Board Meeting Minutes: A Complete Guide and a Free Template

boardable.com

Board Meeting Minutes: A Complete Guide and a Free Template

Julie Perry

19-24 minutes

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Posted: 07.22.2020

Board meeting minutes are certainly tedious, and at times, the board secretary position seems like a thankless job. However, the task is incredibly important.

For one, board meeting minutes are critical for maintaining a historical log of decisions, and they’re also imperative for meeting legal requirements of your nonprofit organization. In fact, many organizations have learned that referring back to well-kept minutes has helped them deal with legal issues, saving both time and money for the organization.

With all that rides on the minutes, it’s not a task that should be taken lightly. Learning how to take effective minutes at a board meeting is worth the time and energy investment, and your fellow board members will appreciate the end results.

To ensure you’re taking the most effective board minutes possible, we’ve compiled a complete guide that covers the ins-and-outs of minute taking. Before jumping into the nitty-gritty details of effective nonprofit board meeting minutes, let’s take a moment to define what they are to make sure we’re all on the same page.

If you are tired of spending hours of time and reams of paper producing a cumbersome board book for every board meeting, we’ve got help.

Maybe it’s time to consider blowing up the board book. Download our free ebook to learn how to do exactly that! You can shave your meeting prep time from hours or day to just minutes. What’s more, your board members will be able to prepare for meetings from anywhere–digitally!

What Are Board Meeting Minutes?

Board meeting minutes record the board of director’s actions and decisions. They serve as an official and legal record of nonprofit board meetings, which means they should include more than a simple overview of discussions. The core purpose of board meeting minutes is to show that the board members did the following:

• Followed relevant procedures.
• Complied with the state laws pertaining to tax-exempt nonprofits.
• Obeyed the organization’s own bylaws and aligned decisions with its mission.

Now that we’ve reviewed the basics of what board meeting minutes are, we can take a deep dive into all they entail, so you can start creating effective board meeting minutes in no time. Here’s what we’ll cover:

1. What Are the Benefits of Board Meeting Minutes?

2. How to Take Minutes at a Board Meeting

3. What Not to Include in Board Meeting Minutes

4. Board Meeting Minutes Template

5. How Board Minutes Tools Can Help

Feel free to use the jump links above to navigate to the section most pertinent or intriguing to you. Otherwise, let’s start from the top with the benefits of effective board minutes so you can start running more productive meetings!

1. What Are the Benefits of Board Meeting Minutes?

Beyond documenting that a meeting did in fact occur, nonprofit board meeting minutes are helpful for a number of reasons. Before taking minutes yourself, it’s important to understand these reasons to ensure you’re documenting all relevant actions.

To get a firm grasp on the purpose behind taking minutes, let’s explore the top three benefits of recording effective notes:

1. Once approved, board minutes become a legal record of what actually occurred in the meeting. In the event of a lawsuit, minutes can be subpoenaed, and in turn, board members could potentially be held liable. If important details are missing or if votes are recorded incorrectly, this could be disastrous for the nonprofit and its board members.
2. Effective board meeting minutes serve as a valid reference point for future decision-making. They act as a reminder of what was addressed in the meeting, who said what, what the designated next steps were, and who is taking responsibility for what upcoming projects.
3. Prospective sponsors looking to expand their philanthropic efforts or other funding sources can access board meeting minutes. Funders can use minutes to determine how effective the board is in leading the organization toward its goals. In other words, this could be the determining factor in whether someone chooses to financially support your cause.

As you can see, nonprofit board meeting minutes are an important resource, not just for future reference by the board itself but also for legal purposes. Now, let’s dive into best practices for creating coherent, well-organized board minutes.

2. How to Take Minutes at a Board Meeting

Creating complete nonprofit board meeting minutes that meet the needs of those who use them is crucial for effective decision-making and record-keeping at your organization. So that you can create the most efficient minutes possible, let’s explore best practices for documenting a clear and accurate account of your board’s actions.

1. Use Your Agenda as a board meeting minutes template.

As with most meetings, planning ahead is critical to create a defined outline that will lead your board meeting in effective conversation. If board administration creates a board meeting minutes template that’s blended with the agenda, taking minutes becomes incredibly straightforward and much less prone to error.

Many board secretaries or administrative staff create a note-taking outline a few days before the meeting. Consider using the meeting agenda as a guideline, and outline important issues that will be covered. This outline gives you a predefined structure to follow, so you can spend more time listening and accurately capturing the conversation, rather than trying to start from scratch and record everything on the fly.

