A nonprofit organization’s mission is to ensure the prosperity of a cause, involving the public or charity, that requires additional funding and support. Bylaws are established by a nonprofit as a written document stating the set rules of its internal operating systems. These founded principles reinforce the organization’s accountability and transparency.
Bylaws are not usually public and are mostly used to guide the internal powers of the
organization. However, the state and federal governments look at a nonprofit’s bylaws to ensure the organization is governed ethically.
Summary
What Are Nonprofit Bylaws?
Bylaws are like a nonprofit’s rulebook. They are the internal governing document that lays out the essential rules and procedures for how the organization functions
What should Bylaws Include?
Bylaws are required to provide your nonprofit organization with structure and procedure. Hence, they help define aspects of functionality for the executive director, board members, and officers. Some of the key details covered in the bylaws include:
Mission and Purpose: This section clarifies why the nonprofit exists and what it aims to achieve.
Membership and Voting Rights: If the nonprofit has members, bylaws specify who can be a member, their rights, and how voting works.
Board of Directors and Officers: Bylaws outline the roles and responsibilities of board members and officers, the size of the board, how they are selected, and what powers they hold. This ensures that board members are taking accountability for their set obligations.
Meetings and Decision-Making: This includes details about how often meetings are held, how decisions are made, and quorum requirements.
Amendments to Bylaws: Procedures for making changes to the bylaws are also included to ensure flexibility as the organization evolves.
Conflict of Interest Policies: Guidelines to prevent and address conflicts of interest within the organization.
Depending on the organization, other details may be included in the nonprofit’s bylaws such as how grant monies will be distributed, and other essential corporate governance matters.
Are Nonprofit Bylaws Required to Be Public?
Even though making bylaws public isn’t legally required, it’s often seen as a best practice. Sharing bylaws can demonstrate transparency, which helps build trust with donors, members, and the community. Hence, many nonprofits voluntarily share their bylaws on their website or provide them upon request to show they have nothing to hide.
Why are Bylaws Important?
All nonprofits need a strong establishment of rules, regulations, and organization to function efficiently. An operating manual is essential to ensure the organization is working in compliance with all state and federal laws.
These rules provide structure on how to solve issues that may arise and address the division of responsibilities of board members. This allows everyone to take accountability for their duties and obligations. If a member of the board or an officer fails to conduct their duties, this incompetence can be identified, and consequences will be placed on the individual.
Bylaws are not public documents, but they can be viewed by any interested party upon request. It would be a good idea for your nonprofit to keep this document updated in case of a request.
The more speedily you can provide the interested party with the organization’s bylaws, the more transparent you are viewed as an organization.
The board of directors can decide whether they want to post the bylaws for anyone and everyone to view or to keep it undisclosed to the public unless requested.
What does the IRS Require for All Bylaws?
Bylaws are a required legal document for nonprofits to possess and practice. The IRS requires all 501(c) organizations to provide any updates of bylaws to be reported on the nonprofit’s annual report (990). The nonprofit board and officers should meet quarterly to review what has been set and determine whether alternations are necessary to improve organizational efficiency.
If an outsider or supporter of a nonprofit organization requests a copy of their bylaws, federal law requires that the nonprofit provides them with the document. An interested party can either get this document by asking the nonprofit organization directly, requesting it from the IRS, or requesting it from state officials.
It is highly recommended that board members and officers review their bylaws frequently, keeping them updated and ready for release if requested. It is not considered to be a public document, but it is required by federal and state laws. Since every nonprofit organization is unique, bylaws allow a nonprofit to express its rules and regulations for the process of fulfilling its mission.
When Should Nonprofits Share Their Bylaws?
There are specific situations where sharing bylaws can be a smart move for your nonprofit. These include:
Grant Applications: Funders often request bylaws as part of the grant review process to evaluate the nonprofit’s governance and operational structure. Hence, making them available when applying for a grant could help funders process your application faster.
Stakeholder Requests: Members, donors, or volunteers may ask for bylaws to better understand how the nonprofit is run and how decisions are made. In this case, providing them with a copy of your nonprofit’s bylaws would boost confidence and trust.
Internal Clarity: Sharing bylaws with staff, board members, and volunteers ensures everyone knows their roles and responsibilities and helps avoid misunderstandings.
In essence, being proactive in sharing bylaws during these scenarios can build stronger relationships and trust with stakeholders.
How to Share Bylaws Responsibly
If your nonprofit decides to make its bylaws available, here’s how to do it responsibly and strategically:
Protect Privacy: Before sharing, make sure to redact any sensitive information, such as personal details about board members or confidential matters.
Choose the Right Platforms: Posting bylaws on your nonprofit’s website or including them in an annual report are excellent ways to ensure accessibility.
Keep Bylaws Updated: Regularly review and update the bylaws to reflect any changes approved by your board or members. Sharing outdated bylaws can lead to confusion and misunderstandings.
Financing Solutions Nonprofit Line of Credit Product
It has always been hard for a nonprofit to get a business line of credit and a business loan. Banks require that all business loans for nonprofits have collateral and personal guarantees which for most small nonprofits is very hard to obtain.
Financing Solutions is a leading provider of business loans for nonprofits in the form of a 501c3/not-for-profit line of credit. Most nonprofits use their credit line for times when cash flow is down and expenses, like payroll, rent, etc. must be paid on time.
The nonprofit line of credit requires no collateral or personal guarantees. If your nonprofit is doing $200,000 per year in revenue and the Executive Director or board member signing the contract has a 650 or better credit score, you will be approved.
The nonprofit credit line costs nothing to set up and nothing until used making it a great cash backup plan. When you use the line it is very inexpensive and can be paid back at any time. The no-obligation, online application takes 2-minutes to fill out and there is no credit check required.
