skip to Main Content

America's First Choice for Nonprofit Startup and Compliance

airport executive plaza

When Foundation Group launched in 1995, we were the first specialty firm in America dedicated exclusively to starting nonprofits and helping them to stay compliant with state and federal regulations.

20 years later, we're still going strong!  In fact, our client base continues to grow exponentially every year...and we've never been more committed to bringing our clients the expertise they need to see their vision come to pass.  Simply put, we love what we do and we're passionate about doing it with excellence!

We were the first...and we've never stopped leading!  Call us and see why we are America's first choice for nonprofit startup and compliance services.

Nonprofit Bylaws – The Dos and Don’ts

Bylaws

Bring up the subject of a nonprofit’s bylaws and you are sure to get an interesting response.  For many nonprofit’s, their bylaws are just some forgotten document, full of legalese, gathering dust in a file cabinet somewhere.  No one on the current board of directors knows who prepared them, nor what any of the provisions mean.  They certainly are not referring back to them for any reason.  For a nonprofit that actively uses its bylaws, the bylaws can be an interesting glimpse into the organization’s governing psyche.  Are they control freaks…or just the opposite?

One fact is sure:  a nonprofit’s bylaws are considered a legal document that dictates how the organization must be governed.  Failure by a board to follow the stipulations outlined in the bylaws can have devastating consequences to the organization…and potentially even to the board members themselves.  Since bylaws are such a big deal, it stands to reason that what they contain and how they are used should be taken extremely seriously.  But what about that?  Let’s take a look at some Dos and Don’ts regarding nonprofit bylaws.

DO:  Get assistance in drafting or amending your bylaws from an expert experienced in nonprofit matters.  This could be an attorney or a professional services firm like Foundation Group.  Two words of caution here:  1)  Don’t assume your attorney understands nonprofit issues.  We have helped fix countless attorney-prepared bylaws, and 2)  Bylaws are a legal document, so using a non-attorney professional means you are getting self-help assistance.  It is still the board’s responsibility to have input into the provisions and to vote to adopt the final product.

DO:  Stick to the basics.  It is a good practice to think of your bylaws much like the US Constitution.  Like the Constitution, your bylaws should deal with only the highest level of governing issues such as:  Organizational purpose, board structure, officer position descriptions and responsibilities, terms of board service, officer/board member succession and removal, official meeting requirements, membership provisions, voting rights, conflict-of-interest policy and any other non-negotiables that your governing body deems necessary.  One critical element often erroneously omitted is the provision for amending the bylaws in the future.

DO:  Know what is in your bylaws.  As a board member, you have a duty to understand what each and every provision means.  If there are provisions you do not understand, ask another board member or consult a professional.

DO:  Follow the provisions religiously.  You not only have a duty to understand your bylaws, you are legally accountable for following them.  This is not optional.  A court of law will side with your bylaws in any dispute brought by another board member, an employee, volunteer or recipient of services who may have a grievance.

DO:  Keep your bylaws relevant.  Times and circumstances change…and your governing document should reflect those changes.  If your bylaws need to be amended to reflect current realities, do it.  Make sure the changes make long-term sense (see below) and follow the amendment procedures as outlined.

DON’T:  Treat your bylaws as a policy and procedure manual.  We have seen bylaws that contain everything from employee vacation rules to the organization’s anti-smoking policy.  These are totally inappropriate for bylaws.  Create a separate policy manual for management purposes.  Again, think Constitution vs. US Code (laws).

DON’T:  Include provisions that tie the hands of future boards.  I currently sit on the board of an HOA with absurd provisions that negatively affect all homeowners.  But, amending them requires a 2/3 approval of every member eligible to vote (about 200 households).  We can’t get 2/3 of the members to vote, much less get super-majority approval.  Think long and hard about the downstream consequences to all provisions.

DON’T:  Fail to review the bylaws.  At least annually, all board members should re-familiarize themselves with the provisions.  This will go a long way toward preventing costly errors.  New board members should be provided with a copy immediately upon installation.

