Legal

Here’s a question that can spark some serious debate: should nonprofit board members get paid a salary? At first glance, it seems like the answer should be simple—nonprofit boards are volunteer-based, right? But hold on. The nonprofit world isn’t always black and white, and this is one of those gray areas where you’ve got to ask yourself: what’s really best for the organization? Before you jump to conclusions, let’s dig a little deeper into the pros, cons, and what it all really means for your nonprofit.

The Traditional View: No Pay, All Heart

Traditionally, nonprofit boards consist of volunteer board members who serve without compensation. And that’s for good reason. Serving on a board is supposed to be a labor of love, a way to give back to a cause you’re passionate about. It’s a role of stewardship, not a gig to make a quick buck or earn a board member salary.

Here’s the deal: the nonprofit sector thrives on people who are willing to give their time, talents, and yes, even treasure (we’re looking at you, fundraising duty). Paying board members could shift that dynamic. If you start cutting checks, does the motivation change? Are people still serving because they care, or because they’re looking for some extra income? These are real questions nonprofits wrestle with when considering whether to pay their boards.

The Case For Paying Board Members: Time Is Money

Now, let’s flip the script for a second. Nonprofit board members put in serious work—strategic planning, financial oversight, fundraising, hiring executive leadership. Sometimes, it feels like a part-time job. So why shouldn’t they get compensated with a board member salary for their time and effort?

Paying board members could attract highly qualified individuals who might otherwise pass on the opportunity because they simply can’t afford to be volunteer board members. In fact, some larger nonprofits with complex financial structures or significant fundraising goals do pay their board members. These organizations argue that it helps them recruit top-tier talent and keeps their boards engaged and accountable.

But here’s the kicker—if you pay board members, you’ve got to be really clear about what that means. Are you paying for their expertise? Their time? Their leadership? If you’re going to write a check, you’d better have crystal-clear expectations in place for the board member salary.

The IRS, State Laws, and All That Fun Legal Stuff

Of course, it wouldn’t be a nonprofit topic if we didn’t talk about regulations, right? Whether or not board members can receive a salary—and how much—varies depending on state laws and IRS regulations. The IRS doesn’t flat-out forbid nonprofits from paying board members, but it has some pretty strict rules about what’s considered “reasonable compensation.”

In plain English? If you’re paying board members, the amount has to be justifiable and not excessive. The IRS frowns upon paying nonprofit boards too much because, let’s face it, that’s money that could be going toward the mission. Plus, there’s always the risk of damaging the public’s trust. People want to know that their donations are going toward making a difference, not lining the pockets of board members with hefty salaries.

The Cons: Losing Sight of the Mission

Here’s a big concern that gets tossed around when you talk about paying nonprofit board members: mission drift. Will paying your board shift the focus from the cause to compensation? Nonprofits run on heart. They’re fueled by passion, dedication, and a deep commitment to solving real-world problems. There’s a worry that once you introduce financial compensation, you start running the risk of attracting folks who are in it for the wrong reasons rather than dedicated volunteer board members.

And then there’s the budget. Every dollar spent on board member salaries is a dollar not spent on programs, services, or staff. Can your nonprofit afford to pay board members, or is that money better used elsewhere? It’s a tough call, and one that has to be weighed carefully.

What’s Right For Your Nonprofit?

At the end of the day, there’s no one-size-fits-all answer to whether or not nonprofit board members should get paid. For some organizations, especially small grassroots groups, it would feel downright strange to offer board compensation. For larger organizations with complex structures and big budgets, paying board members might make sense.

The key is transparency. Whatever decision you make, it has to be above-board (pun intended). You’ve got to be clear about why you’re doing it, how much you’re paying, and what you expect in return. And, of course, you need to stay compliant with state laws and IRS guidelines regarding board member salaries.

My Two Cents

If you ask me, nonprofit board members should serve out of passion for the mission, often as volunteer board members. But I also get that sometimes, a nonprofit needs to compensate board members to attract the talent and expertise it needs to thrive. If you go the route of paying your board, make sure it’s done thoughtfully, legally, and with the nonprofit’s best interest at heart. After all, the mission is what matters most.

