What are 501(c)(3) Nonprofit Bylaws?
Many first-time nonprofit leaders and founders ask questions about what nonprofit bylaws are. Think of your bylaws as the “constitution” of your organization. Once you’ve assembled your nonprofit board members, you’ll establish the organization’s bylaws to guide the board and staff on how your nonprofit will operate. Understanding the state and local laws about nonprofits is essential before creating bylaws for a 501c organization, as you must comply with all municipal regulations.
Bylaws are not just a set of rules, but the very foundation of how a nonprofit organization operates. They are the IRS-mandated guidelines that a 501c3 tax-exempt nonprofit must adhere to. These bylaws are more than just words on paper; they are the internal operating rules that define who does what, how they do it, and when they do it, empowering you with the knowledge of how your organization functions.
What is the Purpose of Bylaws for Nonprofits?
Now that you have a better understanding of nonprofit bylaws, let’s delve into their purpose. Nonprofit bylaws are not just a set of rules; they are a roadmap that guides your board’s actions and decision-making process. By outlining rules around authority levels, board member and employee rights, and performance expectations, these bylaws play a crucial role in preventing disagreements, giving you the reassurance and confidence that your organization is on the right track.
Nonprofit bylaws are not just legal documents; they are the backbone of your organization’s governance. They are not to be taken lightly, as failure to adhere to these bylaws can result in serious consequences. Board members can be held liable for breach of duty, highlighting the gravity of not following the established rules.
Top 5 501(c)(3) Bylaws Best Practices
- Get help.
501c bylaws are legal documents, and their requirements vary from state to state. When drafting this document, consulting a qualified nonprofit professional with experience with charitable organizations is crucial. This step will ensure that your bylaws are comprehensive and in compliance with all legal regulations. Remember, not all legal professionals have nonprofit experience, so if they don’t know what nonprofit bylaws are or how to write them, you might look elsewhere!
- Make your bylaws public
While nonprofit bylaws can be internal documents, making them available on your organization’s website is a powerful way to demonstrate transparency. This practice increases your transparency and builds trust with your stakeholders, which is crucial when it comes to fundraising and securing grants.
- Stick to the fundamentals
Bylaws should only address the nonprofit’s governance structure. For instance, they should include information about the board’s composition, roles, and decision-making processes. On the other hand, details about specific projects or programs, such as marketing campaigns or job descriptions, should not be included in the bylaws as these are subject to change and may not be relevant in the long term.
- Personalize.
While it might be tempting to download templated bylaws from a legal documents website, resist the urge! Good nonprofit bylaws will align with your organization’s mission and culture. They should be custom-made to meet the needs of the nonprofit to be most effective.
- Schedule regular review.
Bylaws must accurately reflect your organization, so it’s important to schedule regular reviews and updates. Over time, your organization may evolve, and laws and regulations may change, making it necessary to update your bylaws. Aim to review and update your bylaws every two years to ensure they remain relevant and effective in guiding your organization’s operations.
Checklist: How to Make Bylaws for Nonprofits
While the nonprofit should tailor the 501c bylaws, this general checklist will help you develop each required section.
- Name and purpose
This section can appear as written in the organization’s Articles of Incorporation. - Election, roles, and terms of board members and officers
Describe the board’s qualifications, term limits, and duties, including election, termination, resignation, and procedures. - Membership
If your organization has members, provide details about eligibility, dues, rights, and termination process. In addition, provide information about your annual meeting, special meetings, and meeting notices. - Quorum guidelines and board structure
Many states specify the minimum and maximum number of board members and the number of present board members required for a quorum, so check your state’s regulations. - Compensation and indemnification
The nonprofit bylaws must disclose Compensation for directors, officers, and employees. In addition, in some states, nonprofits must indemnify or protect the board and directors from loss or harm resulting from risk. Check your state’s regulations to ensure compliance in this area. - Role of the executive director
While the board is responsible for hiring an executive director, the nonprofit bylaws should contain language about the board’s termination authority, including the number of votes needed to approve the removal of the executive director. - Amendment of bylaws
Organizations change over time, so ensure your nonprofit’s bylaws are flexible enough to be amended. Amendments to the bylaws can be made by vote at a routine board meeting. - Dissolving the organization
Most nonprofit bylaws need a dissolution clause unless specified by state law. If required, you must determine how your organization’s assets would be distributed to other tax-exempt organizations, as the IRS requires for tax-exempt purposes should you relinquish tax-exempt status and dissolve.