Nonprofit Bylaws – What to Include & Common Mistakes
Nonprofit organizations exist to meet the needs of the public and address critical issues in our society. While every nonprofit has its own unique mission, all nonprofits need a comprehensive set of bylaws to guide how their organization is governed. Not only do nonprofit bylaws serve to meet legal and regulatory requirements, but they also promote accountability and transparency in the organization, thereby establishing trust with donors and the public. If you need assistance with creating nonprofit bylaws or have any questions relating to your nonprofit, contact the Jennifer V. Abelaj Law Firm at 212-328-9568 to learn how an experienced attorney can help you.
What Are Nonprofit Bylaws?
Nonprofit bylaws are the main governing document for a nonprofit corporation. They are created when the organization is established to guide the decisions and actions of the board of directors. They can also help the organization avoid issues and resolve conflicts by clearly defining rules related to authority and governance. Furthermore, bylaws are a means for holding board members accountable for their actions. Board members that fail to follow a nonprofit’s bylaws are in breach of their duty to the organization and may be held liable for their actions.
In addition to being used internally, nonprofit bylaws are used by third parties to the organization, such as investors, landlords, and financial institutions. By reviewing a nonprofit’s bylaws, third parties can assess how responsibly the organization is being managed and whether or not they are willing to do business with them.
Nonprofit Bylaws –State and Federal Requirements
Nonprofit organizations are governed by state law. A nonprofit organization’s bylaws should be created as a supplement to the rules defined under its state’s corporation code. When a nonprofit’s bylaws do not address a specific issue, it is assumed that the nonprofit follows the applicable rules of the state.
Federal law does not require specific provisions or language to be included in nonprofit bylaws. A nonprofit organization applying for 501(c)(3) tax-exempt status is required to submit its bylaws for review to the IRS, however, as part of the application process.
A skilled nonprofit attorney can assist you in creating your nonprofit bylaws in compliance with all applicable state laws. They can also help you address specific provisions in your bylaws to improve your chances of being granted 501(c)(3) tax-exempt status by the IRS. Contact The Jennifer V. Abelaj Law Firm to discuss your needs with an experienced nonprofit attorney today.
What Do Nonprofit Bylaws Include?
The specific details of a nonprofit’s bylaws are determined by the organization’s unique mission and purpose. In general, however, nonprofit bylaws include:
- Name of the organization
- Location of the organization’s principal office
- Mission and purpose of the organization
- Details about the board of directors, including the number of members, their roles, and compensation
- Rules and procedures relating to electing board members as well as their term lengths and limits
- Details about board meetings, including frequency and procedures
- Quorum requirements, including the number of votes needed to make a decision
- Policies related to maintaining corporate records
- Policies relating to conflicts of interest among board members
- Limitations on the activities of the nonprofit
- Rules and procedures for amending bylaws
Updating Nonprofit Bylaws
Nonprofit bylaws should be updated if the organization goes through any major change, such as merging with another organization or making changes to the management structure. The rules related to amending bylaws, as defined in the existing bylaws, must be followed before any changes can be made. Nonprofit bylaws should also be reviewed at least once per year by the board of directors to ensure they are up-to-date, and all procedures are being followed correctly.
As outlined in the Compliance Guide for 501(c)(3) organizations, bylaw amendments must be reported to the IRS. Some states also require that bylaw amendments are reported.
Common Mistakes Related to Nonprofit Bylaws
Common mistakes with bylaws that nonprofit organizations make are related to:
Operational Policies and Procedures
Bylaws exist to provide an overview of how an organization is governed. Specific details related to day-to-day operations can change frequently and, therefore, should be included in a policy manual written for management purposes.
Provisions for Making Amendments
Many nonprofits make the mistake of including stringent rules around making amendments to existing bylaws, such as requiring an unattainable number of votes to make a change. The needs and realities of a nonprofit organization can change over time. If it is difficult for the board of directors to make changes to the organization’s governance rules and management structure in line with the current needs of the organization, the bylaws will likely become outdated and the organization may develop a culture that is resistant to change.
Reviewing Bylaws
Many nonprofits fail to review their bylaws regularly. By reviewing its bylaws at least annually, a nonprofit and its board members can protect themselves from making mistakes and being held liable for their actions. All board members should review their organization’s bylaws at least once a year to ensure their decisions and actions are aligned with all of its provisions. New board members should be provided with the organization’s bylaws as soon as they are appointed to their position and should be required to familiarize themselves with all of its provisions.
Learn How an Experienced Attorney Can Assist with Your Nonprofit Bylaws
Nonprofit bylaws are an essential component of an organization’s success. Creating provisions that serve to enhance the effectiveness of your organization requires an in-depth understanding of nonprofit organization governance. State-specific nonprofit bylaw requirements, as well as federal requirements relating to 501(c)(3) organizations, must also be considered. At Jennifer V. Abelaj Law Firm, we are committed to assisting nonprofit organizations with all of their legal needs so they can focus on achieving their mission and purpose. Contact our experienced legal team today for a free consultation to learn more.
