Nonprofit Meetings, Minutes & Records

How to Properly Document Your Nonprofit's Actions

Anthony Mancuso

• Publisher: NOLO
• Year: 2018
• Print ISBN: 9781413324785
• eBook ISBN: 9781413324792
• Edition: 3
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

Nonprofit? Stay out of IRS trouble with the ultimate corporate housekeeping tool! Nearly 1.5 million nonprofit organizations are busy preserving historic sites, saving libraries, helping the homeless, greening our cities--and so much more. Yet, while some have sophisticated record-keeping systems, most nonprofits are staffed by volunteers who need help running the organization and keeping up a proper--and legal--paper trail.Help has arrived! With Nonprofit Meetings, Minutes & Records, you'll get the all-in-one solution every nonprofiteer needs to hold meetings and document actions taken by board members. Step by step, it walks readers through:

• calling meetings
• appointing officers
• taking minutes
• making resolutions
• voting on proposals
• adjourning meetings
• working with a lawyer, if necessary, and
• finding a tax adviser.
  

Nonprofit Meetings, Minutes & Records also provides useful tips and advice on how to do important tasks, such as organizing records, preparing meeting folders, and taking minutes. Plus, all necessary legal documents are included for you to fill out. It's everything you need to keep your nonprofit running smoothly and legally.

CHAPTER

1

Housekeeping 101—Understand and Organize Your Records

Your Key Organizational Documents

Your Primary Corporate Document—Articles of Incorporation

Your Operating Manual—Bylaws

Your First Meeting—Organizational Meeting Minutes

Membership Roster

Ongoing Records—Minutes and Written Consents

Other Records

Organize Your Corporate Records

Looking Up the Law Yourself

Locating Your State’s Nonprofit Laws

Finding Answers to Your Questions

Checking Other Laws

State Corporate Filing Offices

When to Consult a Professional

Let’s start by getting acquainted with certain key corporate documents, ones that you’ll refer to time and again throughout the life of your nonprofit. These include your articles of incorporation, bylaws, and other organizational documents. They contain your mission statement, the procedures you must follow to operate your nonprofit corporation, and rules to help you maintain your tax-exempt status.

To operate effectively, you’ll need to keep your key corporate documents well organized and easily accessible. We’ll show you how to set up a corporate records book to help achieve this. Keeping good records is not merely a formality: It can provide crucial documentation in the event of an audit by the Internal Revenue Service (IRS), a lawsuit, or even a disagreement among directors, members, or anyone else about actions taken by your nonprofit.

Why Incorporate a Nonprofit?

Many nonprofits start out as small grassroots organizations, spurred on by the volunteer and part-time energy of just a few people working out of someone’s house or office. Under state law, this type of loosely structured arrangement is considered a nonprofit association. It has the advantage of requiring minimal paperwork and it can obtain tax-exempt status using the standard IRS Form 1023 that nonprofit corporations use. However, every member of the nonprofit is personally liable for the claims, debts, and taxes of the organization. So, as a group increases in size and the scope of its work, it often decides to incorporate to protect its founders and members from personal liability for the group’s activities. There are other advantages to incorporating but this is often the main reason groups choose to do it.

Your Key Organizational Documents

Getting familiar with your corporate documents is a bit like reading the directions for a new appliance—tedious but essential. For a nonprofit, you’ll find that these documents contain many important rules about how you must operate your nonprofit—everything from how to notify people about meetings to the minimum number of directors you must have.

We’ll start with the big three: your articles of incorporation, bylaws, and organizational minutes. Then we’ll move on to others like your membership roster and consent forms.

Your Primary Corporate Document—Articles of Incorporation

The primary corporate document for every nonprofit corporation is its articles of incorporation. A corporation comes into existence on the date its articles of incorporation are filed with the state corporate filing office. While most states use the term “articles of incorporation,” some states refer to this document as the corporation’s charter or certificate of incorporation, or by some other name.

Articles of incorporation contain basic structural information, such as the name of the corporation, its registered agent and registered office address, and the corporation’s membership structure, if any. Nonprofit corporations also often include essential tax exemption information in their articles, such as their tax-exempt purpose(s), a clause dedicating their assets to another 501(c)(3) nonprofit organization or class of organizations, and other operating restrictions necessary for the nonprofit to obtain tax-exempt status (such as limitations on political lobbying and prohibitions against self-inurement). These provisions often mirror state and federal tax law requirements for nonprofit corporations and are a useful reminder for the nonprofit about the legal restrictions with which it must comply. They also provide the IRS with the assurance it needs to grant tax-exempt status to the corporation.

Some nonprofit corporations include program or other descriptive information in their articles, such as an expanded mission or outreach statement. This information isn’t required in the articles and many nonprofits choose to put it in their bylaws instead because it’s easier to change bylaws than articles.

If someone helped you incorporate (such as a lawyer, tax adviser, or paralegal), you may have received copies of these documents in a corporate records book or as part of a corporate kit, which includes a corporate seal (optional under state law) and a fancy corporate records binder. Some lawyers keep their clients’ corporate records, assuming they will handle the organization’s ongoing corporate work. If that was the case for you, you will need to request a copy of all the corporate documents in your client file. This is your property, so you have a right to receive it.

