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The Top 3 Documents Every Nonprofit Needs

Nonprofits engage in various activities around the country, including the preservation of historic sites, providing assistance to homeless people, helping to care for unwanted animals, and greening our urban areas to make them more acceptable to live in. No nonprofit can work successfully without creating some form of organization, so money is found, work is dispatched to willing workers, and successful results are tabulated.

There are more than 1.5 million tax-exempt nonprofit organizations in the U.S. alone, of which more than a million are public charities. More than 100,000 are private foundations while others make up more than 350,337, which include fraternal organizations, chambers of commerce, and civic leagues. In 2010, these types of organizations were responsible for 9.2 percent of the total salaries and wages paid in the U. S. and their share of the GDP in 2014 was 5.3 percent.

Small Nonprofits

The smallest of nonprofit organizations with a yearly revenue of $5,000 or less do not need to declare themselves to the IRS, so if they were known about and included in the statistics, there would be far more nonprofit organizations in existence than are currently known about.

The biggest problem for nonprofit organizations is when the IRS moves the goal posts for tax-exempt status.

The easiest solution for raising funds for a nonprofit is by using social media platforms, which are powerful fundraising tools. It is easy to create a conversation on a Facebook page which draws in followers, some of whom will follow your cause and become regular donators.

If you are setting up a nonprofit for the first time, there are three key documents you need to be familiar with and have dealt with before you can feel relaxed and certain about your nonprofit’s future and status. These three documents provide details of the important rules you need to follow in order to operate your nonprofit. It is also essential that your records are kept properly; otherwise you may lose your tax-exempt status and corporate status too. The three documents are articles of incorporation, corporate bylaws, and organizational meeting minutes.

Articles of Incorporation

It is not until the articles of incorporation are submitted to your state’s corporate filing office that your nonprofit gets its legal status.

The articles of incorporation include the basic information about your nonprofit, including the nonprofit’s name, its registered agent, and its registered address, and not forgetting the membership structure of your nonprofit corporation. You could also add any important tax exemption information, such as the reason for your tax-exempt status. You should also include where the assets would end up if your nonprofit no longer existed.

When you set up your nonprofit, the articles of incorporation document has to be filed at the Secretary of State's office in your state.

When filing the articles of incorporation there are some details you have to get right, one of which is the name. Some nonprofits forget to do a name search of businesses in their state before assigning a name. If you give your business a name that is the same as another, your articles of incorporation document will be rejected and you will have to find a new name. You will normally have to include the name and address of your nonprofit, which is usually where most of your business dealings take place.

Most small nonprofits will only have one location. You must include the precise name and address of your compulsory registered agent who will be the recipient of any paperwork to do with your business. This could be an officer in your nonprofit or an attorney you hire to take on this role.

  • The purpose of your nonprofit needs to be included. This does not need to be specific, but does need to include a statement that says the nonprofit is acting lawfully in relation to state laws.
  • The length of time your nonprofit is likely to last is sometimes requested, but it is generally assumed by most states that any corporation is typically classified as perpetual.
  • You need to include facts concerning the issuing of shares of stock, including the amount your nonprofit is permitted to issue. You should determine beforehand how many shares your nonprofit is permitted to issue, as the more you choose, the more the articles of incorporation will cost. Some states set a fee for a minimum number of shares so it is worth checking and setting your share numbers before the minimum fee.
  • Your nonprofit’s incorporators’ names and addresses or those of the initial officers or directors need to be included with at least one of their signatures. If your nonprofit is small, both your name and signature need to be included.

Articles of Incorporation Fees

The Secretary of State in your nonprofit’s state determines the fee for submitting the articles of incorporation document. Fees typically range from between $100 and $1,000.

The Bylaws

The second most important document is your nonprofit’s corporate bylaws. Bylaws are there to provide an operating manual for corporations. They can be referred to in order to seek information about the nonprofit, such as how long a board member can serve in his or her position or how many members are needed to get a quorum. Bylaws include the procedures and rules for when a meeting is held, the procedure for the election of directors, and the procedures for appointing officers.

Your state’s nonprofit laws outline matters related to corporate governance, similar to your bylaws. However, you are allowed to select different rules, providing your rules are included in your nonprofit’s bylaws. In a situation where the bylaws fail to address an issue included in your state’s law, any relevant state rule will take precedence.

Follow State Rules

It is common for a nonprofit to just restate governance and tax rules in their bylaws so that they can be sure that by adhering to their bylaws they are following state rules too.

