Bylaws are the rules that guide the operation of a nonprofit organization by its board of directors. These guidelines play a very important role in how the board members make decisions concerning the organization and set the direction for internal divisions and the entity as a whole.
Normally, bylaws are made to be concise and brief, with the aim of outlining the parameters in which decisions will be made in the organization. Due to the fact that these documents are legal and binding, a nonprofit board of directors can find itself significantly restricted by bylaws that are too rigid, as the process for changing bylaws after they are established can be involved and tedious.
A well-planned and clearly structured bylaw will take the guess work and corruption out of your organization especially in times of disagreement between board members.
Nonprofit bylaws are the main governing document for your nonprofit corporation. They exist to supplement any other rules that are imposed on your nonprofit by the state corporation’s code and will guide how the nonprofit is run. When you pursue federal tax exemption, the IRS will ask you to either attest to the fact that they have been adopted or request that you attach a copy to your application.
Because of the tax-exempt status of most nonprofit entities, the government strictly regulates how they operate. Every state has a specific direction on the minimum requirements for bylaw writing. You should refer to these state-issued guidelines to ensure compliance.
In order for a nonprofit to be incorporated, it has to apply to the state. A nonprofit is a form of business and is thus regulated by states. For an organization to be incorporated, it needs to have a set of bylaws. There is no requirement that a nonprofit doing charitable work must become incorporated, but there are many advantages to doing so. The most significant advantage is that there is limited liability should anything go wrong. If you do not want to be incorporated at the state level, you could set up an unincorporated nonprofit association. However, that only works if your organization is quite small with limited income.
In addition, if your nonprofit organization seeks 501(c)(3) tax exemption from the IRS, it’s much easier if you are incorporated. Incorporation requires you to set up all the legal requirements such as bylaws that the IRS looks for when granting tax exemption.
How to Write Nonprofit Bylaws
Understand the reason for the bylaws
Bylaws contains an organization’s written rules. Bylaws are very crucial in the sense that they can aid in the resolution of conflict. For instance, if any difficulty should arise in a nonprofit organization, you can check the bylaw to see what steps you are authorized to take.
Bylaws can also cover the following;
- the organization’s name
- the organization’s purpose
- membership requirements
- the titles and responsibilities of officers
- how officers are assigned
- How meetings will be conducted and when they will be held et al.
2. Assign members the task of writing the bylaw
To start, it is important to confer with as many members who helped to start the organization as possible. Bring in about 2 or 3 other people to give their insight and help write the bylaws. In a nonprofit organization, the board of directors can give their input and help to write the bylaws. Drafting the bylaw of a nonprofit should not be a one man business so as to ensure that all perspectives will be represented and accounted for in the laws. Try to make sure that the bylaw committee reflects an accurate cross-section of your organization.
3. Gather information
In order to draft a meaningful bylaw, you will need to understand the organization; its purpose, how officers will advance that purpose, and the future of the organization. In order to get this information, you can gather members of the nonprofit or the board of directors and talk about how they envision the organizations’ purpose and what jobs will be necessary to make that purpose a reality. You also want your bylaws to be in line with other important documents, such as your articles of incorporation, governance policies, and any other documents that reflect how the organization is operated. Gather those documents as you prepare to draft the bylaws.
You should also ensure that the number of board positions and position descriptions are the same on all documents. Make sure too that the meeting days are the same, along with other minor details.
3. Get sample bylaws
You should get the bylaws of other nonprofit organizations so that it can serve as a guide when you are drafting yours. However, you should never copy other nonprofits bylaws out rightly. Call other nonprofits and ask if you can see a copy of their bylaws.
4. Meet with an attorney
You should meet with a lawyer who is experienced in nonprofits so as to make sure that you cover all the necessary ground. An attorney will also make sure your bylaws align with your state’s non-profit law. Non-profit laws are unique in the sense that they may contain prohibitions, such as limitations on proxy voting, and you should be aware of these before drafting your bylaws. If for any reason your bylaw goes in contravention to the state; your bylaw will be void.
To find an experienced lawyer that is specialized in nonprofits, you should visit your states bar association, which should run a referral service. If you are concerned about legal fees, you may be able to get help from a pro bono organization in your area. Legal aid organizations typically help indigent individuals, but many also help nonprofit organizations.
5. Structure your bylaws in an outline format
Usually, Bylaws are written with section heads that are known as “articles” and paragraphs that are called “sections.”
This structure helps to improve the readability of your bylaws and standardizes it with other bylaws. This format also makes it easier to find and cite information on voting rules, committees, and other elements you may have questions about as the organization gets going.
You should begin each article with a heading titled ARTICLE. These headings should be in bold and in capital letters and numbered with roman numerals. Center this heading on the page. For instance, the first article would be titled: ARTICLE I: ORGANIZATION. The second article would be titled: ARTICLE II: PURPOSE.