If you can’t locate a copy of your articles of incorporation, you should check your state’s corporate filing office (often the corporations division of the secretary of state’s office) to see how you can obtain a certified or file-stamped copy. In most states, you can order a copy online. Appendix B gives information on how to locate your state’s corporate filing office online. The office usually charges a small fee for copying and sending this form to you.

RESOURCE

Where to get help preparing your articles of incorporation. If you haven’t yet prepared or filed your articles, there are books that can help you. If you want to incorporate in California, see How to Form a Nonprofit Corporation in California (Nolo). In other states, see How to Form a Nonprofit Corporation (Nolo). Also check your secretary of state’s website for sample or ready-to-use forms. You can find contact information for your state’s corporate filing office in Appendix B.

Your Operating Manual—Bylaws

The bylaws of a corporation are its second most important document. Bylaws basically serve as a corporation’s operating manual. Anytime someone has a question like, “What’s the maximum time one of our board members can serve?” they’d look to the bylaws for answers. Bylaws contain the rules and procedures for holding meetings (like call, notice, quorum, meeting, and voting requirements), electing directors, appointing officers, admitting members (for a membership corporation), and taking care of other essential corporate formalities.

You don’t file bylaws with the secretary of state—they are an internal document. However, when you apply for tax-exempt status from the IRS, you must include a copy of your bylaws with your federal tax exemption application.

Most state nonprofit statutes have provisions that cover basic corporate governance matters just like your bylaws. But don’t worry, you are free to deviate from state law and fashion your own governance rules—as long as the rules you put in your bylaws (or elsewhere) don’t conflict with or violate a mandatory state law provision. For example, say your state law requires that at least six people must attend directors’ meetings in order to achieve a quorum. (Quorum rules are typical provisions of state laws.) You could set your quorum at eight people, but you couldn’t set it at four people, or below the statutory minimum.

Often, nonprofits simply restate the state law requirements in their bylaws. That way, they know that if they follow their bylaws, they are complying with state law. It is also more efficient to have all the important operating rules easily accessible in one document. In any case, if a nonprofit’s bylaws don’t address an issue covered by state law, the state rules usually kick in.

TIP

Make sure your bylaws are up-to-date. Fortunately, major changes to corporate laws generally only happen every decade or two, when states modernize their corporate statutes. Nevertheless, it’s possible that bylaw provisions that were valid at the time you adopted them will later become out-of-date and invalid under new state law provisions. If you plan to take major corporate action (such as restructuring your board or issuing a new class of membership), check your state’s current nonprofit corporation act and make sure your bylaws meet the law. We provide information on how to find your state’s nonprofit corporation act in Appendix B (and see “Checking Other Laws,” below).

Bylaws also usually recite important federal or state tax exemption requirements. Again, this ensures that if a nonprofit follows its bylaws, it is doing its best to maintain its tax-exempt status. This information is also necessary to assure the IRS and the state that a nonprofit is eligible for tax-exempt status. Nonprofit bylaws typically include other rules for governance not addressed by state or tax law, such as the composition and operation of advisory committees, the duties of officers, and the rights and responsibilities of informal, nonvoting participants in the organization. These are all useful pieces of organizational history, especially if and when key staff members leave. Some nonprofits choose to give a more detailed description of the group’s purpose and programs, expanding on the summary given in the articles.

Make sure you have a copy of your most recent, up-to-date bylaws. If you don’t have bylaws yet or want to prepare new ones, there are books that can help you with this task. If your nonprofit corporation was formed in California, see How to Form a Nonprofit Corporation in California (Nolo). For help preparing state-specific bylaws for any other state, see How to Form a Nonprofit Corporation (Nolo).

Your Personal Liability Protection Can Be Lost: Don’t Get Lazy!

If you want the advantages you get as a corporation (including the personal protection of limited liability for your directors, officers, staff, and members), you must follow legal requirements for running it, such as holding and recording meetings, keeping separate books and bank accounts, and following corporate and tax laws. If you don’t abide by the rules, you could find your nonprofit stripped of its corporate and tax status—and the benefits of that status, such as:

• Limited liability. Corporate directors, officers, staff, and members usually are not personally liable for the debts or claims made against the corporation. This means that if the corporation cannot pay its debts or other financial obligations, creditors cannot seize or sell the personal assets of corporate directors, officers, employees, volunteers, or members.

• Tax exemption. A corporation is a separate taxable entity and can obtain tax-exempt status under federal and state law. If a nonprofit loses its tax exemption, it must pay corporate income tax on its net revenue (the corporate tax rate applies to nonexempt nonprofit associations too).

• Employee benefits. A...

Table of contents

• Cover
• Title
• Copyright
• Acknowledgments
• About the Author
• Table of Contents
• Introduction
• 1 Housekeeping 101—Understand and Organize Your Records
• 2 Obtaining Board or Member Approval—Meetings and Written Consents
• 3 Premeeting Steps—How to Call, Notice, and Prepare for Your Meeting
• 4 The Big Day—Holding Your Meeting
• 5 Minutes for Directors’ Annual and Special Meetings
• 6 Minutes for Members’ Annual and Special Meetings
• 7 How to Take Action by Written Consent
• 8 Help Beyond This Book
• Appendixes
• Index