So, should nonprofit board members get paid? It depends. What works for one organization might not work for another. Just make sure that whatever you decide about board member salaries, it helps your nonprofit stay mission-driven, financially sound, and focused on doing good in the world. Because that’s why we’re all here, right?

So, you’re on a nonprofit board. That’s wonderful. It means you care about a cause enough to step up, roll up your sleeves, and serve. But it’s more than passion. It’s about responsibility. And not just any responsibility—fiduciary responsibility. It’s a big deal, and it’s one of the most important nonprofit duties that every board member must take seriously. Think of it like this: you’re the guardian of the nonprofit’s mission, its finances, and its reputation. Let’s unpack what that means in the real world.

1. Duty of Care: You’re Not Just a Placeholder

When you say yes to joining a board, you’re saying yes to being informed, attentive, and ready to act. This isn’t a “show up and smile” kind of deal. The duty of care means that you need to be involved in the nonprofit’s decision-making with your head and your heart. It’s about being proactive, asking tough questions, and making decisions with the nonprofit’s best interest in mind.

Example: A nonprofit’s executive director suddenly fell ill and couldn’t return to work. Here’s where the duty of care shines. Fortunately, the board had been prepared. They didn’t panic or scramble. Why? Because they had planned ahead. They had a well-thought-out contingency plan, with an interim director ready to step in and a list of potential candidates to fill the position permanently. That’s the kind of forward-thinking that makes a board indispensable.

Takeaway: Be prepared, stay informed, understand your board member responsibilities, and always have a plan. Care isn’t passive—it’s active. It means looking ahead and asking yourself, “What’s next?” before a crisis hits.

2. Duty of Loyalty: It’s Not About You

This one’s simple, but it’s crucial. Your job is to put the nonprofit first—always. That means your decisions have to be in the best interest of the organization, not you, your business, or your connections. Conflicts of interest? Address them, disclose them, and step away when necessary.

Example: When the board was set to renew the director’s and officer’s insurance policy, one board member quietly stepped back from the discussion and abstained from voting. Why? Because they worked for the insurance company that offered the policy. By removing themselves from the vote, they honored their duty of loyalty. No hidden agendas here—just doing what’s right for the organization.

Takeaway: If there’s even a hint of conflict, disclose it. It’s better to be overly transparent than to risk undermining the board’s integrity.

3. Duty of Obedience: Stick to the Mission

The nonprofit duty of obedience isn’t about blind allegiance—it’s about ensuring that every action, every decision, keeps the nonprofit on track with its mission. You’re responsible for making sure that the nonprofit plays by the rules—both legally and ethically. And here’s the thing: not every flashy opportunity is the right one.

Example: A donor came forward with a large contribution. Sounds great, right? Except, there was a catch. They wanted the nonprofit to use the funds for a purpose that had nothing to do with the organization’s mission. It would’ve required the nonprofit to go completely off course. The board voted not to accept the donation. They knew that one of their board member responsibilities is staying true to the mission and that's more important than chasing big dollars.

Takeaway: The nonprofit’s mission is your north star. Don’t stray from it, no matter how tempting the detour might be.

4. Duty of Prudence: Be a Good Steward

This is where the nonprofit’s financial health comes in. As a board member, you’re responsible for making sure the nonprofit’s resources are being used wisely. The duty of prudence, another key aspect of nonprofit duties, means being cautious, practical, and thoughtful with how the organization’s assets are managed. It’s about ensuring there’s enough funding to keep the lights on while staying aligned with the nonprofit’s long-term goals.

Example: The board of a small nonprofit knew they had limited financial reserves. When they were offered a low-interest loan to expand their programs, it seemed like a great opportunity. But the board did their homework. After reviewing the financials, they realized that taking on the loan would stretch them too thin and jeopardize their ability to keep up with current projects. They decided to pass. By acting prudently, they protected the nonprofit from potential financial hardship down the line.

