Nonprofit Accounting Basics

Bylaws

Author: 

Amy Kriz, CPA

American Petroleum Institute (API)
Size of Organization: 
Startup

Bylaws form a legally binding document that outlines the organizational authority levels, how the board functions, and how it is structured. This document is unique to every organization, but it should always address a number of specific issues including:

Name and Purpose - The bylaws begin by stating the organization’s legal name and its specific purpose or mission. The purpose statement defines the organization’s reason for existence and outlines the primary activities it will undertake to achieve its goals.

Governance Structure – The bylaws outline the structure of the organization’s governance, including the composition and responsibilities of the board of directors. This section covers board size, term lengths, and the process for board appointments. It may also establish the procedures for board meetings, such as quorum requirements and voting rules.

Membership – If the nonprofit organization has members, the bylaws will detail their rights, privileges, and responsibilities. It may include provisions for membership eligibility, dues, voting rights, and procedures for member meetings. Some nonprofits may operate without members, in which case, this section may be absent.

Officers and Duties – The bylaws will outline the roles and responsibilities of the officers of the organization, such as the board chair, vice-chair, treasurer, and secretary. It may specify the process for electing or appointing officers, their term limits, and the authority and duties associated with each position.

Meetings and Decision Making – The section in the bylaws covers the rules and procedures for conducting board meetings, including meeting frequency and decision-making processes, such as voting procedures, and proxies.

Committees – Often the bylaws authorize the establishment of committees to support the work of the board. The bylaws will define the purpose, composition, and responsibilities of these committees. Typical committees include finance, fundraising, governance or program committees.

Financial and Record-Keeping – Typically bylaws include provisions related to financial management, including the fiscal year, the handling of financial assets, and the required financial reporting and auditing procedures. Additionally, they may outline the organization’s record-keeping requirements and process for inspection and access to records.

Amendments – The bylaws should include a provision outlining the process for amending the bylaws, themselves. This typically requires a vote by the board of directors.

Dissolution – In the event that the organization needs to dissolve or wind up its operations, the bylaws should outline the procedures for distributing the remaining assets to other tax exempt organizations and fulfilling any legal obligations.

The board should have a process in place to review the bylaws every couple of years. This assignment is best carried out by a board task force formed for the purpose. There is no need to have a permanent bylaws committee.

Here are some sample bylaws. NOTE: Please, do not adopt anyone else’s bylaws. Let your board decide on every clause.

DC,gov, https://dc.gov/page/develop-bylaws

BoardSource, https://boardsource.org/shop/