Non-Profit Directors Vs. Officers
When working with non-profits, a question often arises about the difference between non-profit directors vs. officers. Both directors and officers have their distinct roles within a non-profit organization. According to a report by the Office of the New York State Comptroller, New York accounted for the second-highest number of non-profit organizations in the United States. As of 2019, the number of non-profits in New York was over 33,700. Often, the smooth and efficient operation of a non-profit organization depends on both directors and officers. However, it is important to understand the difference between the two roles because each has its distinct duties and responsibilities. At Jennifer V. Abelaj Law Firm, we assist non-profit organizations with various legal needs. Whether you need help setting up a non-profit organization or counsel for your existing organization, consider calling 212-328-9568 to schedule a consultation.
Who Are Non-Profit Directors?
The board of directors is the governing body of the non-profit organization. Non-profit directors make high-level decisions that affect the organization and focus on its accountability. The primary duty of directors is the financial management of the non-profit organization. Key decisions that non-profit directors make include but are not limited to:
- Determining the organization’s mission
- Approving the organization’s annual budget
- Providing proper financial oversight
- Ensuring legal and ethical integrity
- Establishing governance policies
- Interviewing and electing officers and other managerial positions
- Maintaining the organization’s accountability
The non-profit organization’s bylaws usually govern how and when the board of directors will vote on issues affecting the organization. New members can join the board of directors if a designated individual or entity appoints them or the board of directors elects them. A non-profit director cannot make any key decisions on behalf of the non-profit organization unless the board votes on the issue or he or she has permission from the board.
Who Are Non-Profit Officers?
The board of directors can interview and elect non-profit officers. The primary duty of non-profit officers is to run the organization’s day-to-day operations within the limits of the authority that was delegated by the non-profit directors. Usually, the organization’s bylaws will indicate whether or not the elected officer must be a member of the board of directors. The most common positions for non-profit officers are secretary, president, and treasurer. However, the organization may also require officers to serve in the capacity of:
- Executive Director (Chief Executive Officer)
- Chief Financial Officer
- Chief Operating Officer
The duties and responsibilities of these non-profit officers include recruiting and retaining, paying the organization’s bills, keeping records, and more.
What Is the Difference Between Non-Profit Directors vs. Officers?
Unlike non-profit officers, directors do not run the day-to-day operations of the organization. The duties and responsibilities of non-profit directors include delegating authorities related to the management of the organization to non-profit officers. The main comparison of non-profit directors vs. officers is that directors control and monitor the day-to-date operations of the non-profit organization while officers are the ones who run the daily operations in a way that aligns with the vision and mission of the organization. The success of the non-profit organization depends on the good management and leadership skills of directors and the officers’ ability to fulfill key objectives when running the day-to-day operations. Without non-profit officers, directors would have to hold meetings and vote on every daily decision that must be made on behalf of the organization.
Can Non-Profit Directors Also Serve as Officers?
Yes, non-profit directors can also be officers. However, doing so can cause a conflict of interest. For this reason, most non-profit organizations choose to have separate people to serve as non-profit directors and officers to avoid unnecessary disagreements and conflicts. However, it is not uncommon for non-profit directors to also serve as officers. When one individual serves as both a non-profit director and officer, the organization usually pays that person as an independent contractor for serving as the director and as an employee for performing the duties of the officer.
However, if a non-profit organization appoints a director to also serve as the officer, it is critical to have a conflict-of-interest policy in place to address situations when a director/officer may benefit from personal or financial interests. At Jennifer V. Abelaj Law Firm, we assist non-profits with resolving their conflicts of interest and helping them with a wide range of other legal issues.
Non-Profit Directors and Officers: Avoiding Conflict of Interest
When a non-profit director also serves as the organization’s officer, there may be the potential for a conflict of interest. Many states, therefore, require non-profit organizations to adopt a conflict-of-interest policy. New York is one of those states. Under the New York Non-Profit Revitalization Act of 2013, all non-profits must have a conflict-of-interest policy. The Act also offers guidelines for drafting the policy and requires that non-profit directors, officers, and employees act in the best interest of the non-profit organization.
A well-drafted and valid conflict-of-interest policy must contain a provision requiring parties in conflict to disclose the details of the conflict. The policy must also prohibit members of the board of directors from voting on a matter in which they may have a potential conflict of interest. The policy must also contain the mechanisms for resolving and managing potential conflicts. In fact, IRS Form 990 specifically asks whether or not the non-profit organization has a conflict-of-interest policy and whether the policy establishes mechanisms for managing conflicts within the organization.
Non-Profit Attorneys Can Help
Directors and officers serve crucial roles in a non-profit organization, which is why it is essential to understand non-profit directors vs. officers to ensure efficient management of the organization. Jennifer V. Abelaj Law Firm provides non-profits in New York with personalized legal representation in various legal matters, including forming the organization, managing conflicts of interests, drafting bylaws and governing documents, and many more. Consider calling 212-328-9568 to schedule a case review with our experienced non-profit attorneys.