Takeaway: Protect the nonprofit’s assets like they’re your own. Sometimes saying “no” is the best way to ensure sustainability.

Remember, You’re a Guardian, Not Just a Volunteer!

Fiduciary responsibility is the backbone of serving on a nonprofit board. You’re not just there to show up and lend your name—you’re there to safeguard the organization’s mission, finances, and future. The duty of care, loyalty, obedience, and prudence? They’re not just legal terms; they’re the guiding principles that help nonprofits thrive. So, when you sit in that boardroom, remember: your job isn’t to sit back. It’s to lean in, ask questions, and make decisions that put the nonprofit’s mission first. Always.

Serving on a nonprofit board isn’t a seat to fill—it’s a responsibility. A commitment. It’s the moment where passion meets purpose. But here’s the kicker: being a board member in a nonprofit leadership program isn’t just about sitting in on quarterly meetings, nodding in agreement, and then heading home. It’s about rolling up your sleeves and getting to work for the cause you believe in. So, let’s take a deep dive into what that work actually looks like.

1. The Duty of Care

Your nonprofit’s mission? You’re in charge of safeguarding it. Board members have a duty of care, which means you’ve got to be hands-on. Know what’s happening in the organization. Ask tough questions. Read the financials before the meeting, not during. If something seems off, speak up. Care isn’t passive. It’s action-oriented. If the ship goes down, you should have been the one steering to avoid the iceberg in the first place. This hands-on approach is a cornerstone of effective nonprofit leadership programs.

2. The Duty of Loyalty

Loyalty goes beyond just showing up and smiling for the group photo. It means being all in. Your loyalty should lie squarely with the nonprofit, not your personal agenda or side hustle. Conflicts of interest? They need to be called out, addressed, and avoided. Loyalty also means putting the nonprofit’s best interests above your own and making decisions with integrity. Understanding this duty is essential for those who aspire to become a board member.

3. The Duty of Obedience

Now, I get it—no one likes the word “obedience.” It feels too much like a dog following orders, right? But this is important. Obedience, in this context, means keeping the nonprofit on track with its mission. As a board member in a nonprofit leadership program, you’re there to ensure the organization doesn’t drift. That means knowing the bylaws, keeping an eye on the mission, and ensuring the nonprofit’s activities align with both.

4. Fundraising

Let's tackle the elephant in the room. Fundraising. Yes, it's your job when you become a board member. Yes, it's important. I know, I know—people don't join nonprofit leadership programs because they want to ask their friends for money. But here's the thing: you believe in this mission, right? So why wouldn't you want to share it with others and ask them to support it? Fundraising isn't just shaking a tin cup. It's opening doors, making introductions, leveraging your network, and yes, sometimes writing a check yourself. It's part of your duty as a board member, and there's no way around it.

5. Financial Oversight

The financials aren’t just for the accountants. Board members are tasked with overseeing the nonprofit’s finances, ensuring the organization is fiscally sound and responsible. This doesn’t mean you need to be a financial wizard, but you do need to understand the basics: budget, cash flow, income sources, expenses. If something doesn’t add up, it’s your job to ask questions, dig deeper, and protect the nonprofit’s resources.

6. Strategic Planning

A nonprofit can’t survive on passion alone. It needs direction, goals, and a clear plan for the future. That’s where strategic planning comes into play. Board members help chart the course, ensuring that the nonprofit is moving toward long-term sustainability. This isn’t just about what’s happening now—it’s about vision. Are you thinking about the next five, ten years? Where is the nonprofit headed? It’s your job to make sure there’s a roadmap to get there.

7. Hiring and Evaluating Leadership

A nonprofit is only as strong as its leadership, and hiring an executive director is one of the most critical roles a board plays in its nonprofit leadership program. Once the leader is in place, it's not a "set it and forget it" situation. Evaluating their performance, supporting their development, and holding them accountable is key. But remember: this doesn't mean micromanaging. There's a balance. The board hires, guides, and supports, but it doesn't run the day-to-day operations.

