Whether you’re starting a charity, or reviewing your current nonprofit bylaws, making sure your bylaws address key operating topics is critical. Nonprofit bylaws are documents that help your charity operate with rules and policies. According to the IRS, “Bylaws are an organization’s internal operating rules.” But, while federal law doesn’t ask that nonprofits use special language or topics within their bylaws, that might not be true for the state. Therefore, this article will guide you through the best practices for nonprofit bylaws.
What are nonprofit bylaws?
The first place to begin for nonprofit bylaws best practices is to understand what bylaws are best for your group. As noted, think of bylaws as your operating rules. The best rules do not leave things to chance. In other words, they address essential nonprofit operating issues. Strong nonprofit bylaws detail the number of people who will serve on the board. And, they also speak to the roles and responsibilities of the officers and board members. Other topics included in nonprofit bylaws are the rules for nominating and electing new board members, voting, and how meetings are conducted. Finally, other elements include rules for conflicts of interest and how the bylaws can be changed.
Nonprofit bylaws best practices
Let’s take a look at a few tips to make the process easier for your group.
1. Research sample nonprofit bylaws
When you’re seeking to understand how to write charitable rules, one of the best places to begin is by reviewing sample nonprofit bylaws. Thankfully, there are many great examples of nonprofit bylaws that you can find on the internet. By studying them, you’ll start to know the language and the elements of nonprofit bylaws. For example, one of the critical language issues is understanding when and how to use the words “shall” and “may.”
2. Understand what your state requires
Even though the IRS does not need specific language, your state might. So, it’s a good idea to be familiar with your state’s charity laws. Every state has a nonprofit corporation act, and it provides you with what you’ll need to know about the bylaws. If you don’t feel confident enough to review these state laws, then consider speaking to a lawyer. Alternately, you can also use a service that is expert in nonprofit regulations.
3. Be realistic with your nonprofit
Nonprofit bylaws best practices include realism. For example, one national group changed its bylaws after a financial scandal to ensure all motions had 100 percent board member approvals to pass. While this was a noble effort, it created chaos for the charity after a few years. A better approach is to ensure that you get a reasonable number of board members to approve motions. Remember, you want to have rules, but you don’t want to place your nonprofit into a straight jacket.
4. Nonprofit bylaws and transparency
Because nonprofits are not generally taxed, they hold a special status. As you know, the function of most nonprofits is to improve the lives of people. Thus, the public expects transparency from nonprofit groups, and people donate more when charities are clear in how they work. One of the best ways to be transparent is to make your nonprofit bylaws public. To achieve this, you can ensure your bylaws are published on GuideStar and your website.
5. Review your bylaws regularly
Provided that you develop strong rules, get in the habit of making sure to review them every so often. Keep in mind that your nonprofit is a living and breathing group. And, because of it, it changes—and should. In a couple of years, the chances are that you will have new board members, and technology may even change how you operate. Therefore, make it a point to review your nonprofit bylaws every year at the annual meeting, or bi-annually.
Finally, concerning your nonprofit bylaws, it’s important to know that the IRS requires that you include in your 990 any “structural and operational changes.”