Similar to for-profit structures, nonprofit organizations are established through a set of formation documents that include a separate set of guidelines to govern internal operations. This document—typically called an operating agreement when it pertains to limited liability companies—is referred to as the bylaws in the context of nonprofits and general corporations. Unlike the public documents that entities submit to the government as part of the formation process, bylaws are almost always strictly internal in nature as they are designed to serve as a collection of instructions for the board and other managing members.
What are Nonprofit Bylaws?
Bylaws, like any other form of regulatory documents, functions primarily as a handbook for the individuals in charge of a specific organization. Typically set in written form, this document establishes the rights and responsibilities of the individuals appointed to the board, operations procedures, fundraising, voting, member election, and other processes. Bylaws are indispensable for internal conflict resolution, administrative clarity, and tax reporting.
Not every jurisdiction explicitly mandates the existence of bylaws. For instance, corporate bylaws are not directly required in fifteen states, but the remaining jurisdictions make this step an obligatory part of incorporation/nonprofit formation even though you don’t need to submit the actual document to the government agencies aside from the IRS.
Corporate or not, the IRS actually requires 501(c)(3) exempt organizations to submit their bylaws along with their registration forms. But even without these federal requirements, most nonprofits rely heavily on bylaws to optimize their operations and remain productive.
What to Include in Your Bylaws
A not-for-profit is not a standalone entity in itself but rather a qualifier attached to a formal structure, meaning that a nonprofit may be formed as a corporation or limited liability company. It can also be organized as an informal body, typically a partnership consisting of individuals working together for the same cause without turning their affiliation into a legal entity.
But that’s why bylaws are especially crucial for the environments that feel less strict, sometimes even ‘unofficial’. When there is no formal framework to reinforce a nonprofit mission through the articles of incorporation or organization, an organization must be tied to another legally binding document for regulatory purposes.
Most of the time, however, nonprofits follow the corporate structure (specifically C-corp) which puts a board of directors or managers at the head of the entire operation. This is where the bylaws come in. Despite there being no legally-enforced rules for structuring this document, its provisions should usually cover the absolute basics of running an organization, as well as aspects specific to your cause. The general outline usually includes:
- Entity name (should be checked for availability prior to formation);
- Registered address (must be a physical address in the state);
- Purpose of the nonprofit, mission outline, etc;
- Board structure (how many members may be active at the same time and so on);
- Board membership rules (admittance, replacement, training, etc);
- Time restrictions for serving on the board or lack thereof;
- Officers and their responsibilities in the organization (typically includes the president of the board, vice president, chief association executive, secretary, chief operating officer, treasurer, director of philanthropy, etc);
- Procedures to organize meetings (weekly, monthly, quarterly, annual, or emergency);
- Internal committees existing within the board, their individual roles, procedures for regular meetings, etc;
- Voting procedures and basic requirements to make a ruling (quorum, method of counting votes, etc);
- Standard means of communication between board members and notification periods;
- Rules for hiring and managing staff;
- Conflict resolution guidelines, including financial interest;
- Bookkeeping protocols and other rules designed to regulate the entity’s records;
- End date of the fiscal year, specifically the month that closes this period;
- Amendment, transition, and dissolution procedures.
What Not to Include In Bylaws
Although the entire purpose of bylaws is to install a series of detailed regulations, they nevertheless should not be focused on daily logistics. Instead, they should focus on the basic information and structure of the entity, as well as essential procedures in their more generalized form.
The rules outlined in the document must not be drafted with consideration of situational applications that occur daily. The bylaws should be a foundation rather than a day-to-day manual that puts unnecessary restrictions on board members, for instance, fixed meeting addresses or specific times for recurring sessions.
This also includes more transient regulations that are bound to change often in the course of your company’s existence like job descriptions of various staff members. And given how time-consuming the bylaw amendment process is, it’s much more effective to control certain operational aspects with other administrative tools.
How to Write Bylaws
If your nonprofit is formalized through a legal structure, the bylaws are usually created along with other initial steps like incorporation or application for registration.
Analyzing the demands of the organization
As usual, this step should be looked into prior to the actual drafting. Many organizers understandably choose to work with certified attorneys that can provide the necessary information about local, state, and corporate laws. The system of implementing bylaws differs based on location and the type of formal structure used for advancing the nonprofit mission. In addition to state-specific regulations, laws are often applied differently on county and municipal levels. If you don’t have a lawyer to consult with, it might be a good idea to inquire into the bylaw practices of other nonprofits in your area. Naturally, it’s better to analyze organizations with the same legal structure and at least somewhat similar purposes.
When you know the ins and outs of your local bylaw requirements, it’s time to create the first draft. Each organization is unique in its purpose and structure even when it follows the rules of an established legal framework. What does this mean for you? First and foremost that it’s completely fine to use another organization’s bylaws as your template but that you shouldn’t simply copy and paste it. Always adapt it to the specifics of your entity. You can also find more general templates online, as well as some examples tailored to specific fields of work. As mentioned before, certain provisions will always be present in almost all examples of bylaws such as the name of the organization, its mission, goals, and purpose, information about the board and its members, memberships, key administrative procedures, financial interests, and amendment rules.
Reviewing the proposed draft
Even if you decided to handle all previous steps on your own, this one cannot be done without an attorney or similarly qualified expert. In more informal settings, it could even be someone you know—a relative or acquaintance—who has in-depth legal knowledge. They will ensure that the document is legally sound and make relevant edits. This process can take multiple drafts until the document is deemed legally compliant. Once the draft is finalized, it’s time to let other board members review it and make their suggestions. This process is usually more involved rather than strictly sequential, meaning that other members may take an active part in making the first draft and perfecting it with each review.
Authorization and publication
The document is made legally binding when it’s approved by all essential members of the board. Once it is signed and authorized, it can be circulated among investors, committee leaders, stockholders, and staff. A great number of nonprofits also choose to make their bylaws public to remain operationally transparent in the eyes of the community.