Basics of nonprofit boards

Nonprofit boards of directors are essential for keeping organizations running smoothly and staying compliant with relevant laws and regulations. Most nonprofits operate as 501(c)(3) organizations under the Internal Revenue Code. This tax-exempt status includes accountability, good governance, and a clear focus on the organization’s mission.

Board members have three main responsibilities called fiduciary duties: the duty of care (above personal agenda), duty of loyalty (acting in the nonprofit’s interests above personal gain), and the duty of obedience (ensuring the organization follows its purpose and the law). These duties help keep nonprofits focused, responsible, and aligned with their mission.

To stay tax-exempt, boards must follow IRS rules like avoiding private inurement, which means no one in the organization can personally profit from its funds. They also need to limit activities like lobbying or political campaigning, as too much involvement in these areas can jeopardize tax-exempt status.

Every nonprofit needs foundation documents such as articles of incorporation, bylaws, and a conflict of interest policy. These documents explain how the board works, what its members are responsible for, and how decisions are made. Keeping good records of meetings and decisions is also important for showing accountability and transparency.

By understanding and following these federal rules, nonprofit boards can maintain tax-exempt status and gain the trust of donors, partners, and the community. With the right structure and governance, boards can focus on what really matters: advancing the nonprofit’s mission and making a meaningful impact.