2. Assign a Minute-Taker in Advance.

Putting a board member on the spot could come as a very unpleasant surprise. In fact, this will certainly compromise the quality of that board member’s engagement and participation levels and could even go as far as to compromise the quality of the meeting minutes. Because of this, you’ll want to choose a minute-taker in advance.

Have the same person take minutes at every meeting and designate a backup person to take them for when that regular minute-taker is unable to attend. This allows these individuals to familiarize themselves with the process and will ultimately lead to stronger, clearer board minutes. Typically, the designated minute-taker is the board’s secretary.

After appointing the task to someone, you’ll want to make expectations crystal clear. This includes:

1. What format should be used – Is there a particular format that your minute-taker should mimic? The exact format used varies by the organization, although best practices for governance indicate that all should include some basic information, such as essential details regarding motions and voting. Using past board minutes as a template can be an effective option, and a minutes maker tool will streamline this process further.
2. Whether or not they should participate in the discussion – Is your minute-taker a board member? If not, they should NOT participate in any discussion unless expressly invited to do so. A case in which they’re invited to participate may be when the board wishes to hear a non-board member’s perspective on an issue.
3. How they should take minutes – Technology can streamline the process of taking accurate minutes but only if the minute-taker knows how to operate the board minutes system. During the meeting is not the optimal time for learning how to use these tools, so be sure your minute-taker undergoes training to become familiar with them beforehand.

2. Write in an Objective Voice.

One of the most important aspects for your board secretary to remember is that board meeting minutes must be written objectively. When you encounter controversial issues or contentious votes, attempt to summarize the debates and arguments. Weed out all the emotion by following these suggestions:

• Stick to the facts, including votes in favor of a motion, votes against a motion, abstentions, and pertinent details about discussions. Listen carefully to the main topics and simply document significant portions of the discussion.

• Ask a third party — someone who is not on the board— to read the board minutes to give you an unbiased opinion. When doing so, make sure the third party is not privy to any confidential information.

• Return to them the next day. Since the secretary is also a voting board member, recording information objectively can be challenging. If you’re unsure if your board minutes are objective, sleep on it and re-read them the next day with a fresh mind.

By following these tips to ensure objectivity, you’ll create unbiased notes that capture essential information for future reference.

3. Include Pertinent Details.

Board meeting minutes are a matter of law for nonprofits. They serve as the official record to show that the meeting was actually held and important matters were discussed, and as such, it’s always important to capture all necessary details.

While there are no legal rules for what information board meeting minutes must include, most boards base their outlines on Robert’s Rules of Order. Full use of these rules would be cumbersome for most nonprofits, but limited use can be helpful in maintaining order and quickly addressing agenda items. When following Robert’s Rules of Order, board minutes must include:

• The type of meeting.
• The date, time, and location of the meeting.
• A list of attendees, including nonvoting participants with their names, titles, and reasons for attending.
• When the meeting was called to order and when it was adjourned.
• A record of motions, seconds, and whether or not the motion passed.

Overall, aim to create board meeting minutes that are specific enough to capture the board’s focus and decisions, but not so sparse that you can’t decipher what actually occurred during the meeting a few months down the line. Plus, scant board minutes could open up the board up to liability issues, so you never want them to be so minimal that they raise suspicions.

Think of it this way: major decisions and discussion points should always be captured but in a “short and sweet” fashion.

4. Proofread and Share Minutes Securely.

When all is said and done, you’ll want to review your board meeting minutes before sharing them. Be sure they’re consistently formatted and presented. If there are side notes that need to be rewritten into the minutes, see to it promptly after the meeting.

From here, board minutes should be finalized and distributed to attendees as soon as possible while the meeting is still fresh in the board and minute taker’s memory. A secure platform will allow board members to readily open board meeting minutes, the agenda, and any other pertinent documents.

3. What Not to Include in Board Meeting Minutes

Knowing what to leave out of board meeting minutes is just as significant as knowing what to include. With this in mind, let’s explore five things nonprofit boards commonly record but shouldn’t.

1. Don’t Include How Individuals Voted.

In each of your board meetings, you’ll likely have a handful of items that need to be voted on. While you should name who made and seconded the motion, you shouldn’t include how individuals voted. Exclude their names and simply note the number of those in favor, those against, and those who abstained. As a general rule, keep the record impersonal.

However, there is an exception to this rule. If financial transactions involving board members come up or if the executive pay is set, let the board meeting minutes reflect how individuals voted and their rationales. In the event of any legal challenges, rationales will support reasonability.