8. Advocacy and Ambassadorship

You’ve got the nonprofit’s name behind yours, and that comes with a responsibility to be an ambassador. This means championing the organization, promoting its work, and raising awareness. Whether you’re at a cocktail party, community event, or on social media, your role as a board member is to be a constant advocate. Your voice is powerful—use it.

9. Compliance and Legal Responsibility

Nonprofits are subject to laws and regulations, and when you become a board member, it's your job to ensure the organization stays compliant. This can be everything from filing tax forms on time to adhering to nonprofit laws in your state. Ignoring these responsibilities can put your nonprofit at risk—and nobody wants that.  Understanding these legal aspects is crucial for those who want to become a board member and is a key focus in many nonprofit leadership programs so stay on top of it.

10. Fostering Organizational Culture

Lastly, but certainly not least, board members help shape the culture of the organization. It starts with the boardroom. Are you fostering collaboration, transparency, and respect? The tone you set trickles down to staff and volunteers. A healthy organizational culture is the bedrock of a successful nonprofit, and the board plays a significant role in maintaining it.

In Conclusion: Being a Board Member Is a Privilege—Treat It That Way

When you become a board member, you’re not just filling a seat. You’re holding the reins of an organization's nonprofit leadership program that’s trying to make the world better in some way. Don’t take that lightly. Understand your duties, embrace your responsibilities, and remember why you’re there: to serve a mission greater than yourself. Because at the end of the day, it’s not about you—it’s about the work, the impact, and the people who rely on the nonprofit to make a difference.

So go ahead, roll up your sleeves. There’s work to be done, and you’re just the person to do it.

Are you starting a nonprofit organization? Or are you already running one? Whether you're just getting started or have been operating for years, understanding nonprofit bylaws is essential for your organization's success. In this ultimate guide, we will explore everything you need to know about nonprofit bylaws, from what they are to why they matter and how to create them. 

Nonprofit bylaws are the internal rules and regulations that govern how your organization operates. They outline procedures for decision-making, define roles and responsibilities, establish membership criteria, and provide a framework for handling conflicts. Bylaws are vital for ensuring transparency, accountability, and legal compliance within your nonprofit.

In this comprehensive guide, we will go through each component of nonprofit bylaws step by step, providing expert advice and practical tips along the way. We will discuss the key elements of bylaws, such as organizational structure, board of directors, membership, meetings, voting, and amendments. By the end, you will have a solid understanding of nonprofit bylaws and be ready to create or revise your own.

Let's dive in and unlock the secrets to effective and impactful nonprofit bylaws.

The importance of nonprofit bylaws

Nonprofit bylaws play a crucial role in the smooth functioning of an organization. They provide a clear understanding of the organization's purpose, structure, and governance. Bylaws establish the ground rules for how decisions are made and how the organization operates. They serve as a guide for board members, staff, and volunteers, ensuring everyone is on the same page and working towards the same goals.

Having well-crafted bylaws not only helps in day-to-day operations but also enhances the credibility and reputation of your nonprofit. Potential donors, funders, and partners often review an organization's bylaws to assess its commitment to transparency, accountability, and good governance. Bylaws also provide a framework for resolving conflicts and disputes, ensuring that the organization can navigate challenges effectively.

Key elements of nonprofit bylaws

To understand nonprofit bylaws thoroughly, let's dive into their key elements. Bylaws typically include the following components:

1. Organizational Structure: This section outlines the structure of the organization, including its legal name, purpose, and type of nonprofit (e.g., charitable, educational, religious). It also defines the board of directors' role and responsibilities, as well as any committees or advisory boards.
2. Board of Directors: This section provides details about the board of directors, including the number of members, their qualifications, terms of office, and powers and duties. It may also cover topics such as board meetings, quorum requirements, and decision-making processes.
3. Membership: If your nonprofit has members, this section will define the criteria for membership, rights and responsibilities of members, and any membership dues or fees. It may also outline the process for admitting new members and terminating membership.
4. Meetings: This section covers the frequency and procedures for board meetings, including notice requirements, agenda preparation, and voting protocols. It may also address special meetings, electronic participation, and proxy voting.
5. Voting: This section establishes the rules for voting on board matters, including the number of votes required for decisions, tie-breaking procedures, and any restrictions on voting rights. It may also address voting by proxy or absentee ballot.
6. Amendments: Bylaws are not set in stone and may need to be updated from time to time. This section outlines the process for amending the bylaws, including how amendments are proposed, approved, and documented.
   

