Posts filed under ‘Getting Incorporated’

Articles of Incorporation

The next step of an incorporated nonprofit is drafting the legal incorporation document.  This document may be called the certificate or the articles of incorporation depending on your state.  Call your Secretary of State or Attorney General and request written information on filing for incorporation; ask specifically if it includes an example of your states Articles of Incorporation. This will give you some guidelines to follow while forming your articles.  Once you have completed the document consult an attorney to review them for you.  The IRS is very specific about the wording in your organizations articles and you may be rejected for tax-exempt status if you have not included specific IRS language.

Besides the legal language you will be inserting your specific organization information.  This information includes the name of the organization and where its main office will be located.  You also need to include your organizations primary goals.   Keep your goals very broad so that you do not limit your organizations expansion in the future.

 A couple of decisions need to be made throughout the articles.  The first being what type of organization you will be.  For the purpose of becoming a 501© 3 organization your nonprofit should be established as one of the following:

CHARITABLE
EDUCATIONAL
SCIENTIFIC
RELIGIOUS
LITERARY
PROMOTING AMATEUR ATHLETICS
OR EDUCATIONAL

 (A more thorough list and explanation can be found at:
www.SumptionAndWyland.com – FAQ -General activities of nonprofits
or through www.IRS.gov)

 Next you will need to decide whether your nonprofit will have members, not have members or reserve that decision for later:

 shall have no voting members.
may (but need not) have voting members
shall have a voting membership

There are advantages and disadvantages to each choice.  You need to consider the long-term future of your nonprofit before making this decision.  Although you may start out as the founder and serve on the board of directors, after incorporation these decisions will follow strict voting procedures as laid out in your bylaws.  Voting membership is an opportunity to elect and remove directors as well as vote on changes and amend bylaws.  This prevents the nonprofit from being completely controlled by its board of directors.  This decision also places some liability in protecting member rights and outlining all responsibilities of each member.  Study several different types of membership organizations and ask questions concerning their voting procedures.  This will help you decide if it is the best decision for your nonprofit.

Recommended paperwork for members should include some type of letter of agreement.  This needs to be signed by each potential member and includes the rights allocated to the member through the bylaws.  You will also need some kind of nominating procedure stating who is eligible to become a member and the voting procedures to accept them.  You can have several different classes of members and allow different voting privileges to each class, each with separate dues amounts.  All of this information is established through the nonprofit bylaws and will be discussed more thoroughly at that point.  The only decision to be made here is which type of organization you will be.

The articles of incorporation are not as intimidating as they appear.  They do need to follow certain state and federal guidelines but your Secretary of State will provide those details and then all that is left to do is plug in your own information.  Once your attorney reviews them there may be slight modifications but you will have the basic document ready for them to work with.

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March 11, 2008 at 1:23 pm Leave a comment

Board of Directors

The Purpose of a Board of Directors

Your organizations board of directors will help manage, discuss, implement and maintain your mission and goals. They should be able to attend regular meetings to ensure successful organizational planning and see that all resources are managed effectively.

Directors supervise all aspects of the organizations operations and evaluate its performance and success. Directors need to follow all activities that affect the mission or goals. All directors must be able to set aside any potential conflict between their personal or individual business interests to support the ongoing growth of the organization.

A Board of Directors gets its authority from the articles, which will be discussed in the next lesson. This governing document specifies, for example, its name, the purpose or mission of the organization, place of business, primary officers, etc. 

Duties of a Board of Directors

Several states have statutes adopting duties, which can be used in court to determine whether a board member has acted improperly. These standards are usually described as the duty of care, the duty of loyalty and the duty of obedience.

Duty of Care

The duty of care describes the level of competence that is expected of a board member, and is commonly expressed as the duty of “care that an ordinarily prudent person would exercise in a like position and under similar circumstances.” This means that a board member owes the duty to exercise reasonable care when he or she makes a decision as a steward of the organization.

Duty of Loyalty

The duty of loyalty is a standard of faithfulness; a board member must give undivided allegiance when making decisions affecting the organization. This means that a board member can never use information obtained as a member for personal gain, but must act in the best interests of the organization.