2. Don’t Include Particular Board Members’ Opinions.

As previously mentioned, your board meeting minutes should be unbiased. Because of this, board minutes should focus on decisions, not discussion.

On occasion, disagreeing members may state flat-out that they want their disagreement recorded. Avoid this, and instead, simply note that it occurred — no further explanation necessary.

Similarly, if there was a debate, mention it, but don’t make opinionated notations. After all, board meeting minutes are discoverable papers that can be used in any potential legal situation.

3. Don’t Include Summaries of Documents or Presentations.

You should mention presented materials in your board minutes. However, don’t go into great detail about its content. Instead, note where it’s obtainable, so members don’t have to rifle through excess information in the minutes itself.

With comprehensive tools, presentations are easy to locate at any point. Specifically with solutions like Boardable’s Document Center, you can organize and store pertinent records, presentations, and other documents alongside your board meeting minutes.

Plus, Boardable is compatible with Dropbox and other widely-used cloud-based storage systems, making it easily accessible to all board members.

4. Don’t Include Things that Could Subject a Tax-Exempt Entity to Scrutiny.

While there are common distractions in every board meeting, recording them can be problematic in a legal investigation. You’ll want to exclude these distractions. For example, leave out:

• Praise or displeasure.
• Small talk or political banter.
• Negative spin.
• Unnecessary legal terms.

When in doubt, simply leave it out. That goes for anything that could present complications if reviewed later by others. If legal commentary was made or if the nonprofit’s lawyer advised the board, simply note that this occurred in the board minutes. Further, don’t record the substance of the legal advice.

5. Don’t Include Off-The-Record Conversations.

Side discussions are bound to happen, but they shouldn’t be recorded. These off-the-record comments and discussions are certainly allowed to take place, but they must be clearly designated as off-the-record. If a board member brings up an issue that’s worth clarifying but doesn’t appear in the agenda, it doesn’t normally need to be detailed.

Instead, note that directors took the time to discuss items that weren’t on the agenda. Nothing else should be recorded about any tangents.

To avoid these complications, create an Agenda Requests folder in your Document Center. This way, future discussion topics are correctly scheduled into future meetings.

While the content of your nonprofit board minutes will change from one meeting to the next, following a standard outline will help in the minute-taking process to ensure consistency and accuracy. There’s no “right way” to draft meeting minutes, and each organization has its own preferences for what effective ones look like. However, there are several details every nonprofit board needs to record during meetings.

If you’re new to the process, you’re likely unfamiliar with these components, and you may be unsure of where to start when creating a reusable outline. To help, we’ve created a board meeting minutes template that you can use in your own operations based on Robert’s Rules of Order.

If you’re unable to view the above board meeting minutes template, we’ll break it down into five key steps:

1. Opening the meeting, where you include the date and time the meeting started, take attendance, and vote on the approval of the previous meeting’s minutes

2. Reports from officers, standing committees, and any special committees

3. Old business, where you discuss unresolved issues from previous meetings

4. New business, where you discuss any other agenda items that come up

5. Closing the meeting, where you include the date and time of adjournment

While the above board meeting minutes template will serve as a solid starting point, you’ll need to customize it to suit your board’s exact needs. With an outline to go off of, you’ll set your team up for success and ensure all important discussions and motions are recorded in a cohesive, clear, and consistent way from meeting to meeting.

While creating a template manually may work, it’s not optimal. Luckily, current technology offers several options when it comes to accurately recording a meeting with board meeting minutes templates. For instance, Boardable offers tools that enable you to record minutes directly within your agendas, an option which we’ll discuss in-depth below.

5. How Board Minutes Tools Can Help

As you now know, taking board minutes requires substantial work and unwavering attention to catch all the pertinent details. Just like most of your day-to-day tasks, this process can be streamlined with the right technology.

By solidifying your digital strategy and investing in dedicated tools to take notes, it’s even possible to have completed, ready-to-distribute board minutes for everyone just minutes after the meeting wraps up.

For those looking to improve their board meeting minutes and simplify the process altogether, Boardable’s Minutes Maker tool is a great option!

With our dedicated tools, you can take minutes using the agenda you’ve already built to ensure you don’t miss a single detail. Simply pull up your agenda and quickly enter notes, assign tasks, and record votes. From here, any tasks will appear on the assigned individual’s dashboard as a reminder. Take a look at how simple recording notes and assigning tasks is:

Plus, sharing your board minutes has never been easier! Once you’ve finalized them and gotten them signed off on using our e-signing tools, publish them and instantly distribute them to your desired audience. You can choose to make meeting minutes public if desired, and they’re always associated with the meeting and its attendees. You can choose to save a record in your Document Center or email a PDF, keeping everyone updated.

