One of the first responsibilities of newly appointed directors is to create and document bylaws for the organization. Typically, this is completed at the first official meeting of the board. Bylaws are needed early on since they provide the structure for the nonprofit organization’s general operations. They contain several specifics including rules and procedures for meetings, how issues are voted upon, the process for how they are accepted or declined, and how officers and directors are elected to their positions. Here are some of the basic characteristics of the bylaws for nonprofit organizations.
Forming Your Nonprofit Organization’s Bylaws
Many states mandate how a nonprofit is governed but the Secretary of State of Illinois does not indicate guidelines for the internal governing practices of a nonprofit. The bylaws of your organization need to be written in detail, so they are easily understood by all parties. Think of the document as the organization’s operating manual and build it so it’s easy to understand what is expected of every involved party. Here are a few of the specifics to be included:
- Specifics pertaining to the board, its size, how it is to function
- Roles and duties of officers and directors (Illinois requires 3 directors)
- Procedures for how meetings are handled, electing directors and appointing officers
- All policies and procedures
- How grant money is to be distributed
- Any other governance matters for the corporation
Are Bylaws Public Documents?
A nonprofit organization is not required to make bylaws public. However, when they are readily available it can increase transparency and provide accountability. This can be helpful for encouraging the board to adhere closely to them as well as build trust in the community. They should be reviewed periodically and amended as they relate to the growth of the organization. If bylaws are changed, these changes must be reported to the IRS using a 990, if you are required to file an annual report.
Why Nonprofits Need Bylaws
A nonprofit must apply to the state to become incorporated but in order to be incorporated the organization has to have established bylaws. For nonprofits doing charitable work, it is not required to become incorporated. However, there are significant advantages for those who do. For instance, if something does go wrong, there is limited liability.
Best Practices for Writing Bylaws
For those who are unsure where to start writing bylaws, there are many samples and outlines available online. Use these as a skeleton to ensure nothing is overlooked in your organization. Bylaws are relatively simple to create. Unlike Articles of Incorporation, the bylaws are not required to have any specific language included. However, there are some best practices to consider:
- Note the difference in words like “may” and “shall.” These are distinctly different concepts. Choose carefully between the two.
- Although you’ll find many samples of bylaws online, don’t just copy them word for word. Tweak them so they fit the wants and needs of your organization.
- Illinois provides a template for establishing bylaws but doesn’t require it to be filed with the state
Even though the bylaws do not have to be registered with the state, Illinois does require all nonprofits to file an annual report of officers and directors. This report is due annually in the month the organization was incorporated.
To know more about bylaws and how to create your non-profit organization, give us a call today at (847) 729-3939 and schedule an appointment. James C. Provenza & Associates, PC provides a comprehensive solution for your non-profit organization including tax planning, board resolutions, bylaws and simple to complex business services.
