Dos and Don’ts Of Nonprofit Bylaws

Nonprofit bylaws are the rule book for a charity or any nonprofit organization. They define how the organization should be run, covering everything from meeting procedures to decision-making. 

Think of them as the instructions that help guide nonprofit leaders so everything runs smoothly.

Today, we will explore the dos and don’ts of nonprofit bylaws. We'll cover what you should always include in your bylaws and what you should avoid to keep your nonprofit on track. 

The Dos of Nonprofit Bylaws

1. Define Purpose and Mission

Start by clearly stating your nonprofit's purpose in the bylaws. Your mission should match what's in your Articles of Incorporation. This step is crucial because it guides every aspect of your operations and goals. 

Make sure the bylaws are easy to understand so that anyone who reads them can understand what your organization stands for and aims to achieve. 

2. Detail Board Structure and Roles

The bylaws should clearly describe the structure of your board. Include the number of members, their roles and responsibilities, and the length of their terms. 

Ensure everyone knows their duties and how long they are expected to serve. Clear definitions help manage the board effectively and smooth transitions when adding new members.

3. Set Meeting and Voting Procedures

Your bylaws should outline specific procedures for how meetings are held, how often they occur, and what counts as a quorum (the minimum number of members who must be present to make the proceedings of the meeting valid). 

Also, clearly describe the voting process. Ensure that all board decisions are effective, clear, and legally binding. Setting these rules in the bylaws helps to run smooth meetings and ensures that every decision is counted and recorded properly.

4. Define the Election Process

Your bylaws should clearly state how board members are elected. The process must be transparent and fair so all members have an equal opportunity to participate. 

Set specific guidelines on how nominations are made, how voting is conducted, and how the election results are managed. A well-defined election process helps maintain democratic principles within your nonprofit organization.

5. Conflict of Interest Policy

Don’t forget to include a conflict of interest policy in your bylaws. The policy should outline how to handle situations where a board member's personal interests might conflict with the interests of the organization. 

It helps maintain honesty and integrity in decision-making and ensures that all actions are taken in the nonprofit's best interest.

6. Fiscal Policies

Clearly outline your organization’s fiscal responsibilities in the bylaws. Include how the budget is approved, who is responsible for financial oversight, and when the financial year begins and ends. 

Clear fiscal policies help with effective budget management and financial planning. They also promote accountability and regular monitoring of financial practices.

7. Committee Guidelines

In your bylaws, clearly specify how committees are formed, what their purpose is, and the extent of their powers. Detailing these aspects helps distribute tasks among different groups within your organization. It also allows for more efficient management and better use of member skills. 

Make sure these guidelines are clear so everyone understands their roles and responsibilities within any committee.

8. Include Amendment and Dissolution Procedures

It is important to plan for changes in your organization's operations and structure. Your document should include clear procedures for amending the bylaws. 

Also, if necessary, provide detailed steps for dissolving the organization. These guidelines ensure that any changes or the winding down of operations are handled systematically and with proper governance.

9. Compliance with Laws

Your bylaws must comply with state and federal laws, especially those governing tax-exempt organizations. 

Compliance helps prevent legal issues and ensures your organization maintains its integrity and tax-exempt status. 

Include a statement in your bylaws about adhering to applicable laws and regulations, and consult with a legal expert to verify that all requirements are met.

10. Regular Review and Updates

Establish a routine for reviewing your bylaws at regular intervals or as needed. Your bylaws should always reflect the current needs and conditions of your nonprofit and any changes in the law. 

Regular updates help keep the organization effective and compliant with all regulatory requirements. Make sure to involve key stakeholders in the review process to get comprehensive feedback.

The Don’ts of Nonprofit Bylaws

1. Don't Be Overly Specific

Avoid including too much detail about every minor operation or process in your bylaws.

While it's important to be clear, being overly specific can limit your organization's flexibility and might require you to frequently update the bylaws as conditions change. 

Keep the bylaws focused on broader policies and essential structures to allow for some adaptability in day-to-day operations.

2. Don't Overlook Board Member Removal Procedures

Nonprofit bylaws should always have fair and clear procedures in place for removing board members when necessary. 

Neglecting to include these procedures can lead to complications and conflicts within your organization. 

Ensure the process is simple, providing a clear pathway for handling such sensitive situations, thus maintaining governance integrity and team dynamics.

3. Don't Allow Indefinite Terms

Do not allow indefinite terms for board members. Establishing clear term limits promotes the circulation of new ideas and prevents any single individual or group from holding power too long, which can lead to stagnation. 

Term limits bring fresh perspectives to the board, increasing innovation and responsiveness to new challenges.

4. Don't Be Inflexible

While your bylaws need to establish solid guidelines for organization operations, they also need to be adaptable. 

Make sure your bylaws include provisions for amendments that can be applied without excessive hurdles. The flexibility allows your organization to respond to changes and evolving needs more effectively.

5. Don't Ignore Emergency Provisions

Do not overlook the inclusion of emergency provisions in your bylaws. These should cover scenarios where normal operations are disrupted. 

Make sure there are clear plans for holding electronic meetings and making decisions when in-person gatherings are not possible. These provisions help nonprofit organizations continue operating effectively even in unexpected situations.

6. Don't Mix Bylaws with Policies

Keep your bylaws separate from operational policies such as employee management, vacation rules, or smoking policies. 

Bylaws should focus on governance and the overall framework of the organization, while more specific rules and procedures can be detailed in a separate policy manual. The separation helps to keep the bylaws clear and focused on broader organizational issues.

7. Don't Use Ambiguous Language

Avoid using unclear or ambiguous language in your bylaws. Be specific about the use of terms like "shall" (which indicates a mandatory action) versus "may" (which indicates an optional action). 

Clarity is crucial to prevent misunderstandings and make the bylaws easy to follow and enforce. When your language is clear, it helps everyone involved understand their obligations and rights without confusion.

8. Don't Set Unrealistic Voting Thresholds

Avoid setting voting thresholds that are too high to realistically meet. Requiring an overly high percentage of votes can lead to gridlock, where no decisions are made because the required threshold is rarely met. 

Instead, set realistic and practical thresholds that allow for effective decision-making and allow necessary actions to be taken without undue delay.

9. Don't Neglect the Record-Keeping Requirements

Do not overlook the importance of specifying how records should be kept in your bylaws. Clear guidelines for documenting financial transactions and recording meeting minutes are essential. 

Proper record-keeping is not only a best practice for organizational transparency and accountability but is also often required by law. These requirements should be clearly defined to avoid any confusion or legal issues related to improper documentation.

10. Don't Contradict the Articles of Incorporation

Your bylaws should not contradict your Articles of Incorporation. 

The Articles of Incorporation serve as the primary legal foundation of your nonprofit, and the bylaws are meant to support and complement this document. All provisions in the bylaws must align with and reinforce the stipulations in the Articles of Incorporation.