Best of all, you can connect the minutes, agenda, and tasks of a past meeting with the materials for the next one, which makes approval, review, and preparation for upcoming discussions a breeze! Take a look at how simple it is to group meeting information together:

Using dedicated tools can help protect your board from liability and inefficiency by ensuring you catch all vital details. Let Boardable do the heavy-lifting, so you can focus on producing effective notes that capture the essence of your meeting.

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Wrapping Up

From documenting discussions to important votes to follow-up assignments, there’s a lot that goes into board meeting minutes. To recap, they’re more than a general account of your board’s conversations and actions. They serve as a reference point for future discussions, inform those who were unable to attend, and serve as an official and legal record of your meetings, so the job shouldn’t be taken lightly.

If you’re unsure where to start when documenting your next meeting, feel free to build out your minutes using the above board meeting minutes template. For a more tailored approach, our powerful board software and intuitive Minutes Maker tool will streamline the process further, ensuring you capture all essential discussion points.

To help you continue your research on effective board operations, we’ve compiled a list of resources that we thought you might find useful. Explore each of these pages to expand your knowledge, so you’ll understand how to instill a spirit of collaboration and efficiency throughout your nonprofit:

• A Complete Guide to Board Meeting Agendas (with Templates!). An agenda is the staple of your meetings and can serve as a starting point for your board minutes. Explore this guide to learn how to design effective agendas that drive productivity.

• Virtual Board Meetings: A Nonprofit’s Guide to Success. If you’re making the transition to digital meetings, make sure you’re well-prepared by learning the ins-and-outs of effective ones with this complete guide.

• The Best Software for Nonprofits [Rated & Reviewed]. If you’re expanding your nonprofit’s digital toolkit, check out these tools suggestions. You’ll find software solutions for effective board management, fundraising, and donor management.

If you’re tired of preparing agendas, budgets, reports, minutes, and all the documents that go into a board book, how about you… BLOW IT UP?

Learn all about how to get rid of the traditional paper board book in this free ebook download. Share the PDF with your team and never create another cumbersome board book again!

 

How to Form a California Nonprofit Corporation | Nolo

How to Form a California Nonprofit Corporation | Nolo

nolo.com

How to Form a California Nonprofit Corporation

Nolo

8-10 minutes

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Start a California 501(c)(3) nonprofit corporation by following these steps.

Most nonprofits are 501(c)(3) organizations, which means they are formed for religious, charitable, scientific, literary, or educational purposes and are eligible for federal and state tax exemptions. To create a 501(c)(3) tax-exempt organization, first you need to form a California nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of California. Here are the steps to create a nonprofit in California.

1. Choose the initial directors for your corporation.
2. Choose a name for your California nonprofit corporation.
3. Prepare and file your nonprofit articles of incorporation.
4. Prepare bylaws for your California nonprofit corporation.
5. Hold a meeting of your board of directors.
6. Set up a corporate records binder.
7. File your Form 1023 federal tax exemption application.
8. Obtain your California state tax exemptions.
9. Other state reporting and registration requirements.

Form Your California Nonprofit Corporation

To form a nonprofit in California, first you need to form a nonprofit corporation under California state law (California Corporations Code Section 5000 et. seq.).

1. Choose the initial directors for your corporation

In California, you must have at least one director on your board.

2. Choose a name for your California nonprofit corporation

The name of your nonprofit corporation cannot be the same as or too similar to an existing corporation name on record with the California Secretary of State. To see if your proposed name is available, you can check the Business Search database on the Secretary of State's website. This is not an official name availability check. To do that, mail a Name Availability Inquiry Letter to the Secretary of State's office. You can reserve a name for 60 days by filing a Name Reservation Request Form which will prevent another corporation from registering the name while you prepare and file your articles.

See Cal. Corp. Code §5122 for more information on name restrictions for nonprofits.

3. Prepare and file your nonprofit articles of incorporation

You create your nonprofit entity by filing articles of incorporation for a nonprofit with the California Secretary of State. Your articles of incorporation must include basic information such as:

• the name of your nonprofit
• the following statement:

"This corporation is a nonprofit public benefit corporation and is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for (public or charitable [insert one or both]) purposes."

• the name and street address in California of the corporation's initial agent for service of process
• the initial street address of the corporation
• the initial mailing address of the corporation, if different from the initial street address.