Proper use of an organization’s bylaws not only provides the necessary structure to effective governance, it eliminates the willy-nilly guesswork so common among ineffective nonprofits.  Good governance establishes a foundation for good work.

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

Leave a Reply

38 Comments on "Nonprofit Bylaws – The Dos and Don’ts"

Notify of
avatar
Sort by:   newest | oldest | most voted
Lisa Suydam
Guest
I am a member of Alcohoics Anonymous and I have a question regarding our mission statement and bylaws for our club where we meet, which is a 501c3. Our mission statement (or charter) states that our purpose is to provide meeting space for Alcoholics Anonymous and Ala-non family groups. That is our entire statement. We have club members who are wanting to allow Narcotics Anonymous and Cocaine Anonymous to meet at our club. Some club members (one of which is a charter member) is saying that we are not allowed to do so, per our mission statement, and that if… Read more »
Justin Williamson
Admin
Hi, Lisa. The governing body simply needs to meet to decide whether it would like to expand its programs to additional target groups, and then amend the purpose statement within the bylaws, and likely the organizing corporate documents with the state. With the program activity being essentially the same, the 501(c)(3) status does already support the expansion of the target audience under the approved charitable purpose. Even if no amendments were made to the corporate and governing documents, the IRS would consider this a natural expansion of the approved programs, which would not jeopardize the 501(c)(3) status. I hope this… Read more »
Lisa Suydam
Guest

That definitely helps. Where would I get a copy of the original bylaws that were filed with the IRS. And, what about UBI? If we have soda machines, fundraisers, etc so that we can pay the mortgage and keep the lights on, is that acceptable?

Justin Williamson
Admin
UBI is perfectly OK for nonprofits, but it requires a much higher level of accountability and sophistication than raising funds through program-related revenue. UBI is also defined as income from a business activity that is not substantially related to the nonprofit’s exempt purpose AND that is regularly carried on. So, activities such as fundraising wouldn’t typically fall under UBI. If you do plan on fundraising, be sure that you have filed for Charitable Solicitations in your state (if your state is one of the 40 that requires it). If you’re not registered, you can contact our office for more info… Read more »
Tonia R Cain
Guest

Recently our chairperson resigned from the board. Do we need to refile now or can we wait until our annual refiling date?

Justin Williamson
Admin

If you have a vacant spot on your board, the first thing you should do is follow the guidelines of your Bylaws to find a replacement. You can report the change on your next Form 990 filing.

mike
Guest
Hello Greg, I’m not sure what to do here. I fell like I need to report a company I know but I am not sure how to go about it or if they are even breaking the rules. I think this company is paying for this persons home, car, and I know her grandkids cell phone bills but I don’t know if any of that is legal or not or if I should even do anything. What would you suggest I do? Sorry if this is off the current subject but I could post on a more related blog for… Read more »
Justin Williamson
Admin

You should first contact the leadership of the nonprofit (I’m assuming the company you are referencing here is a nonprofit organization). If it’s something the leadership team is aware of, it is up to them to correct any noncompliant activity or else they could become personally responsible and subject to fines by the state. You could also try reaching out to the IRS directly at 877-829-5500.

S Grace
Guest

Hi Greg, if a non-profit has an appendix that is referenced in their bylaws, can I, as a member, have access to this appendix? If the appendix is in the P & P and is only available to board members? Thanks!

Justin Williamson
Admin

A nonprofit’s Bylaws are considered to be public record, so the board members should be able to give you a copy of them.

Susan Larson
Guest

Greg, I am a volunteer working with a group of citizens trying to get answers about a recent decision by our local nonprofit hospital. We asked the board chair for a copy of the bylaws and she said they are private and referred us to the hospital administrator. Is this correct. Aren’t they part of the public record?

Justin Williamson
Admin

When a nonprofit files for tax-exempt status with the IRS, they must include a copy of their bylaws in addition to the application. Because their tax-exempt application is public record, then yes, bylaws are public record by extension. You should be able to get a copy of either the bylaws. Perhaps the hospital administrator will help you out a little further.

