DEFINITION:
Like any other type of structured organization, there are many pieces needed to run a successful nonprofit organization. The list below identifies the most common roles within a nonprofit organization and their responsibilities.
Incorporator: The incorporator is the person(s) responsible for filing documents on the state level (Articles of Incorporation, Amendments to the Articles, etc.). This role is responsible only for state documents and does not handle any information on the federal level.
Registered Agent: A registered agent is chosen by the organization to receive all legal documents on behalf of the organization. Registered agents are required to have a physical mailing address in the organization’s state of incorporation.
Board Member: Board members are the governing body of the organization. The members of the board of directors are legally accountable for the organization’s activities. Board members meet to discuss and vote on the affairs of the organization.
Officer: Officers are elected by an organization’s board of directors. Officers are given a higher level of responsibility compared to board members. Typically, board members of a nonprofit elect a President, Secretary, and Treasurer who act as officers. Officer roles should be specifically outlined in an organization’s bylaws.
Employee: Employees are typically paid by the employer in regular amounts at stated intervals (weekly, bi-weekly, etc.). In most cases, tools and equipment are furnished by the employer (in this case, the organization is the employer). Employees are given a W-2 by the organization for their personal taxes.
Independent Contractor: Independent contractors are typically paid by each job performed, either at a negotiated flat rate, by commission, or by a competitive bid. Contractors usually work as they choose, unless specifically stated otherwise in a contract. Contractors typically use their own equipment. Contractors are given 1099’s for their personal taxes.
Volunteer: Volunteers are individuals who dedicate their time to assist organizations and their programs. To be considered a volunteer, an individual cannot receive any form of compensation for time or services rendered to the organization.
Member: A member of an organization is allowed to vote on matters of governance, direction, approval of budgets, activities, staffing, and/or substantial financial obligations that the organization might undertake. Typically, organizations require individuals to pay a membership fee to become a voting member of the organization.
BEST PRACTICES:
Board Member: Board members should be individuals who are interested in the overall success of the organization. An annual meeting must occur with all board members present. Additional meetings might take place throughout the year to allow board members to discuss and vote on decisions. Any individual can become a board member, but there are guidelines in place that help public charities avoid inurement (see Conflict of Interest document).
Employees: It is best practice for board members not to serve as an employee of the organization, as this creates a conflict of interest (however it is possible; refer to Conflict of Interest document). Employees should be competent individuals who have proper skills and job experience in the role they serve. Salaries must be set at a reasonable amount based on similar positions in the field.
Independent Contractor: An organization should execute a written agreement that outlines reasonable compensation and expectations of an independent contractor. It is best practice to avoid percentage-based contracts. If an organization does or plans to use percentage-based contracts, then a maximum amount of compensation should be established to avoid inurement.
Officers: Though officers are typically board members, there are no guidelines or requirements that suggest an organization cannot elect an individual outside the board to be an officer for the organization. It is possible for an individual to hold two separate offices, with the exception that the President cannot also serve as the Secretary.
Volunteer: In some cases, volunteers should be subject to a background check before volunteering time or services to the organization. As stated above, volunteers should never receive compensation for services to an organization. Some form of gifts may be permissible to give volunteers (an event t-shirt, for example). Organizations may also provide training/education for volunteers (such as CPR training).
Member: The organization may include benefits to its members (such as free/discounted prices to events). Organizations must have criteria for membership, fees required, and perhaps benefits and responsibilities. Do not mistake this for membership funding. Membership funding allows individuals to “say” they are members without being a voting member (a zoo membership is good example of membership funding).
RESOURCE(S):
- Conflict of Interest
- Compensation Matters
- Independent Contractor vs. Employee
- Directors vs. Members
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