Creating and drafting nonprofit bylaws

Now that we understand the key elements of nonprofit bylaws, let's move on to the process of creating and drafting them. Crafting effective bylaws requires careful consideration and consultation with key stakeholders. Here are some steps to guide you:

1. Research and benchmark: Start by researching nonprofit bylaws of similar organizations to get an idea of what works best for your sector. Look for templates and sample bylaws provided by reputable sources, such as nonprofit support organizations or legal experts.
2. Gather input: Engage your board members, staff, and other relevant stakeholders in the bylaws creation process. Seek their input on key decisions, such as board structure, membership criteria, and decision-making processes. This collaborative approach ensures buy-in and promotes a sense of ownership.
3. Seek legal advice: Nonprofit laws and regulations vary by jurisdiction. It's crucial to consult with a nonprofit attorney or legal expert who can review your bylaws drafts and ensure compliance with applicable laws. They can provide guidance on specific clauses and language to include or avoid.
4. Customize to your organization: Tailor the bylaws to fit the unique needs and circumstances of your organization. Consider factors such as size, mission, geographic location, and the nature of your nonprofit's work. Ensure that the bylaws align with your organization's values and strategic goals.
5. Review and finalize: Once the initial draft is ready, circulate it among key stakeholders for feedback and review. Incorporate any necessary revisions or suggestions, and seek consensus on the final version. It's essential to strike a balance between being comprehensive and keeping the bylaws concise and user-friendly.

Reviewing and updating nonprofit bylaws

Nonprofit bylaws should not be set in stone. As your organization evolves and faces new challenges, it's important to review and update your bylaws periodically. Here are some reasons to consider revising your bylaws:

1. Changes in governance requirements: Nonprofit laws and regulations may change over time. Stay informed about any legal updates that may impact your organization. Review your bylaws regularly to ensure compliance with the latest requirements.
2. Organizational growth: As your nonprofit grows and expands its programs or services, your governance structure may need to adapt. Review your bylaws to ensure they reflect the current and future needs of your organization.
3. Lessons learned and best practices: As you gain experience in running a nonprofit, you may identify areas for improvement in your bylaws. Learn from your past experiences and incorporate best practices to enhance the effectiveness of your governance.
4. Board and leadership changes: When there are changes in board members or leadership positions, it's a good time to review your bylaws. New members may bring fresh perspectives and ideas that can contribute to the improvement of your governance practices.

Common mistakes to avoid in nonprofit bylaws

While creating or revising nonprofit bylaws, it's important to be aware of common mistakes that can undermine their effectiveness. Here are some pitfalls to avoid:

1. Ambiguity and vagueness: Clear and precise language is key to effective bylaws. Avoid using ambiguous or vague terms that can lead to confusion or differing interpretations. Be specific and provide sufficient details to ensure everyone understands their rights and responsibilities.
2. Lack of flexibility: Bylaws should strike a balance between providing structure and allowing for flexibility. Avoid overly rigid provisions that can hinder your organization's ability to adapt to changing circumstances. Leave room for amendments and consider including a provision for bylaws review on a regular basis.
3. Failure to align with mission and values: Your bylaws should reflect the mission, vision, and values of your organization. Ensure that the language and provisions align with your nonprofit's overall goals and objectives. This alignment reinforces your organization's identity and purpose.
4. Inadequate conflict resolution mechanisms: Conflicts and disagreements are inevitable in any organization. Your bylaws should include clear procedures for resolving conflicts, such as mediation or arbitration. By addressing potential conflicts proactively, you can minimize disruption and maintain harmonious relationships.

