Understand the Function of Nonprofit Bylaws
When you start a nonprofit organization you are probably far more interested in the function of your organization within the community than making sure your organization is structured properly. However, you must have bylaws in place before you launch your organization. The bylaws serve the most important functions and will be extremely helpful when written correctly. You need bylaws in order to function within the law and to avoid disputes when they arise within your organization. And, believe me, disputes will arise.
Your nonprofit bylaws provide the backbone of governance for your organizations and you will eventually come to understand the importance of this invaluable document. Once you’ve written your bylaws, don’t put them on the back burner and forget about them. Schedule at least a yearly review of your bylaws to make sure they remain flexible to accommodate the organization’s function and to ensure that the organization is compliant with the law.
Below, I have provided a few of the key concepts to remember as you are establishing or reviewing your bylaws. Remember, if you need help writing your bylaws or want to have them reviewed, contact my office.
Make Sure You Understand Your State’s Nonprofit Corporation Law
A nonprofit organization is governed by its state of incorporation and the state’s statutes regarding nonprofits supersede any provision of the organization’s bylaws. It’s important to review the default provisions in your state’s nonprofit corporation act and determine if there are any defaults your organization would want to override by including a specific provision in the bylaws. You also must be sure that your bylaws do not permit practices that are prohibited by the state nonprofit corporation act; if so, those bylaw provisions will have no force or effect, and any actions taken pursuant to those provisions will be null and void.
Ensure Your Bylaws are Consistent with Other Regulatory Documents
If your nonprofit organization is governed or licensed by another state agency, such as a state department of education or department of banking, other state laws might provide additional mandatory bylaw provisions for your organization.
Try to Address All Foreseeable Scenarios
Sometimes bylaws will contain a provision about removing a board member, but leave out any provision covering how that position gets filled upon removal. Exercise patience upfront. It’s important to take the time to carefully walk through all of the “what-if” scenarios to avoid holes in the bylaws.
Coordinate the Actions of Your Bylaw Committee with Legal Advice
Take the initiative to coordinate with legal counsel from the beginning of your bylaw process, not after all of the committee’s work has been done, when it can be very difficult to start over. When writing or rewriting bylaws, a legal adviser will be able to spot inconsistencies and potential problems.
Keep Your Bylaws Flexible
How your nonprofit organization functions in the beginning may not be exactly the way it will need to function in the future. Building flexibility into the bylaws is important. For instance, you may want to include a range as opposed to an exact number of board members and allow the board to designate additional officers not named in the bylaws. This type of flexibility can help the organization moving forward.
This is by no means a comprehensive overview of bylaws, however it’s a glimpse into the importance of your governing documents. If you are just beginning your nonprofit and could use some help establishing your bylaws or if you are reviewing your bylaws and could use an experienced objective opinion, contact my office today.