All nonprofit organizations and ministries need bylaws. Bylaws provide direction for how the board of directors operate-how they govern. The IRS requires bylaws to be submitted with the organizing document, Form 1023. However, organizations applying for nonprofit status using the short form, Form 1023EZ are not required to submit bylaws. Just because they are not required does not mean they are not needed!
Bylaws guide the actions and decisions of the board of directors. When the organization is being formed, the bylaws are created. Occasionally, the board will begin word-smithing the bylaws and struggle through their formation. Since bylaws can be changed with a board vote, it is better to form the document in a very general manner and then over time, tweak them to reflect how the board operates. This means, then, the bylaws must be reviewed by the board on a regular basis (usually annually) to ensure the board has not drifted from the described processes.
All bylaws need to cover name and location of organization, its purpose, number of board members and their terms of service, frequency of board meetings, board structure and a dissolution clause. It should be noted that in an effort to be transparent, some organizations make their bylaws public; the IRS does not require bylaws to be made public, so do not feel pressured to do so.
Some considerations for clauses that may be included in initial bylaws (or during an annual review):
- Committees – It can be challenging to identify the specific committees that are needed when the organization is being formed. A statement in the bylaws can give the board the authority to form committees as the need arises.
- Number of board members – Instead of specifying a specific number of board members, it is recommended to specify a range. For instance, the range could be between 3 and 7 board members. This gives the board some flexibility.
- Proxy voting – In the event a board member can not be present at a board meeting, will they be permitted to have someone vote for them? This may or may not be desirable.
- Electronic voting – Many organizations discovered during the COVID pandemic that they were not permitted to vote electronically. (Meetings also were not permitted to be held electronically). Organizations would be wise to develop some policies about whether or not they will recognize electronic voting and or electronic meetings.
Additionally, faith-based organization should include a Statement of Faith in their bylaws. Recent court cases have documented organizations are protected when their bylaws include a detailed statement of faith defining their beliefs on key cultural issues. If your organization does not have a Statement of Faith, now is the time to develop one.
The bylaws of an organization are a legal document. They are not broken or ignored intentionally. For this reason, annual reviews are essential to ensure they are being followed and to revise as necessary.
Does your organization have bylaws in place? Are they still relevant to how the board operates? Do you need help developing the bylaws to reflect the work of the board? Send us an email, we can help.