Next, number every subheading section within each article. Each and every section that appears in your article should be clearly numbered and should be given a short description of the section. For instance, you might write: Section 1. Regular Meetings. This will then be followed by a concise description of the modus operandi for regular meetings. Then you’d write: Section 2: Special Meetings. This would be followed by a brief description of protocol for special meetings.
Write the Organization’s Name Article
the organization’s name article is a short statement that identifies the official name of your organization. You can also give the primary operating location of your office in this article. For instance, you might write in this section: “The name of the organization shall be the ABC Foundation.”
Include the Organization’s Purpose Article
This article will include your mission statement and vision of the organization. You can make this to be just one sentence or something more complex. Or instance, you can write “This nonprofit organization is organized for the purpose of supporting the education of children by fostering relationships among schools, parents, and teachers.”
Draft the Membership Article
This article should address several sections, including eligibility (that is, who is allowed to join and not allowed to join), dues (do members need to pay a fee to join? Do they need to pay a fee annually?), classes of members (active, inactive), requirements for how to remain a member, and how to withdraw from membership.
A Sample language for the first section under the Membership heading might read: “Membership is open to all who sympathize with the church’s purposes and programs, regardless of race, creed, gender, sexual orientation, age, national origin, and mental or physical challenge.” You can then forge on with subsequent sections describing dues, requirements for remaining a member, and how members can leave the organization.
Write the Officers Article
This article should address several sections regarding officers including listing each office, the duties related to each office, how officers are nominated and elected, terms of office (how long they can serve in their position), and how to handle vacancies. For instance, for the first section, you might write: “The officers of the organization are a president, vice president, secretary, treasurer, and three directors.” This section should be followed up with other sections that regard officers, along with their respective duties.
Include the Meetings Article
This article should cover several sections that show how often the meetings of the nonprofit organization will be held (be it quarterly, Semiannually, annually et al.), where the meetings will take place (at the primary location of operation?), and how votes can be cast for motions. This article also establishes the number needed for a quorum, or the number of board members who must be present for motions to be carried.
For instance, if an organization has nine board members, and the bylaws require two-thirds of the board to make up a quorum (a meeting), then at least six board members must be present to make decisions for the organization. Some states may require a minimum for a quorum; check with your Secretary of State to find out your state’s requirements. Sample language for the first section of this article might read: “Regular meetings of the society shall be held on the first Tuesday of each month.” Then proceed to address the other sections in the rest of this article.
Write the Committees Article
Even though these committees are specific to your organization, but they might include a volunteer committee, publicity committee, membership committee, fundraising committee et al. You should include a brief description of each of these committees. Then, you should follow this section up with a brief description of how committees can be formed (would they be appointed by the board of directors or by some other means). Sample language might read: “The society shall have the following standing committees; ” followed by a list and brief description of each committee that you have.
- Draft the Finances Article: here you should specify when a budget will be created, whose duty it will be to keep up to date financial records (usually the treasurer), procedure for approval of expenses, and what will happen to funds should the organization dissolve. For instance, you could write: “A budget shall be drafted in the summer for the following fiscal year and shall be approved by a majority vote of the Board.” Then, you can assign to the treasurer (or another officer) responsibilities for keeping financial records: “The treasurer shall keep accurate records of any disbursements, income/credits, and bank account information.”
- Write the Parliamentary Authority Article: the Parliamentary authority refers to a set of guidelines that govern how the nonprofit organization will be run. Many organizations abide by Robert’s Rules of Order, a guide for how to run meetings in an assembly of people in order to ensure that voices are heard and taken into account.
An article on parliamentary authority will also name the specific resource that guides the bylaws, procedures and operation of the organization. You can use this template, “Robert’s Rules of Order shall govern meetings when they are not in conflict with the organization’s bylaws.”
- Write the Amendments and Other Provisions Article: even though bylaws are made with the intention of accommodating many tentative situations that could arise in the nonprofit organization, from time to time, there will be need for an amendment.
You should write into the bylaws what amendment process you will use. Having an amendment process in your bylaw will go a long way to show that your organization is not rigid and understands that change is constant. Do not make it too difficult to amend the bylaws. Instead, choose a process that is appropriate for the culture and politics of your organization. You can also include a section that states your fiscal year, or you can include a separate article that states your fiscal year. For instance, your amendment can read; “These bylaws may be amended or replaced at any meeting of the society by a two-thirds (2/3) vote of those present and voting. Notice of any proposed change shall be contained in the notice of the meeting.”
- Write the Conflict of Interest Article: Your organization should protect itself against a personal or financial conflict of interest from the board of directors or other officer. To this effect an article should be included which specifies what should happen if someone has a conflict of interest. Your conflict of interest article can read; “Whenever a director or officer has a financial or personal interest in any matter coming before the board of directors, the affected person shall
(a) Fully disclose the nature of the interest and
(b) Withdraw from discussion, lobbying, and voting on the matter.
