You’ve drafted those bylaws, and you’re ready to form a Board of Directors. It isn’t just about selecting individuals who believe in your organization’s mission or who can positively influence the organization’s growth – there are some minimum requirements that each board member needs to meet in order to qualify for a spot. These 501(c)(3) board of directors rules vary by state, but we will identify some of the general basics that will help you get started forming your board.
1. Know Your State’s 501(c)(3) Board of Directors Requirements
Each state stipulates the minimum number of individuals that need to sit on an organization’s board of directors. Each state’s nonprofit requirements will also outline minimum age requirements, residency, and natural citizenship. They may set the minimum at three individuals on the board. Most boards like to have five members: uneven numbers help avoid ties during voting matters.
States will also stipulate the term each board member should serve. They may also outline the types of necessary officers that must sit on the board, such as a secretary, a treasurer, a president, and so forth. The state may determine how often your board of directors should meet (annually, quarterly, etc).
2. Are Those Guys Related?
But seriously, are they? It’s important to understand the existing relationships between board members, whether they’re blood related or business affiliated, this stuff matters to the IRS.
Having related board members is not explicitly prohibited by the IRS, but they will review the composition and qualifications of the board of directors annually via Form 990. The annual review is conducted to validate that public funds are being used for intended purposes. It’s also a protection against abuse of charitable funds.
In order to avoid complications, choose three board members not related by blood or business. As mentioned, although you can technically have board members who are related by blood or business, that information will need to be disclosed to the IRS.
Keep in mind that the time may come when you need to remove or add a board member. This could disrupt the delicate balance of your board, especially if some of your members are related. Public charities must have a board with a majority of unrelated members – so keep that in mind when you are adding or removing members! Always add or remove board members in accordance with your bylaws – this is where you will internally have your 501(c)(3) board of directors rules defined.
3. Do Board Members Get Paid?
Any board member who receives more than $600 during the year must be sent IRS Form 1099-MISC by the nonprofit organization. The board member must complete the form and submit the financial information.
If a staff member from the organization wants to join the board of directors, you should first visit your organization’s bylaws to see if it’s permitted. In order for the staff member to receive his/her paycheck for their work at the organization, they have two options:
- Opt out of sitting on the board since members are not paid
- Become a non-voting board member, which will allow the individual to earn its paycheck as a staff member at the nonprofit
To sum it up, board members do not get paid. And if you want to be a paid staff member, you could be a non-voting board member only if your bylaws include this as a permissible 501(c)(3) board of directors requirement.
4. Follow the Fiduciaries
Nonprofit corporate board members are fiduciaries, which means board members have certain duties and responsibilities to carry out and follow.
Legally, nonprofit board members have three duties: the duty of care, loyalty, and obedience. These duties regulate conduct and depending on the state, they are often within the court of law to determine whether or not a board member acted improperly.
- Duty of Care: This duty describes the competency and temperament in which a board member must carry out their service. When making decisions, a board member has the duty to exercise reasonable care.
- Duty of Loyalty: A board member should act faithfully to the organization. The individual should never use information obtained about the organization for personal profit – instead they should make decisions for the sole benefit of the organization.
- Duty of Obedience: This duty is concerned with the nature in which a board member conducts itself – they should not act in ways that are antithetical to the mission and the organization’s central goals. This duty also stipulates that board members obey the law and the inner 501(c)(3) board of directors requirements.
The Ideal Board Member…
- Works well individually and within a group
- Thinks creatively, listens well, and analyzes
- Has skills that you may not have, such as soliciting funds, recruiting board members, reading and understanding financial statements
- Is honest, empathetic
- Is a clear and effective communicator
- Has a good moral character and is generally liked by the public
- Advocates for the organization’s benefit
Did you know that nonprofit board members often make regular personal donations to the organization they’re a member of? Also, they often volunteer additional time to help out at events. Their fundraising commitment goes hand-in-hand with using their personal and professional networks to help grow the organization in a positive direction. It is handy and effective for nonprofit boards to conduct self evaluations cyclically in order to ensure that members are growing in a positive direction and using their energy and expertise for the benefit of the organization and not personal gain.
The Nonprofit Experts at BryteBridge Are Ready to Assist!
Still sorting through the details, 501(c)(3) board of directors requirements, and regulations associated with forming a nonprofit organization? Give yourself a break and reassurance – schedule a consultation with the professionals at BryteBridge Nonprofit Solutions. Take our Nonprofit Readiness Check to see how well you’ve done your homework! Explore our online resources to help you understand the ins and outs of nonprofit management. Contact a team member today!