If a board member wanted to know how many board members are needed for a quorum, would you direct the board member to your nonprofit’s articles of incorporation or the bylaws? Did you just ask yourself if they’re the same thing?
If you’re scratching your head and racking your brain for the answer, we’ll sort out the confusion by describing the important differences between the articles of incorporation and the bylaws – two compliance documents that all board members should be keenly familiar with.
Before we get to that, it’s important to know that both the articles of incorporation and the bylaws are considered legal documents.
What Are the Articles of Incorporation?
The articles of incorporation pertain to corporations, limited liability companies, and nonprofit organizations. The articles combine to form one of the necessary documents to establish a nonprofit and get it up and running. Depending on the state where your nonprofit was established, this document is sometimes called the articles of organization, articles of formation, or certificate of formation.
State governments regulate nonprofits in their states, and all nonprofits must file formal documents with the proper state authority to form a tax-exempt organization. In most states, the proper authority is the Secretary of State or a similar agency. Once the state authority receives your documents, the documents become available for public viewing.
The articles of incorporation tell your state what your nonprofit intends to do according to its mission. The articles of incorporation also outline who is responsible for managing the nonprofit. Certain states may require additional provisions depending on their state mandates. States typically provide a standard fill-in-the-blank form to make sure your board dots its i’s and cross its t’s.
At a minimum, you can expect to gather the following information before filing your articles of incorporation:
- The name of the founder or founders
- The name of your nonprofit
- The names of your nonprofit’s initial board directors
- The addresses for each of the board member’s initial directors
- The nonprofit’s mission statement
- The location of the primary office and mailing address
- The name of the registered agent
After your board drafts a final copy of your articles of incorporation, your board will approve them and file the form with the proper authority.
What Are the Bylaws?
By contrast, your bylaws are a set of internal documents that describe how you will run your nonprofit. You might think of it as an internal operating manual. In essence, bylaws are a set of rules that govern how, why, and when your board does things.
Establishing bylaws is a necessary part of obtaining tax-exempt status as a nonprofit organization from the federal government. During the 501(c)(3) application process, the IRS will ask for a copy of your bylaws and file them along with your application and articles of incorporation.
The IRS requires all nonprofits to keep a copy of the bylaws and the articles of incorporation at their principal business location at all times.
Your nonprofit doesn’t have to submit a copy of the bylaws to the IRS every year. The only time it’s required is when you apply for tax-exempt status.
Your founders and board directors may have a preference about filing the bylaws before, after, or at the same time as they file the articles of incorporation. Ultimately, the timing of filing the bylaws depends on the laws in your state of incorporation.
It’s common for founders to establish a board of directors before they write the bylaws. This is a way to bring multiple perspectives into the organization right from the start.
As you create your bylaws, be prepared to include:
- The name of the nonprofit
- The nonprofit’s primary place of business
- Standard policies and procedures
- Operational standards
- The number of officers and directors the nonprofit should have
- The length of terms of the officers and board directors.
- Processes for holding board meetings
- Record-keeping procedures
- Requirements for making amendments to the bylaws
- Requirements for amending the articles of incorporation
What Are the Differences Between the Articles of Incorporation and the Bylaws?
To get an even better understanding of your nonprofit’s documents of incorporation, we’ll detail the distinct differences that set the articles of incorporation and the bylaws apart:
- By providing a broad framework for establishing your nonprofit, the articles of incorporation serve as the constitution of your nonprofit. By contrast, the bylaws consist of individual laws, and they must be consistent with your articles of incorporation.
- State laws describe what you must include in your articles of incorporation. Typically, the articles of incorporation consist of general details about your nonprofit. Your bylaws outline the detailed rules and procedures for managing your nonprofit.
- All nonprofits must file their articles of incorporation with the proper state agency. In many states, nonprofits don’t need to file the bylaws with the state because they’re solely for internal use.
- Your board must pay a filing fee when you submit the articles of incorporation to the state agency. state laws determine the amount of the fee. There is no fee for the bylaws.
- The articles of incorporation and the bylaws are legal documents in both are admissible in a court of law.
- Once your articles of incorporation are approved by your state agency, they become a public document, whereas the bylaws or kept within the nonprofit’s records and not displayed for the public. However, investors or others may request a copy of the bylaws before investing in your nonprofit.
- To keep things simple, boards generally don’t repeat provisions that are already covered in the articles of incorporation in the bylaws. This alleviates the problem of having to amend the articles whenever the board amends the same provisions in the bylaws.
One of the first duties of every new board member is to read the articles of incorporation and the bylaws. Whenever there is a question about the structure or the rules and procedures, board members should turn to their founding documents for the answers.
When you use BoardEffect’s board management system, all board members will have 24/7 access to the founding documents, board meeting minutes, reports, and all other board-related data where all the information they need is safely and continuously stored in the cloud.