The California Secretary of State has a nonprofit articles of incorporation form on its website for 501(c)(3) Nonprofit Public Benefit Corporations (Form ARTS-PB-501(c)(3)). Use this form to create your charitable or public purpose 501(c)(3) nonprofit corporation. Complete and file your articles following the instructions provided. You can create your own articles or use the fillable articles form on the website. Whether you create your own articles or use the fillable version, you will need to file your articles with the Secretary of State by mail with the appropriate filing fee. There is no online filing option.

To receive tax-exempt status from the IRS and the state of California, you'll need to have certain specific language in your articles, including:

• a statement of purpose that meets IRS requirements
• statements that your non-profit will not engage in prohibited political or legislative activity, and
• a dissolution of assets provision dedicating your assets to another 501(c)(3) organization upon dissolution.

The articles form on the California Secretary of State's website contains the tax-exempt language required by the IRS and the state of California. For more information on IRS requirements for tax exemption, including sample language, see IRS Publication 557, Tax-Exempt Status for Your Organization, available on the IRS website. Make sure you include the required tax-exempt language in the articles you create.

4. Prepare bylaws for your California nonprofit corporation

Before you file your articles of incorporation, you'll need to have bylaws that comply with California law. Your bylaws contain the rules and procedures your corporation will follow for holding meetings, electing officers and directors, and taking care of other corporate formalities required in California. Your bylaws do not need to be filed with the state -- they are your internal operating manual. For more information and sample bylaws for a California nonprofit, see How to Form a Nonprofit Corporation in California, by Anthony Mancuso (Nolo).

5. Hold a meeting of your board of directors

Your first board meeting is usually referred to as the organizational meeting of the board. The board should take such actions as:

• approving the bylaws
• electing directors (if not named in your articles)
• appointing officers
• setting an accounting period and tax year, and
• approving initial transactions of the corporation, such as the opening of a corporate bank account.

After the meeting is completed, be sure to create minutes that accurately record the actions taken by the board.

6. Set up a corporate records binder

You should set up a corporate records binder for your nonprofit to hold important documents such as articles of incorporation, bylaws, and minutes of meetings. For more information, as well as minutes forms, consent forms, and other resolutions, see Nonprofit Meetings, Minutes & Records, by Anthony Mancuso (Nolo).

Obtain Your Federal and State Tax Exemptions

Now that you have created your nonprofit corporation, you can obtain your federal and California state tax exemptions. Here are the steps you must take to obtain your tax-exempt status:

7. File your Form 1023 federal tax exemption application

To obtain federal tax-exempt status from the IRS, you will need to complete and file IRS Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. This long and detailed form asks for lots of information about your organization, including its history, finances, organizational structure, governance policies, operations, activities, and more. For line-by-line instructions on how to complete the Form 1023, see How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo).

Smaller nonprofits may be eligible to file Form 1023-EZ, Streamlined Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code. This is a much simpler, shorter form that is filed online. Only smaller nonprofits--those with projected annual gross receipts of less than $50,000 and total assets of less than $250,000--are eligible to use the streamlined 1023-EZ application.

See the IRS website for more information on the Form 1023 and Form 1023-EZ filing requirements.

8. Obtain your California state tax exemptions

Once you have your federal tax exemption, you can obtain your California state tax exemption. This may include exemptions from income, property, sales, and other state taxes. The website for California's tax agency, the Franchise Tax Board, will have the form you need to file to obtain your state tax exemption, FTB 3500A, Submission of Exemption Request.

9. Other state reporting and registration requirements

Depending on your activities and the size of your organization, you may need to register with the state before doing any fundraising activities. The Office of the Attorney General, Registry of Charitable Trusts division, has information and forms about fundraising and registration requirements for nonprofits in California.

 

Nonprofit Bylaws | Sample Nonprofit Bylaws | Nolo

Nonprofit Bylaws | Sample Nonprofit Bylaws | Nolo

nolo.com

Nonprofit Bylaws

Christine Mathias, Attorney

7-9 minutes

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A nonprofit's bylaws provide the rules and procedures for running the organization.

When you create a nonprofit, one of your most important steps will be to draft the organization's bylaws, which establish the internal rules for operating the organization. The board of directors, tasked with setting policies and overseeing the nonprofit, will follow the rules and procedures outlined in the bylaws. Some states require nonprofits to have bylaws, but it's a good idea to have them even where not required. Bylaws can help directors run your organization, resolve conflicts among directors, and demonstrate to the public and the IRS that your organization is responsibly managing donations to further the nonprofit's charitable mission.