Guide To Non-Profit Board Meetings: Minutes and Agendas
Holding a productive board meeting requires thorough planning. Crafting a well-structured agenda can help ensure that all of the organization’s most pertinent concerns are covered. During the non-profit board meeting, minutes will serve as an official recording of what takes place. Proficient handling of both minutes and agendas can add significant benefit to the structure of nonprofit board meetings. You can learn more about these and other nonprofit strategies by contacting the experienced New York nonprofit lawyers at the Jennifer V. Abelaj Law Firm (abelajlaw.com): call today at 212-328-9568.
What Should a Nonprofit Include in Board Meeting Minutes?
The Internal Revenue Service (IRS) and most states legally require nonprofit organizations (and all other corporations) to record and keep copies of their board meeting minutes. According to the New York Department of State, not-for-profit corporations must maintain minutes for the proceedings of members, the board of directors, and the executive committee. Minutes should be treated as a concise summary of the meeting. While there are several key components that should be included, it is not necessary to transcribe the meeting word-for-word.
Nonprofits should consider including the following information in their minutes records:
- The time and date that the meeting is held
- The name of the venue where the meeting is held
- Name of the organization holding the meeting
- The names of participants, as well as board members who were absent
- Names of other non-board member attendees
- Identify who is recording the minutes
- Purpose of the meeting
- A record that the previous meeting’s minutes have been approved
- A summary of motions, including an exact transcription of any motion statements, the name of the person who made the motion, and the results of the vote
- The time the meeting ends and a signature from the individual who recorded the minutes
Legal Considerations For Board Meeting Minutes
In order to protect from potential future liability issues, it is usually best to keep minutes as concise as possible. Unnecessary information may provide little value while potentially opening up the possibility of legal complications. Showing legal compliance with both IRS and state standards is one of the main benefits of keeping a concise yet accurate minutes record.
Some organizations choose to employ legal counsel for minutes recording on the basis of confidentiality and to ensure all legal standards are met. You can learn more about the legal aspects of keeping minutes for nonprofit board meetings by contacting the Jennifer V. Abelaj Law Firm.
Creating an Effective Board Meeting Agenda
A well-prepared board meeting agenda can help determine the course of the meeting. A thoroughly researched agenda will address all of the most worthwhile topics for the organization at the time of the meeting, and ideally, arrive at valuable answers to many of the organization’s current concerns. Conversely, poorly prepared board meeting agendas might waste time and make nonprofit board meetings much less productive.
What Information Should a Nonprofit Board Meeting Agenda Contain?
While each board meeting agenda will vary, there are a few types of information commonly found in these documents:
- Header – This should only include basic information, such as the name of the nonprofit, contact information for the organization, and the board meeting date, time, and location.
- Call to order – The call to order starts the meeting, usually with a statement from the chair to the board, company mission statements, and introductions.
- Agenda changes – Following the call to order, the chair may ask if anyone would like to suggest changes to the agenda, including adding or deleting information.
- Minutes approval – During this stage, board members can either approve the minutes of the previous meeting or suggest corrections. The board can provide final approval for these minutes after the secretary has finished correcting any errors.
- Reports – The Executive Director and Financial Director may each provide reports to board members, which cover the nonprofit’s operations, projects, business outlook, finances, and more.
- Old and new business concerns – Unresolved previous business concerns and new business items may be discussed at this stage.
- Special announcements – If applicable, the chair can make special announcements regarding the organization. Board members may also be given the opportunity to make announcements or mention other business concerns.
- Adjournment – The board chair may formally end the meeting, including a statement of the ending time which can be included in the board meeting minutes. The next meeting date may also be mentioned during the adjournment.
Board Room Agenda Best Practices
Every nonprofit will have its own needs and unique strategy for board meeting agendas. However, there are a few best practices that most organizations will benefit from adhering to:
- Set a beginning and end time for the meeting.
- Budget time towards discussing the most important organizational concerns and voting on these issues.
- Organize and distribute all relevant information regarding the board meeting topics to all board members. This includes research, reports, and background information.
- Include a list of questions for board members, carefully considering how they are phrased, the order in which they will be asked, and who will be asked to answer.
The nonprofit chair and board secretary should collaborate to plan the agenda, which may be a combination of standard best practices and unique concerns of the business.
Learn More About Minutes and Agendas by Contacting an Experienced New York Nonprofit Lawyer
New nonprofits and existing ones alike can often benefit from the assistance of legal counsel. At the Jennifer V. Abelaj Law Firm, our experienced New York nonprofit lawyers are available to assist not-for-profit organizations with a variety of legal matters. We are prepared to help organizations get off the ground during the early stages, make sure they are tax-compliant and adherent to state and federal legal standards, and assist with other related matters.
If you are looking for guidance regarding agendas, minutes, or any other concerns related to nonprofit board meetings, you can learn more about your organization’s options in a free consultation: give us a call today at 212-328-9568.