It is better if you have the opportunity to include important material in your bylaws and not your articles of incorporation as changing them, if required, is far simpler. The voting demand to amend a bylaw is usually less difficult, so there is a better chance that your state will not need to be consulted.

Your nonprofit bylaws are the rules that determine how your business is run. This includes such details as where and when meetings of directors and shareholders take place and what their voting rights are. The bylaws are put into place by your nonprofit's directors at their first board meeting.

Your nonprofit’s bylaws document is the second most important of your nonprofit corporation documents. It is the operational manual for the organization, and when any details need to be checked, this should be located in this document. The sorts of information that may need to be referred to or clarified is the period of time a board member is permitted to hold his or her position. Another key point that often gets forgotten is the number of people required to reach a quorum.

As corporation law is not standardized, bylaws should outline the rules and procedures that should be followed at meetings, how the directors' elections should be conducted, and the method used to appoint officers. Other decisions are included as well, such as when and where meetings should take place for both directors and any shareholders. Without a bylaw document, confusion and unnecessary discussion may take place in certain situations. Typically, the nonprofit's directors start using the bylaws document at their first meeting.

One of the most important details about a nonprofit is whether it is board or member controlled. A corporation that is run by a board of directors does not have any members while a member-driven nonprofit allows voting rights for its members and they have the powers to vote in directors and remove them too. If you have members in your nonprofit, under state law they do have rights so you have to include these rights in your bylaws document. You also need to express clearly who is in control: the members or the directors.

The following provisions should be included in your nonprofit bylaws:

  • Governing Structure – It is important to be sure if the nonprofit is either member-driven or board-driven. A board-driven nonprofit corporation does not have any members or, if there are any, their rights are limited. A member-driven organization means the members can vote directors in and out of their position.
  • The Role of Directors – Written in the bylaws should be the conditions of office for the directors. If there is more than one director, then their terms could be staggered so their start and finish dates are not identical. This allows for more continuity as there is always at least one director who knows what is happening in the nonprofit at any one time. Sometimes, directors’ terms finish at the same time and this is referred to as a successive term.
  • Officers in a Nonprofit – Most states require that officers, such as the secretary, treasurer, and president, are named in the bylaws. The bylaws should also include how the officers are appointed, what their duties are, how long they are appointed for, and how they are removed and replaced.
  • Voting Rules – The bylaws should include the number of directors who need to be present so that a valid meeting can take place and what the voting rules are.
  • Committee Formation – How a committee is formed and abolished is an important bylaw. It makes it simpler for the nonprofit if a committee can be abolished through a board resolution rather than going through the process of amending a bylaw.

Sometimes conflicts of interest occur, and it is necessary to include in the bylaws how this will be handled. A policy separate from the bylaws may then be formed to handle conflicts of interests.

Amendments to Bylaws

The bylaws must include how amendments are made and whether it is through the board, the membership, or by getting approval from a third party. Sometimes, a 66-percent majority is required before a bylaw amendment can take place.

Organizational Meeting Minutes

When a nonprofit starts operating for the first time, a meeting is usually held so that approval can be given for business items that are fundamental to the nonprofit. This is called the corporation’s organizational minutes. The meeting should be convened by either the incorporators or the board of directors, depending on whoever filed and signed the articles for the corporation.

The meeting minutes are a formal record of the proceedings and actions taken.

Typically, these actions include:

  • setting up an accounting time period and tax year for your nonprofit;
  • approving the membership, the issuing of certificates to members, and deciding on membership dues and payment dates for a business that is a membership nonprofit;
  • authorizing and establishing the board and other committees;
  • the appointment of officers;
  • the approval of bylaws;
  • deciding on the tax exemption status and when it is to commence; and
  • giving approval for the first transactions of the nonprofit, like opening an official bank account.

Often, a startup nonprofit is created without paying attention to taking minutes from the first meeting. If this has happened, then you can write the minutes from memory to include in your record, but you have to state that they have been created after the meeting and not at the time of the meeting.

You will need to create a file to store your corporate documents. This could be a hard copy, such as a ring binder. Included in it should be:

  • the three main documents: the articles of incorporation, the bylaws, and the organizational meeting minutes;
  • the nonprofit's directors' names and addresses (or the members' names and addresses if your nonprofit is a membership organization); and
  • written agreements for any actions taken by the board of directors or members.

All your nonprofit’s records should be kept securely at the business's main base so that they can be accessed when necessary. If your nonprofit is subject to an IRS audit, then keeping all your documents close by and easily accessible ensures such situations run smoothly. Disputes are far more easily resolved if your file is up to date and accurate.

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