Whether you are about to incorporate a nonprofit or have already incorporated your nonprofit entity, you need to start thinking of how to write the bylaws for your nonprofit.
So, what exactly are nonprofit bylaws and what purpose do they play? Well, bylaws are simply rules that help everyone to understand how the organization runs. Their role is to establish procedures for holding different elections, membership structure, quorum requirements, and many other aspects of the nonprofit. This simply means that bylaws are a sort of organizational manual, which is meant to bring order to your organization. Read the complete How-to Write your Nonprofit Bylaws with free sample bylaws templates.
Bylaws are different from organizational policies and procedures in that they are not as detailed as the operating policies and procedures so don’t confuse the two. Some states will require bylaws as part of the incorporating process, while others may not. You can learn more about the laws in your state by checking the Secretary of State’s office in your state.
If you plan to apply for 501(c)(3) status, the IRS doesn’t require any specific language to be used in your bylaws. But they will be looking for certain sections in the bylaws.
So, what does the IRS wants to see?
Well, for starters, they will look for your conflict of interest statement, purpose statement, indemnification clasue, and accounting period. This makes these components essential in your bylaws.
Besides what the IRS will be looking for, it will also be important to ensure that you have other components to make your bylaws more focused on managing the internal affairs of your nonprofit. We will look at some of these components briefly as we discuss how to write bylaws for your nonprofit.
Note: The above video gives a good outline of the different sections you should include in your bylaws.
What Articles to Include in your Bylaws
Your Organizations Name
The likely first section of your bylaws will the your organizations name. You should have this especially if you are already incorporated. If you need help naming your nonprofit have a look at HYPERLINK “to name page” YouTube video.
Corporate Purpose
Describe your corporate purpose by having a general purpose and a specific purpose. The IRS looks for certain language in this area so it is important to ensure that you follow it strictly especially if you will be looking for a 501(c)(3) status.
When writing the specific purpose, it is critical to ensure that you touch on the major activities that the nonprofit will be involved in but don’t be too specific so that you don’t end up limiting your scope and your growth prospects. (IRS language link).
Membership
Your membership could be limited to the board of directors or it could include members of the public.
If your nonprofit is open to public membership, you will have to follow any guidelines provided by the secretary of state in your state. Your public membership section should outline such things as eligibility for membership, any annual membership fees, the rights that each member will have, terms relating to resignation and termination, and whether there will be any members without voting rights followed by a description of their rights.
Membership Meetings
If you have public membership, come up with a clear description of when and how different meetings can be held. For instance, talk about annual meetings, regular meetings and special meetings. Describe how each will be held and who is responsible for setting up meetings. Proceed to talk about such things like notice for the different types of meetings (you don’t want to ambush your members with impromptu meetings) and then mention a thing or two about quorum. Don’t forget to talk about voting and decision making.
Board of Directors
Describe the board of directors in detail and ensure to outline such things as: powers, the minimum and maximum number of directors, their tenure, their responsibilities, their qualifications, meetings of directors (annual, special, and general meetings), quorum criteria, forfeiture, filling director vacancies, termination, confidentiality, and compensation.
You should also include topics relating to removal of members, voting, election of officers and how meetings are run.
[box type=”download” align=”alignleft” ]Downloadable sample bylaws, with complete article-by-article descriptions, are available on my Bylaws Page.[/box]
Committees
Describe the different committees that you are going to have in your nonprofit. It is important to look into the different scenarios that are likely to require committees then include that in your bylaws. However, you could try to leave the aspect of the formation of committees a little open to allow the set up new committees when the need arises. Some of the committees you are likely to need include a finance committee and possibly an executive committee.
Conflict of Interest
It is important to describe matters relating to conflict of interest and compensation. The IRS gives you some sample verbaige in their form 1023 instructions (the form you will fill out if applying for your 501.c.3 status). Learn more at MY PAGE
In this section of your bylaws you can introduce the purpose of the conflict of interest and compensation article then define the essential components like personal interests, financial interests and what compensation means in the eyes of your nonprofit.
Other aspects that will be critical in solving issues related to conflict of interest include the duty to disclose, determination of whether conflict of interest exists and the different procedures that will be important in solving any issues relating to conflict of interest. It is also important to mention how information about conflict of interest would be captured in meetings and issues relating to compensation where there is a conflict of interest.
This may seem overwhelming, but it doesn’t have to be. The IRS’s sample language is a great starting point and will help alleviate some of your concern about writing this section. (LINK)
Indemnification
You should also include an indemnification article within your bylaws to ensure that the board members and employees are protected, as individuals, if a lawsuit were filed against your organization.
Eventually you may want to get an insurance policy to cover your employees and board members against being held personally liable. This part is largely a legal matter so it is best to seek help from a lawyer on how to do this right.
Employees
You can also include a section about staff. Even if you don’t have any staff at the moment, you should be open to the likelihood that you will have paid staff at some point. As such, you may want to write down a few guidelines of how you want things to work. Ensure to use “may” and “shall” properly to ensure that you don’t end up making things hard for you.
Accounting Period
You can have a fiscal or a calendar account period. A calendar year is 12 consecutive months beginning January 1 and ending December 31. A fiscal year is 12 consecutive months ending on the last day of any month except December.
You should describe your nonprofit’s accounting period in your bylaws and have a clause stating that the nonprofit shall keep complete books of your account(s). The IRS will be looking for this so don’t leave it out.
Amending the Bylaws
Describe the process that will need to be followed when adopting the bylaws and the process that will need to be followed when amending the bylaws.
[box type=”info” align=”alignleft” ]For a complete “how to” about writing your nonprofit bylaws, including downloadable sample bylaws, visit my Bylaws Page.[/box]
Summary
You need to be thorough when addressing the different scenarios that are likely to occur in the life of your nonprofit. For instance, when you address how to remove a board member, don’t leave out how that position will be filled after removal. As such, you should carefully walk through as many “what if” scenarios as possible to ensure that your bylaws don’t have holes that could make it hard to operate smoothly.
Having said that, it is important to ensure that you keep your bylaws fairly flexible. Too much detail can end up forcing you to fulfill unnecessary duties on a regular basis.
The idea is to be general in your writing so that you can provide room for growth and flexibility. But at the same time, be detailed in what you do choose to include.
How to Write your Nonprofit Bylaws eBook: “Coming Soon”
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thanks Steve,this was very helpful.Good luck.