What to Include in Your Bylaws

Your bylaws will provide basic information about your organization and the rules that will govern your board of directors. Although the law does not require nonprofits to include any specific provisions, you should address the following to give your board adequate guidance to run the organization:

• the official name of your nonprofit
• the organization's principal address (the location where you will store your corporate records)
• the organization's purpose (more below)
• an outline of the board structure (minimum and maximum number of directors)
• a list of your officers (such as the president, vice president, secretary, and treasurer) and a description of what each will do
• your procedure for adding and removing board members (including qualifications to serve on the board)
• any term limits for board members
• your schedule for regular and annual board meetings
• details on giving notice of board meetings (how many days before the meeting, and method of communication)
• your rule on quorum requirements (how many board members must be present to make a decision)
• a list and description of board committees (smaller groups within the board to address issues such as fundraising or operations )
• the date that will be the end of your fiscal year (the last month of your budgeting cycle)
• your rules for amendments (how can you change the bylaws), and
• how you will handle the dissolution of your nonprofit (when and how you can close the nonprofit).

Review your state's nonprofit laws to make sure your bylaws are in compliance. For instance, many states require nonprofits to have a minimum of three directors, as well as a president, secretary, and treasurer. When your bylaws do not address an issue that is addressed by state law, your nonprofit must follow the laws of your state. For example, your state might provide that directors serve for terms of one year unless the bylaws provide otherwise. If your bylaws are silent on the matter of terms, by default your directors will have one-year terms; but if you wish, you can use the bylaws to set a different term.

Additional Considerations for 501(c)(3) Nonprofits

Many nonprofits pursue 501(c)(3) tax-exempt status, which allows organizations to avoid certain corporate, sales, and property taxes. Tax-exempt status is granted by the IRS, which does not directly require nonprofits to include specific provisions in their bylaws. However, when you apply for tax exemption, the IRS will look at your bylaws to determine if your nonprofit meets the legal requirements for exemption. By addressing the following provisions in your bylaws, you will increase your organization's likelihood of gaining 501(c)(3) status:

• The nonprofit's purpose: Here you can show that your organization's purpose meets the requirements for 501(c)(3) status. Your organization's purpose must be charitable, religious, educational, scientific, literary, for public safety testing, related to amateur sports competitions, or for the prevention of cruelty to children or animals.
• Conflict of interest policy: An exempt organization cannot provide a private benefit to an individual, including business dealings with board members. Your bylaws should have a policy that addresses potential conflicts, by requiring directors to disclose interests and abstain from voting on matters they could personally benefit from.
• Compensation policy for board members: Exempt nonprofits cannot pay directors more than a reasonable amount for their time and efforts, and many nonprofits have a policy stating directors will serve without compensation.
• Documents retention and destruction policy: Exempt nonprofits must maintain corporate records and meeting minutes, and after a specified period of time (which differs depending on the document), the directors should destroy the records. Your bylaws should set out your procedures for retention and destruction.
• Public disclosure of exemption application and annual tax returns: An exempt organization's tax filings, including the exempt application and annual returns, must be available for public inspection and copying.
• Limitations on activities: Exempt nonprofits cannot engage in political activity or substantial lobbying (read more about the restrictions here), and you can include this limitation in your bylaws.

What Not to Include In Your Bylaws

Your bylaws should address only basic information about your organization and an overview of board procedures, and not the specifics of your day-to-day operations. Do not include rules that will be difficult for your board to follow (which they'll want to change) or procedures that will change frequently, because changing bylaws isn't simple—you must follow legal rules to amend your bylaws (as discussed below). For example, instead of stating the time and address of your board meetings, you can simply state that your board will meet once a month at an agreed-upon location. You might include general descriptions of officer positions that will stay the same throughout the life of the nonprofit, but avoid listing employee positions, which are likely to change.

How and When to Update Bylaws

Make plans to review your bylaws regularly. Review the document whenever the nonprofit undergoes a major change, like moving the organization to a new state or merging with another nonprofit. Also plan to review your bylaws annually, both to make sure you are following them and to update provisions as necessary. To make amendments, follow the rules outlined in your bylaws, which should provide the number of director votes you need to make amendments (if your bylaws do not provide guidance, check with your state's laws). Record the results of the vote in your meeting minutes.

If your nonprofit has tax-exempt status and you make a "structural or operational" change to your organization, such as changing the name or purpose, you must inform the IRS. For smaller changes, like changing director term limits, you do not need to inform the IRS. You can report some changes on your annual tax return, while the IRS requires you to report other changes on different forms. Check with the IRS for details.

