Dr. Adrienne B. Haynes, Esq.

Not for profit corporations are entities created for public benefit and a purpose that is either charitable, educational, religious, or political. To best protect the mission and the entity’s liability, I recommend formalizing first by registering with the Secretary of State and the Internal Revenue Service. 

After filing, most state statues require the preparation of bylaws with specific provisions about how the organization must be governed. This is an internal corporate governance document that outlines the charitable purpose of the organization and details how the leadership will govern. A nonprofit is not owned by any one person, but is governed by a collaborative team of staff, members and board of directors.

In the bylaws, the provisions should respond to the state’s corporate laws and ensure that key information, organizational values and processes are articulated. This process allows the board to come to a consensus about the management and operations of the operation and ensure that the nonprofit can focus on the pursuit of its charitable purpose. Some of the considerations for the bylaws will include:

• Will we need members?
• What are board terms and qualifications?
• What are board member responsibilities?
• What are the roles on our executive committee?
• How will we ensure the financial health of the organization?
• Will we need committees? If so, what are their functions?
• How will the Board of Directors be governed?
• What additional policies may we need to put in place?

Once drafted and approved by board resolution, the document can be filed for safe keeping and regular reference.

In addition to the bylaws, a nonprofit organization can develop additional agreements or policies to ensure that expectations are clear and risk is mitigated. Policies that the board may want to implement may include a code of ethics, conflict of interest policies, financial management and gift acceptance policies, and more.

Relationship agreements that may be used by a nonprofit include membership agreements, employment and independent contractor agreements, waivers and service agreements. Once prepared, best practice is to have all of the business agreements reviewed every 2–3 years to ensure that they are still consistent with the law and with the way that the organization operates.

After formalizing the nonprofit, staff and board members must pay attention to administrative detail and corporate compliance to remain in good standing. A nonprofit’s leadership team should prioritize timely responses to required State and Federal filings, including annual registration reports and the IRS annual information report on Form 990. Form 99N or Form 990 is due to the Internal Revenue Service by the 15th day of the 5th month after the close of an organization’s tax year, or May 15 for those on a calendar fiscal year. Registration reports at the state level may be submitted annually or bi-annually depending on the entities formation year. The organization’s registered agent will receive the notice and reminders, and these dates should be calendared so that the necessary information is on hand to prepare a response. If a for profit or nonprofit corporation is or has been administratively dissolved, this can result in personal liability for organizers who continue without an entity and loss of funding.

This article is an overview of nonprofit governance, including formation requirements, corporate documentation, and compliance considerations and does not cover every legal right or obligation, consideration, exception, or restriction. These decisions are complex and should be well researched and discussed with professionals before being made.

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Thanks for reading!

My name is Dr. Adrienne B. Haynes and I’m an entrepreneur and attorney based here in Kansas City. My law firm, SEED Law, has been partnering with business owners across the Northeast and the city for over 10 years. I loved living in the Northeast and I was fortunate to serve as an Entrepreneur in Residence for the Kauffman Foundation in 2017. Together with a dedicated group of Northeast residents and leaders, we explored a community designed innovation district pilot program. I was able to present this work during a TEDxUMKC Talk on Community Innovation Design in 2020.

I’m grateful for the opportunity to contribute articles and resources on business and estate planning legal considerations. If you have questions, please reach out directly at adrienne@seed.legal.