nonprofit limited liability company can be complex, so few people choose this option. When people refer to nonprofits, they often mean a nonprofit corporation. This is because many of the founders of nonprofits choose to incorporate.
If your nonprofit plans on doing business beyond your geographic area, you will want a federally registered trademark to secure your brand. Registering a trademark protects it in all 50 states, even if your nonprofit is not currently doing business in every state.
Typically, a mission statement includes a basic description of the company, its purpose, and its goals.
What are mission and vision statements? A mission statement defines the organization's business, its objectives, and how it will reach these objectives. A vision statement details where the organization aspires to go.
The mission statement communicates the purpose of the organization. The vision statement provides insight into what the company hopes to achieve or become in the future. The values statement reflects the organization's core principles and ethics.
A values statement lists the core principles that guide and direct the organization and its culture. In a values-led organization, the values create a moral compass for the organization and its employees. It guides decision-making and establishes a standard against which actions can be assessed.
- Purpose. ...
- Application. ...
- Examples. ...
- Step 1: Develop Your Winning Idea. ...
- Step 2: Clarify Your Goal. ...
- Step 1: Find the Human Value in Your Work. ...
- Step 2: Distill Into Values. ...
- Step 3: Combine Your Mission and Values.
A good mission statement embraces the expectations of a target audience for something they truly crave. For example, Zappos' mission statement is “To provide the best customer service possible.” That creates the expectation in Zappos' customers that they will deliver superior customer service each and every time.
Two years later, (David, 1989)  identified nine key components i.e. customers, products / services, markets, technology, concern for survival, philosophy, self-concept, concern for public image, and concern for employees.
Purpose statement examples
Example 1: "Our purpose is to inspire every family in the world to enjoy Sunday dinner together." Example 2: "Our purpose is to support the health and well-being of our planet and everyone who lives here."
Generally, a good benchmark for a worthwhile charity is having at least 75 percent of income spent on programs, or the nonprofit's mission, according to Sandra Miniutti, a spokeswoman for Charity Navigator. Aside from vetting a charity's financials, Ms.
- Transparency. One of the most important aspects of a great charity is transparency. ...
- Understand How Donations are Used. ...
- Alignment With Your Values and Goals. ...
- A Strong Public Presence. ...
- Results and Accomplishments.
- Employees can feel a sense of pride working for a company with strong values.
- Your customers can feel like their patronage is helping to make the world a better place.
- Most importantly, your donations can advance causes that you care deeply about.
- Pick the Ideal Charity. Look at a charity that matches your aims, size and outlook. ...
- Look for Transparency. ...
- Impact. ...
- Synergy and Connection.
|Charity Name||Percentage of funds that go directly to the cause, versus administrative or fundraising costs|
|Feeding America's Hungry Children||99.10%|
|Caring Voice Coalition||99.00%|
|Foster Care to Success||99.00%|
Here are a few of the common subgroups: Disease and Disorder Charities. Medical Research Charities. Patient and Family Support Charities.
A Unique Donation Experience
They are how charities become successful, raise money and gain recognition. Successful charities know that donors are more than the financial backing they can provide – they are a crucial part of the fabric of the charity.
donator. noun. someone who gives money or goods to an organization, especially one that helps people. The usual word is donor.
Studies have found that acts of kindness are linked to increased feelings of wellbeing. Helping others can also improve our support networks and encourage us to be more active. This, in turn, can improve our self-esteem.
The site goes on to say that the 50% rule applies to four different types of charitable organizations: Public charities. Private operating foundations. Private foundations that distribute donations to private operating foundations and public charities within 2.5 months from when the contributions are received.
Annual income tax deduction limits for gifts to public charities, including donor-advised funds, are 30% of adjusted gross income (AGI) for contributions of non-cash assets, if held more than one year, and 60% of AGI for contributions of cash.
When you donate cash to a public charity, you can generally deduct up to 60% of your adjusted gross income. Provided you've held them for more than a year, appreciated assets including long-term appreciated stocks and property are generally deductible at fair market value, up to 30% of your adjusted gross income.
“The perfect partnership is one that is mission-led on the charity side, and purpose-led on the corporate side. It is strategic, long-term and both partners are focused on solving a problem”.
Corporate Social Responsibility / CSR Partnership
There are benefits of partnerships to both corporations and NGOs, the practical difficulties they present, and the elements necessary to establishing a healthy collaboration between both actors.
The right corporate partnership is a mutually beneficial arrangement: for the charity, funding, support and increased visibility; for the sponsor, brand building, good PR and the chance to “make a difference.”