How to Draft Nonprofit Bylaws

Your organization's current board of directors will draft and approve the bylaws. Nonprofits often draft bylaws before or shortly after filing formation documents with the state. However, you can create bylaws any time after formation. You can even create your bylaws with Nolo's online form.

Your state laws specify which officers must sign the bylaws, such as the secretary or the president. Unlike other organizational documents, like the articles of incorporation, you do not file bylaws with the state. You must keep them with your nonprofit's records, and ensure they are accessible to board members.

Sample Bylaws

To get you started on your draft, check out the following sample bylaws.

 

How to Start a California Nonprofit - CalNonprofits

How to Start a California Nonprofit - CalNonprofits

calnonprofits.org

How to Start a California Nonprofit

Patrick Santana

21-26 minutes

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A Step-by-Step Guide & Additional Resources --->

Congratulations. You've got an idea for making the world a better place, and you want to start a nonprofit as the means to do so. The good news is that starting a California nonprofit isn't that hard to do if you have a sound plan, the right team, and sufficient startup funds.

The bad news is that running a successful nonprofit is not easy. You'll need to think through how you will bring value to the public, obtain funds, attract staff and/or volunteers, build a board of directors, and comply with the various laws that regulate nonprofits. Your answers to these questions will determine whether you should start a nonprofit or consider alternatives. More on these points later in this article.

Check out the recorded webinar from January 28, 2021 with CEO Jan Masaoka, where she walks through the major steps and gives advice about boards, finding your first funding, and more. FREE for Members / $10 for not-yet-members. 

Questions to consider:

- Do you need to work with an attorney to start a nonprofit?
- Should you start a nonprofit? What are the alternatives?

10 basic steps for starting a California nonprofit public benefit corporation:

1. Determine the name of the corporation
2. Draft and file the articles of incorporation
3. Appoint the board of directors
4. Draft the bylaws and conflict of interest policy
5. Take the initial board actions
6. Obtain an employer identification number (EIN)
7. File the initial registration form with the California Attorney General’s Registry of Charitable Trusts
8. File the Statement of Information with the California Secretary of State
9. Apply for federal tax exemption with the Internal Revenue Service (IRS)
10. Apply for California tax exemption with the California Franchise Tax Board (FTB)
Bonus: Additional Resources

1. Determine the name of the corporation.

A nonprofit is typically formed as a corporation and its name can be a valuable asset. A corporation’s legal name must be registered with the state where the corporation is formed. In California, a corporation name may be accepted by the California Secretary of State if the name is not the same as or too similar to an existing name on the agency’s records and if it’s not misleading to the public.

You can check the current database of existing names in the business search page on the Secretary of State website. You can also reserve a name for 60 days by mailing in a Name Reservation Request, which prevents another person from registering that corporation name with the California Secretary of State while it is reserved. You must also make sure the name does not infringe on another person’s trademark rights. This is not always easy to determine, but a good start includes running a trademark search on the U.S. Patent and Trademark Office database and a simple Google search. For some founders, it may also be important to confer with an intellectual property attorney to help ensure they are not infringing on another’s rights and to protect their name from being used by other parties.

Also, if you plan to operate the nonprofit in other states in addition to California, some founders may want to check that the corporation’s name is similarly available in those other states where the nonprofit plans to have operations and therefore may need to register as a foreign corporation with the required state agencies in order to conduct business there.
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2. Draft and file the articles of incorporation.

A corporation is legally created with the filing of the articles of incorporation. Articles of incorporation typically identify:

(a) The organization’s name;

(b) Its purpose or purposes of the nonprofit;

(c) The agent for service of process -- that is, a person who can receive lawsuits and other official correspondence and other matters, which can be an individual whose name and address are identified or a corporate agent registered with the California Secretary of State for such purpose;

(d) Limitations on the corporation’s operations, consistent with its tax-exempt status;

(e) The corporation’s street address and mailing address, if different; and

(f) Appropriate dedication and dissolution clauses.

For California, the articles will also identify the type of nonprofit corporation being formed. There are three types of nonprofit corporations in California: public benefit, mutual benefit, and religious. A nonprofit public benefit corporation (the focus of this step-by-step guide) is the appropriate choice for a nonprofit formed for charitable or public purposes. The articles of incorporation are typically signed by an "incorporator," which can be just one person but may also be signed by the initial board of directors if they are named in the Articles.

