Best Practices for Nonprofit Bylaws
Governmental bodies do their best to serve the public, but there are never enough financial resources and personnel to fill every need. Nonprofit organizations also serve the public interest by filling in some of the gaps in service that governments can’t provide. Nonprofit organizations play an essential role in the economy. Most are incredibly dedicated and work very hard to strengthen their communities.
Nonprofit organizations address a wide variety of needs, including religion, science, the economy, health, arts, civil rights, education and the environment. Of course, nonprofits enlist the help of many others along the way. Corporations, foundations, governments and individuals donate to their worthy causes.
The growth and sustainability of nonprofits depend on good governance. Accountability, transparency and efficiency help to foster excellence in nonprofits and inspire the trust of the people they serve.
The bylaws provide written rules for running the organization and rules for board directors to rely on in their duties as organizational leaders. Best practices for creating the bylaws for nonprofits ensure that organizations will be well governed and abide by state and local laws.
Why Are Nonprofit Bylaws Important?
The founders of nonprofit organizations create the bylaws when the organization is being established. They are the main governance documents for the organization. The bylaws are a set of rules that supplement the rules in the state statutes. It’s important for board directors to be aware of all state and local laws that pertain to nonprofit organizations and to be sure that the new bylaws don’t contradict laws at any level of government. Board directors should also be aware of their legal duties and responsibilities and that they can be held personally liable for not following the bylaws.
The bylaws serve as a sort of handbook for nonprofit board directors. The bylaws outline how the organization will be run and serve as a guide for the board as they take actions and make decisions. When questions arise, the bylaws can be extremely helpful in preventing or resolving disagreements.
Best Practices for Creating Nonprofit Bylaws
In addition to nonprofit organizations, public and private companies also have bylaws to guide them. In all cases, the bylaws are legal documents. While nonprofit board directors can create their own bylaws, it’s wise to have a lawyer or legal team review them for accuracy and comprehensiveness. Statutes have legal requirements for what nonprofits must include in their bylaws. It’s important for board directors to understand the basics of legal terms such as “shall” and “may.” From a legal perspective, “may” means that something is optional and “shall” means something has to happen — it’s not optional.
State laws may have various requirements such as how many board members the board must have and other specifics. These are bases that must be covered.
Nonprofit boards aren’t required to be transparent or accountable, but there are many benefits to them in doing so. Nonprofits that are open and honest with their stakeholders will inspire trust. That is a huge benefit that often helps them get volunteers and donations.
A good tip for nonprofits is to create bylaws with the long term in mind. Bylaws should include the most fundamental rules only. Boards can make amendments to the bylaws as needed. Things that are apt to change are better written as policies. For example, boards should put how often they will have meetings in the bylaws, but not specify the day or time of meetings.
Bylaws should be customized according to the needs of the organization because each of them was created for different purposes. Another important issue that boards should consider is to make sure that the bylaws reflect the mission, vision and operational needs of the organization. Nonprofit organizations should review their bylaws at least every two years to ensure that the information they’re putting on IRS Form 990 is accurate.
In the excitement of creating a nonprofit, it may seem strange for boards to add a section on dissolution to the bylaws. However, nonprofits must have a dissolution clause in the bylaws according to legal requirements. Because nonprofits are required to re-invest monies back into their charities to maintain tax-exempt status, if the organization ever dissolves, there are specific rules for how they can distribute their assets.
Board Management Software Is a Secure Platform for Creating and Storing Bylaws
Nonprofit boards have the same pressure as private and public companies to operate responsibly and in the best interests of those they serve. Board management software is a good way for boards to streamline their basic board duties and ensure that board business is secure.
Paper board packets are quickly becoming outdated. The cost of labor and materials in producing paper board packets and meeting preparation materials makes them inefficient and impractical. With board management software, boards can cut meeting preparation time from hours to minutes.
Board management software by BoardEffect is the best platform for storing the nonprofit’s bylaws, Articles of Incorporation and other important documents. With unlimited, cloud-based storage, board directors can access any document they need, any time of the day or night. Electronic storage also makes it easier to keep documents updated. With BoardEffect, board directors can access board agendas, board meeting minutes, strategic plans, bylaws, board policies, financial reports, audit reports and any other documents whenever they need them, even during board meetings.
Board directors can also mark up board meeting documents, make annotations, highlight important sections, and share their documents, with or without their notes.
Another advantage of board management software is that boards can use the platform to organize committees, create surveys and vote on important matters.
With the risk of data breaches, it’s important for boards to communicate and share files securely. Personal and business email accounts are simply not secure enough. Once board directors send a file, they don’t want to have to hold their breath and wonder whether it will reach its destination without incident. The platform makes it easy to enable or disable printing and emailing for even more control.
Board management software streamlines board activities, gets rid of the pain points, and offers secure communication and collaboration. These are all features that demonstrate the basics of good governance — efficiency, transparency and accountability.