Any transaction or vote involving a potential conflict of interest shall be approved only when a majority of disinterested directors determine that it is in the best interest of the corporation to do so. The minutes of meetings at which such votes are taken shall record such disclosure, abstention and rationale for approval.”
- Include a Dissolution Clause Article: in some states, there are laws that specify that a dissolution clause or a statement that describes how the organization can be closed down must be added to the bylaw. Even if your state does not have this, it is highly advised that you should have this clause in your bylaw in order to prevent conflicts. Here, you might write: “The organization may be dissolved with previous notice (14 calendar days) and a two-thirds vote of those present at the meeting.” Some states require organizations to include a dissolution clause in their bylaws. Check with your state’s Secretary of State for specific information.
At this point, you are almost done with your bylaw, you should then compile the articles into one document. It is best to use only one type of formatting throughout the whole document and also use one font and one font size (11- to 12-point font is most readable). Include a title page with the name of your organization, the date of the last revision of the bylaws, and when the bylaws go into effect.
When you are done with compiling the bylaw, you should give it to a professional parliamentarian to review your bylaws. Your bylaws will outline procedures by which to run the organization, conduct meetings, elect officials or committee leaders, and so on. These procedures are based on rules that dictate what happens first, how many people need to vote to reach a decision, who can vote by proxy (sending in their vote instead of voting in person), et al. A professionally credentialed parliamentarian is someone who is an expert in these rules and procedures. Parliamentarians can be found by contacting associations such as the American Institute of Parliamentarians or searching online for “professionally credentialed parliamentarian” in your state. You will likely need to pay a consulting fee for their services.
Other Tips for writing a nonprofit bylaw
- Seek assistance from an experienced source: if you want to write a nonprofit bylaw and you do not have experience in doing it, it is best to seek out someone who is experienced in nonprofit matters to help you out. This could be an attorney or a professional services firm. However, you should not assume that all attorneys have a good understanding of nonprofit matters.
- Stick to the basics: it is advisable to think of your writing a nonprofit bylaw like writing a 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. A very important element that some people forget to add to their bylaw is a clause to amend it in the future, so don’t make that mistake.
- Know what is in your bylaws: as a board member, it is up to you to have a clear understanding of what each and every clause means. If there are certain things that you do not understand about the bylaw, you should ask other members of the board or you can consult a professional.
- Follow the provisions religiously: in addition to having a clear understanding of your bylaw, you should also follow 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.
- Keep your bylaws relevant: the only thing that is constant in life is change, and your bylaw should be able to reflect this simple fact. If your bylaws need to be amended to reflect current realities, do it. Make sure the changes make long-term sense and not just a quick fix for a present predicament.
- Bylaws are not a policy or procedure manual: it is not unheard of to come across a bylaw that contains employee vacation rules or the organization’s anti-smoking policy. However, this is very inappropriate and should not be in a bylaw. Create a separate policy manual for management purposes. Again, think Constitution vs. US Code (laws).
- Don’t not add clauses that can be restrictive in the future: Think long and hard about the downstream consequences to all provisions because you don’t want to include a provision that can end up tying the hands of the board members in future.
- Review the bylaws regularly: 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.
- Use simple yet clear language for your bylaws. Bylaws are legal documents, so you want them to sound professional. When looking at a bylaws template or sample, study the language they use. Keep an appropriate tone and use understandable vocabulary. Even though bylaws are legal documents, that does not mean you should use vague jargons and obscure language to write them. You should however use basic English that can be easily understood by all and not open to multiple interpretations. Keep details for policies, not the bylaws. The bylaws are the guidelines to implement specific policies, therefore the bylaws should be flexible and able to be interpreted in conjunction with more detailed policies. Keep the bylaws fairly general.
Making changes to your bylaw
Organizations that are exempt from federal income tax, as described in Internal Revenue Code 501(c)(3), are required to report changes to its bylaws and other governing documents annually to the IRS on the organization’s IRS Form 990.
Substantial changes to a tax-exempt organization’s character, purposes, or methods of operation should be reported to the IRS as soon as possible. This is because if such changes are not in line with the organizations tax-exemption status, they can have their tax-exempt status revoked. In the event of minor changes to the bylaw, you should just report them on your organization’s next annual Form 990.
Check with your state of incorporation about its regulations for reporting changes to your bylaws.
In conclusion, as a nonprofit organization, you will have to compile your bylaws before you can be incorporated in your state. Your state office, (usually the Secretary of State) that oversees incorporation will probably have a template for your bylaws that you can use.
Granted, bylaws are not public documents, yet, it is advisable to keep make them available to the general public in order to increase your nonprofit organizations transparency. Bylaws should be used, changed when needed, and examined often. Don’t just create a bylaw for formality sake, make them a working document in every sense.