Nonprofit Corporations

 

Nonprofit corporations are specific entities under state law as well as under the federal tax codes. If you have questions about forming or operating a nonprofit corporation you should consult legal authority, either by researching the law or consulting an attorney.

Sometimes the question is simple and may be answered by simple research. However, sometimes the apparently simple question is more complex than it appears and legal advice is essential. For example, if a nonprofit is creating or revising bylaws and the directors add a provision allowing cumulative voting for directors by the members, that provision cannot thereafter be amended by the directors themselves and must be amended by vote of the members. This is because of the principle that the directors may give members rights, but once given, the directors may not take away certain rights. Also, by allowing the members to have cumulative voting the directors may not know that they have affected the nonprofit's ability to conduct mail ballots for directors without a meeting. (California Corporations Code section 7513(e).)

Where an action by the board is controversial there may arise questions as to its legality under the bylaws or state law. An attorney should be consulted whenever there is significant doubt whether the board's decision may lead to liability for the organization. Directors have a fiduciary duty to the organization and they are normally protected from liability in exercising this duty by the reasonable director rule. But the usual protections against personal liability may not apply if they do not exercise reasonable caution by adequate inquiry or seeking of advice from appropriate counsel in unusual situations.

 

Services to Nonprofit Corporations:

 

      Consultation to incorporators or existing unincorporated associations for transition to nonprofit corporate status.

 

      Preparation of Articles of Incorporation, Bylaws, and other organizational documents.

 

      Preparation of applications for Federal 501(c)(3) and California nonprofit status.

 

      Consultation for updating and/or revision of current bylaws.

 

      Board training on organization and governance.

 

      Parliamentarian services for board meetings or conventions. (Member of National Association of Parliamentarians.)

 

      Review of corporate contracts and documents.

 

      Consultation to boards regarding potential litigation or liability, including handling employee issues with eye to resolving problems without litigation.

 

 

 

Links to Resources for Boards:

 

Four Simple Rules of Parliamentary Procedure By A. Gregory Wonderwheel

 

Free Management Library(SM) Hosted by Management Assistance Program

 

 

 

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