Starting a Nonprofit: Bylaws
Most people don’t start a nonprofit because they love thinking about things such as bylaws! They do so to pursue a passion of their heart, or meet a need that hits close to home.
Yet a well-crafted set of bylaws can help make sure the nonprofit operates exactly as intended to meet those important needs. Bylaws can prevent someone from highjacking the vital mission of the nonprofit.
Articles of Incorporation serve the same purpose for an entity as the Constitution serves for the United States. They are the ultimate authority on all issues. However, more “laws” are needed to govern the organization, in much the same way as legislative laws are needed in the US to further govern the country. Accordingly, a set of bylaws should be drafted early in the organization’s existence to lay out in more detail how the organization will function.
Out of good intentions, the leaders of a newly formed nonprofit organization often borrow a set of bylaws from another entity, and then cut and paste from that document to create their own set of bylaws. While it may be beneficial to look to other similarly-situated organizations to learn best practices, more will be required to ensure that the bylaws meet the needs of the specific organization.
Bylaws should be specific, and written in such a way as to leave no “dead ends” on any issues. Bylaws are easier to amend, and therefore should contain the kinds of provisions that may need to be updated periodically.
Bylaws commonly include the name and purpose of the organization, the location of its principal and other offices, membership requirements and responsibilities (if the organization is a membership organization), Board of Director appointment and duration of service, Board of Director roles and responsibilities, Corporate Officer appointment and duration of service, Corporate Officer roles and responsibilities, procedures for amending the bylaws, the dates of the organization’s fiscal year, and the authority for receiving and disbursing funds.
Care should be taken if any provisions are included in both the bylaws and the Articles of Incorporation to ensure consistency. The Articles will trump the bylaws if there are any contradictions between the documents. Depending on the contours of state law, the bylaws may need to include an Indemnification Clause empowering the organization to protect its directors and officers from liability for actions taken. The organization may include its Conflict of Interest Policy as a clause in its bylaws in order to address how conflicts will be addressed.
One bylaws are drafted, reviewed by legal counsel, and deemed ready, they should be formally adopted by the Board Members of the organization. The adoption should be included in meeting minutes, and the Board Members (or at least the Secretary of the organization) should sign the originally adopted bylaws document.
Bylaws should be reviewed periodically by the Board Members. Keep in mind that bylaws can, and should, be amended from time to time in order to best meet the needs of the organization.