Duty of Obedience

The duty of obedience requires board members to be faithful to the organization’s mission. They are not permitted to act in a way that is inconsistent with the central goals of the organization. A basis for this rule lies in the public’s trust that the organization will manage donated funds to fulfill the organization’s mission.

Requirements of a good Board of Directors

The people you elect to serve on the board of directors should have:

·        Passion about the mission

·        Knowledge of all the ins and outs of the organization

·        A wide variety of expertise

·        Understanding of the overall mission and vision

·        Commitment to the mission and it’s goals

·        Time available to serve the organization

Job Descriptions of a Board of Directors

Most states require at least 3 members on the board of directors, which constitute the organizations officers.  These must include a president (board chair) and a secretary.  For this lesson I am including the basic job descriptions of the President, Vice President, Treasurer, Secretary and the basic Board Member

PRESIDENT / CHAIR / CHIEF VOLUNTARY OFFICER (CVO)
(adapted from The Board Café)

General: Ensures the effective action of the board in governing and supporting the organization, and oversees board affairs. Acts as the representative of the board as a whole, rather than as an individual supervisor to staff.

Community: Speaks to the media and the community on behalf of the organization (as does the executive director); represents the agency in the community.

Meetings: Develops agendas for meetings in concert with the executive director. Presides at board meetings.

Committees: Recommends to the board, which committees are to be established. Seeks volunteers for committees and coordinates individual board member assignments. Makes sure each committee has a chairperson, and stays in touch with chairpersons to be sure that their work is carried out; identifies committee recommendations that should be presented to the full board. Determines whether executive committee meetings are necessary and convenes the committee accordingly.

Executive Director: Establishes search and selection committee (usually acts as chair) for hiring an executive director. Convenes board discussions on evaluating the executive director and negotiating compensation and benefits package; conveys information to the executive director.

Board Affairs: Ensures that board matters are handled properly, including preparation of pre-meeting materials, committee functioning, and recruitment and orientation of new board members.

VICE PRESIDENT / VICE CHAIR
(adapted from The Board Café)

General: Acts as the president/chair in his or her absence; assists the president/chair on the above or other specified duties.
Special Responsibilities: Frequently assigned to a special area of responsibility, such as membership, media, annual dinner, facility, or personnel.

Some organizations choose to make the vice president, explicitly or implicitly, the president-elect.

TREASURER
(adapted from The Board Café)

General: Manages the board’s review of, and action related to, the board’s financial responsibilities. May work directly with the bookkeeper or other staff in developing and implementing financial procedures and systems.

Reports: Ensures that appropriate financial reports are made available to the board. Regularly reports to board on key financial events, trends, concerns, and assessment of fiscal health.

Finance Committee: Chairs the Finance Committee and prepares agendas for meetings, including a year-long calendar of issues. In larger organizations, a separate Audit Committee may be chaired by a different person.

Auditor: Recommends to the board whether the organization should have an audit. If so, selects and meets annually with the auditor in conjunction with the Finance and/or Audit Committees.

Cash Management and Investments: Ensures, through the Finance Committee, sound management and maximization of cash and investments.

Board Secretary Job Description

The following description was adapted from materials from the National Center for Nonprofit Boards.

1. Is a member of the Board

2. Maintains records of the board and ensures effective management of organization’s records

3. Manages minutes of board meetings

4. Ensures minutes are distributed to members shortly after each meeting

5. Is sufficiently familiar with legal documents (articles, by-laws, IRS letters, etc.) to note applicability during meetings

 Board Member Job Description
(The following description was adapted from materials from BoardSource)

1. Regularly attends board meetings and important related meetings.
2. Makes serious commitment to participate actively in committee work.
3. Volunteers for and willingly accepts assignments and completes them thoroughly and on time.
4. Stays informed about committee matters, prepares themselves well for meetings, and reviews and comments on minutes and reports.
5. Gets to know other committee members and builds a collegial working relationship that contributes to consensus.
6. Is an active participant in the committee’s annual evaluation and planning efforts.
7. Participates in fund raising for the organization.

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March 4, 2008 at 5:20 pm 2 comments


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