Marlene Gottfried
Guest

We are a small local charitable club having 501(c)(3) status. How difficult and what are the steps involved in amending our bylaws. A bylaw section currently states officers can serve no more than two consecutive years in an office. We are considering amending that. We’d appreciate your input.

Justin Williamson
Admin

Bylaws of a nonprofit can be amended by a majority vote of the Board of Directors. Be sure you have the majority of board members present, and that the vote is documented in Meeting Minutes.

Debra Andrews
Guest
Hi Greg. I am on a 3 person Leadership team of a missions based ministry. All 3 of us are way not new to the organization, but we are new in overseeing the ministry location. I am presently the President. In reading the bylaws, all 3 of us are not comfortable with how the governing bylaws are stated. Are we even able to change the underlying governing laws now? (Of basically “where does the buck stop?”) The problem is that a long time ago, we had a much larger membership, and something called the “voting staff” that voted on such… Read more »
Justin Williamson
Admin
Bylaws of a nonprofit can be amended by a majority vote of the Board of Directors. Because this is a matter for the Board of Directors, it doesn’t seem like the voting staff needs to be involved, unless the current draft of the Bylaws states differently. Be sure you have the majority of board members present, and that the vote is documented in Meeting Minutes. If an amendment is approved, it would be in your best interest to inform everyone involved in the management of the nonprofit so they are aware of the adjustments decided upon by the board.
Jennifer
Guest
Hey Greg, I’m a former member/student/employee of a local non profit that is for the public educational martial arts school. 12 years ago I resigned my post as an instructor and was then denied admittance into any of their sponsored events. I recently received an email from the exec. Director asserting they have a policy against my inclusion. I’ve never harmed this organization nor anyone in it. No criminal acts were committed by me, and no remedy-able(sp.?) offenses were explained. Is this possible, that they have incorporated a policy? And if so, do I have a right to see it?… Read more »
Justin Williamson
Admin

Events put on by a nonprofit organization should be open to the general public. You should be able to request a copy of this policy, and if you feel that this matter needs to be taken further, speak with an attorney.

Michael Valencia
Guest
Hey Greg, I work for a non-profit that owns a very profitable product and they decided to create another company that is a for-profit company to make money out of this one product. This new for-profit company is selling this product and making a killing (we are talking about $25MM a year), but this new product is still being made (and provide phone and technical support) by employees working and getting paid under the non-profit company. Is this legal to have your staff being paid using tax breaks and having them “give” this product to the for-profit to sell? Thanks.… Read more »
William M. Brown
Guest

Is a qualified 501(c)(7) organization required to notice the IRS/TE-GE of a change to the organization’s governing documents that has the effect of substantially changing the organization’s exempt purpose…charging all non-resident non-members a fee to enter upon the community’s private gated property for any reason whether related or unrelated to the exempt organization…however, the entry fee, for whatever purpose, is paid (revenue) to the exempt organization.

If so, by what means?

Thank you in advance.

Suzanne
Guest
I was approached to run for an executive board position for a school’s HSA (home & school association (which is the same a PTO or PTA)). I accepted to run as co-president (which the by-laws say I can do). The principal and current president (the presidents term ends June 30th) asked to meet with me and told me that they don’t really want a co-president “because working with one person has just worked better”. I advised them the by-laws state differently and they just said they should change them. The principal has also defamed by character and slandered me for… Read more »
Brian
Guest
Hello Greg: This is great and timely information. Our 501(c)(3) ski club has been around for over 60 years, and has run well until recently. The last two boards don’t seem to have any familiarity with the bylaws, or just don’t care (I’m not sure which). The have ignored the specific clause in the bylaws that says the club must be run “in accordance with the wishes of the general membership” (not just a few), and have also tried to make changes to the bylaws to eliminate member input on how the club is run, with said attempt also being… Read more »
I. krimsky
Guest