Bylaws vs. articles of incorporation: Understanding the difference

It's important to understand the difference between bylaws and articles of incorporation, as they serve distinct purposes in the nonprofit sector. While bylaws govern the internal operations of your organization, articles of incorporation establish your nonprofit's legal existence. Here's a brief overview of each:

1. Articles of Incorporation: This document is filed with the appropriate government agency (such as the Secretary of State) to create your nonprofit as a legal entity. It typically includes basic information about your organization, such as its name, purpose, location, and initial board of directors. Articles of incorporation are relatively static and do not cover the day-to-day operations or governance procedures.
2. Bylaws: Bylaws, on the other hand, are dynamic and provide detailed guidelines for how your organization operates. They cover topics such as board structure, decision-making processes, membership, meetings, and amendments. Bylaws are usually not filed with any government agency but are internal documents that guide your nonprofit's governance.

Resources for nonprofit organizations to develop effective bylaws

Developing effective nonprofit bylaws can be a complex task. Fortunately, there are numerous resources available to help nonprofit organizations navigate the process. Here are some valuable resources to consider:

1. Nonprofit Support Organizations: Many nonprofit support organizations offer resources, templates, and workshops on bylaws development. These organizations specialize in providing guidance and assistance to nonprofits and can help you create well-crafted bylaws tailored to your organization's needs.
2. Legal Experts and Attorneys: Consulting with a nonprofit attorney or legal expert can provide invaluable advice and ensure legal compliance. They can review your bylaws drafts, answer specific legal questions, and provide guidance on best practices for nonprofit governance.
3. Online Libraries and Guides: Online libraries and guides, such as those provided by reputable nonprofit organizations, offer a wealth of information on nonprofit governance and bylaws. These resources often include sample bylaws, checklists, and explanations of key concepts.
4. Networking and Peer Support: Engaging with other nonprofit professionals through networking events, conferences, or online forums can provide insights and practical tips on developing effective bylaws. Peer support can help you navigate challenges and learn from the experiences of others in the sector.

Ensuring compliance with nonprofit bylaws

Creating well-crafted nonprofit bylaws is only the first step. Ensuring compliance with the bylaws is equally important for the effective governance of your organization. Here are some tips to help you maintain compliance:

1. Educate board members and staff: Provide training and orientation sessions to board members and staff on the organization's bylaws. Ensure they have a clear understanding of their roles, responsibilities, and the governance procedures outlined in the bylaws.
2. Regularly review and update: Review your bylaws periodically to ensure they remain up to date and relevant. Consider establishing a bylaws review committee or including a provision for bylaws review in your governance practices.
3. Document amendments and changes: Any amendments or changes to the bylaws should be documented and communicated to all stakeholders. Maintain a record of amendments and make them easily accessible to board members, staff, and relevant parties.
4. Internal audits: Conduct regular internal audits to assess compliance with the bylaws. This can help identify any areas of non-compliance or opportunities for improvement. Address any issues promptly and make necessary adjustments to ensure ongoing compliance.

The significance of well-crafted nonprofit bylaws

In conclusion, nonprofit bylaws are the foundation of effective governance for your organization. They outline the rules and procedures that guide decision-making, define roles and responsibilities, and ensure legal compliance. Bylaws provide transparency, accountability, and structure to your nonprofit, enhancing its credibility and reputation.

Creating well-crafted bylaws requires thoughtful consideration, collaboration, and consultation with legal experts. Periodic review and updates are essential to adapt to changing circumstances and maintain compliance. By understanding the key elements of nonprofit bylaws and avoiding common pitfalls, you can create a solid framework for your organization's success.

Remember, nonprofit bylaws are not just a legal requirement; they are a tool for achieving your mission and making a positive impact in the community. Embrace the process of developing effective bylaws, and let them serve as a roadmap to guide your organization towards its goals.