Nonprofit Accounting Basics

Forming a Board

Size of Organization: 

Every nonprofit corporation needs a board. To be able to enjoy the various benefits of a nonprofit status, the organization needs a board that stands for the organization. The board is the accountable body that:

  • determines the direction for the organization
  • guards its mission
  • sets the standards and ethical guidelines
  • monitors its performance
  • ensures the organization is managed in a responsible manner

As nonprofits do not have owners per se, the board as a collective body acts as the moral owner and ensures the organization meets the expectations of its constituencies. Ultimately, the board is legally liable for the actions of the organization.

The first board of the organization has a big job to accomplish. It functions as the governing body while carrying on the management and administrative chores. Very often there is no staff yet, so board members wear numerous hats. Even before the nonprofit is ready to function as an organization with programs, products, and services, the first board is responsible for:

  • building the organization's infrastructure
  • securing funds
  • completing all the necessary IRS and state filings

All of this must be accomplished by the founding board to turn the organization into a functioning entity.

Additional references

BoardSource:  Forming the Nonprofit's First Board

FormsLaw.  An online tool to allow for the creation of bylaws for your nonprofit organization.