Can a non profit force board members to live in a specific city

Justin Williamson
Admin

Technically speaking, a nonprofit’s Bylaws could include a provision that requires board members to live locally as a condition of service. An HOA, for example, may require all board members to live in the neighborhood the HOA serves. However, such a restriction may result in difficulties if you decide to expand the board or need to replace members, depending upon the circumstances.

leyla
Guest
Hello Greg, I am in the early process of establishing a non-profit. I am doing this by myself, I am very green and I am in need an assistant, I am unsure as to which type of org to go with, a public charity or a private foundation. I don’t have an endowment but the mission is to raise consciousness and appeal to every able adult to donate to at-risk children around the world. I am not sure if I would funnel donations to public charities such as “Save the Children” or if the non-profit would also include a way… Read more »
Justin Williamson
Admin

Hi Leyla, If you haven’t done this type of work before, you may fall into some pitfalls that put your nonprofit vision at risk. I recommend reaching out to our office to discuss your ideas with one of our Nonprofit Advisors. One of our core services is assisting startups in the process of establishing a new organization. This process doesn’t make a good do-it-yourself project. Feel free to give us a call, or better yet, submit an inquiry here: https://www.501c3.org/501c3-services/start-a-501c3-nonprofit/

John
Guest

I am an incoming executive director for a non-profit. Years ago the board voted in a request by staff/employees (all management heads) to have a vote in the Board of Directors meeting. 1) Shouldn’t be board members alone have the vote on business matters for the organization?
2) Should I push to change the by-laws of the organization/board members to change it?

There voice should be heard but I don’t believe that the employees should be voting at board meetings. Am I off base by thinking this?

Thank you for listening/reading.

Karen
Guest

Greg, you have an extraordinarily informative site. Question: I am looking to access the bylaws of a California nonprofit. They are unwilling to disclose this information to their employees and members. Is there anything I can do to obtain this info without legal action?

Sincerely,
Karen Williams

George G. Shepherd
Guest

Having just completed the by-laws for my nonprofit the rampAtheater Inc, I found this article informative. I have a few changes to make. Thank you.

Sincerely,
George G. Shepherd

FRANK
Guest

IT’S GOOD ADVICE WHEN IT COMES FROM SOMEONE LIKE YOU, WHO IS CURRENT AND KNOW THEIR STUFF.

THANKS,
Frank

P.S. EMAIL ME YOUR TAKE ON BROAD EXECUTIVE AUTHORITY. For Minstry 501c3, not a Church, Just Ministries/ Outreach, etc.

Pamela Grow
Guest

Excellent post Greg. Like Gayle I appreciated the Constitution vs US Code – makes it an easily understood concept. I’ll be forwarding this on to a few clients – thanks!

Gayle L. Gifford, ACFRE
Guest

Greg,
As a consultant to nonprofit boards, I see lots of bylaws in the course of a year and most of them make me cringe.
I want to reinforce how seriously US courts take the bylaws. We’ve had at least two cases locally in which disgruntled donors or members took action … both came down to what the bylaws said.
Thank you for such a straightforward approach. I really appreciate the Constitution vs US Code metaphor and plan to use that from now on to help explain the difference… giving full credit to you, of course.

trackback

[…] This post was mentioned on Twitter by Foundation Group, Mickie Kennedy. Mickie Kennedy said: Nonprofit Bylaws – The Dos and Don’ts: Bring up the subject of a nonprofit’s bylaws and you are sure … http://bit.ly/fPBC2j #nonprofit […]

wpDiscuz
Back To Top
Free eBook Download!
Successfully Starting a New Nonprofit
  • Defining Your Nonprofit's Purpose
  • Nonprofit Ownership
  • Board of Directors
  • Executive Compensation
  • Fundraising & Compliance Basics
Start a 501(c)(3) Nonprofit
Introducing the SureStart nonprofit formation system.
Cost-Effective. Turnkey. Guaranteed!

Don’t compromise your vision. Discover just what you can accomplish with the right assistance!