Bylaws Definition Nonprofit: Everything You Need to Know
Nonprofit Bylaws are a legal document that outlines how an organization will be governed.3 min read
Nonprofit Bylaws are a legal document that outlines how an organization will be governed. Bylaws manage the membership requirements, frequency of meetings, amendment procedures, voting procedures, and more.
What Are Nonprofit Bylaws?
Bylaws are considered the operating manual for a nonprofit organization. They consist of:
- Duties and roles of officers and directors
- Rules regarding how the board of directors will function and its size limit
- Rules regarding the procedures for electing directors, holding meetings, and appointing officers
- How the funds received from grants will be distributed
- A description of the conflict of interest procedures and policies
- Other relevant corporate governance issues
Nonprofit governance issues will usually be addressed by state nonprofit law. The bylaws of the organization may be customized based on the nonprofit's requirements, as long as they don't violate state law.
The bylaws of a nonprofit are not filed publicly, but they do add transparency and accountability to the actions taken by the officers and board of directors. The bylaws should be updated and amended as the organization evolves and grows. Under the Internal Revenue Code (IRC) Section 501(c)(3), a nonprofit organization is required to file an annual return and must list any changes to the name, address, and structure. For example, an annual report should notify the IRS of any changes made to the bylaws that occurred during the course of the year.
The Exempt Organizations Determinations Office should be notified of any changes to the bylaws if the organization isn't required to file an annual return. Remember, there are some states that will require nonprofits to file and report changes made to the bylaws. A nonprofit's bylaws may also be referred to as a:
- Nonprofit corporation bylaws
- Bylaws for nonprofit organization
How To Write Your Nonprofit Bylaws
When writing a nonprofit's bylaws it's important to remember that there's a difference between the words "shall" and "may." “Shall” is generally used to express an intended provision in the form of offers or suggestions. On the other hand, “may” is generally used to express possibility or permission. Also, check the laws in the state in which the organization has been incorporated to make sure the bylaws meet state requirements.
Your local Secretary of State office should be able to supply the applicable laws for your nonprofit. The bylaws of a nonprofit organization will typically contain the following 12 articles:
- Name of the organization: The name of the nonprofit organization
- Corporation purpose: The purpose of the nonprofit organization
- Membership: Define who is currently a member and how an individual becomes a member
- Meetings of members: Address when the meetings of the members will occur
- Board of directors: Identify the general powers, tenure, requirements, and qualifications of the board of directors
- Officers: Outline what positions will be created for the executive officers
- Committees: Illustrate what and how committee will be formed
- Corporate staff: Express the intent of the nonprofit to hire corporate staff
- Conflict of interest and compensation: Describe how to protect the nonprofit when entering into a transaction that potentially benefits a member of the board of directors or an officer
- Indemnification: An indemnification clause is added to the bylaws to help prevent employees and board members from being sued
- Books and records: Define where the complete book and record of bylaws will be filed
- Amendments: Explain how the bylaws may be amended
Nonprofit Bylaws – The Do's and Don'ts
- Do: Get help in creating and amending the bylaws from expert. A professional services firm or an attorney may be able to add some assistance. Two things to take into consideration:
- Don't assume your current attorney understands nonprofits
- Bylaws are a legal document and the board of directors should supply input and vote to adopt them
- Do: Be as simple and basic as possible. Stick to the addressing the highest levels of governing issues, such as:
- Board structure
- Organization purpose
- Officer position responsibilities
- Meeting requirements
- Voting rights
- Do: Follow-through with the intentions of the bylaws
- Do: Hold the board members legally responsible for understanding and adopting the bylaws
- Do: Keep the bylaws relevant
- Don't: Get so detailed that the bylaws turn into a corporate procedure and policy manual
- Don't: Include bylaws that restrict future boards from acting effectively or efficiently
- Don't: Forget to review the bylaws on an annual basis
If you need help with nonprofit bylaws and the definition of a nonprofit, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.