There is a template you can fill in and print on the Secretary of State’s website. This is a good starting point but does not provide guidelines or advice on every important consideration. For example, there is no guidance on specific purpose statements (you’ll want to be careful about restricting the corporation’s activities in the future by a very limiting specific purpose statement) and no option to select any 501(c)(3) purposes other than charitable, educational, and religious [in the dissolution clause. It also does not address other language that may be required in the articles if the nonprofit also intends to seek exemption from property taxes in California.

A word on specific purpose statements: A broad specific purpose statement provides room for the organization’s mission to evolve without requiring an amendment to the articles of incorporation. It and may also make it easier to comply with charitable trust laws that require charitable funds be used consistent with the specific purpose of the organization at the time such funds were originally acquired. If, instead, you adopt a narrow purpose statement such as "to restore and maintain Pomponio State Beach," you would not be able to use funds acquired while the articles of incorporation contained this purpose statement to restore any other beaches, but the statement would provide a stronger mission anchor to help ensure that your organization stays on a specific course after the founders have left. In this example, the organization could amend its articles with the Secretary of State to broaden its purposes to include other beaches, though only the funds acquired after that change is in effect could be used for those broader activities. A better choice might be for the nonprofit to adopt a purpose statement "to restore and maintain California beaches and adjoining habitats."

For additional information on this issue, read Starting a Nonprofit: Articles of Incorporation and Specific Purpose Statements.

More about the agent for service of process: It is also important to understand that the agent is responsible for receiving lawsuits and possibly other important legal documents on behalf of the organization and making sure those documents reach the President or other authorized officer or director in a timely manner. If the agent fails to do so (e.g., fails to have his or her mail checked regularly while away for an extended period), the organization could face negative consequences such as losing a default judgment for not showing up to defend a lawsuit. An organization can identify an individual who resides in California who is willing to serve as agent or may elect to pay for a registered corporate agent, which may be preferred if there is no person willing to accept this responsibility or if privacy concerns are an issue (an individual agent’s name and street address will be a matter of public record).
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3. Appoint the board of directors.

If the initial directors are not named in the articles of incorporation, the incorporator can and should appoint the board through a written action.

Under California law, a nonprofit board may be composed of as few as one director, but the IRS may take issue with granting recognition of 501(c)(3) status to a nonprofit with only one director. It is commonly recommended that nonprofits have between three and 25 directors.

These directors – board members – should understand their legal duties and responsibilities to act with reasonable care and in the best interests of the organization while providing direction and oversight over the organization’s activities, finances, officers, and legal compliance. Bridgespan offers valuable resources on nonprofit corporate governance, including BoardSource's Ten Basic Responsibilities of Nonprofit Boards ($29). We recommend also looking at the Board Source website and for more information and resources about boards, many of which are free.
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4. Draft the bylaws and conflict of interest policy.

A corporation’s bylaws provide the fundamental provisions for governance of the corporation’s activities and affairs. Bylaws should provide guidance to the board and reassurance of sound governance practices to government authorities, funders, and other interested stakeholders.

Bylaws typically contain specific provisions detailing:

(a) The powers of the board and duties of the directors;

(b) How directors are elected or otherwise selected (e.g., by majority vote of directors at the annual board meeting);

(c) How the board may take an action (e.g., by majority vote of directors at a board meeting or by unanimous written consent);

(d) How board meetings are called, noticed, and held (e.g., four times per year with 14 days advance notice by email);

(e) How board meetings are conducted (e.g., the chair of the board presides or pursuant to Robert’s Rules, which we generally discourage for most nonprofits);

(f) The officers of the corporation (California law requires three officers: a president or chair of the board, secretary, and treasurer or chief financial officer);

(g) The duties and responsibilities of each officer;

(h) Whether the corporation has voting members or is a non-membership corporation, either of which should be clearly stated in the bylaws;

(i) The authorization of board and non-board committees (e.g., committees tasked to act with the authority of the board versus advisory committees that can only make recommendations);

(j) The level of indemnification provided by the corporation to protect its directors, officers, employees, and other agents; and

(k) The reports due to directors and members, if any (e.g., financial reports).

Bylaws may also include the corporation’s specific purpose or mission statement (which might replicate or make more specific the purpose statement in the articles of incorporation) and the corporation’s core values if they would be viewed as helpful in guiding the board on its leadership and decision-making – though the corporation should also be mindful to avoid inconsistencies between the articles and bylaws if mentioning the purposes or mission statement in both places (for which the articles will control).

If the nonprofit has voting members, the bylaws will also need to contain additional provisions regarding member rights and processes. Nonprofits considering a voting membership structure may want to first discuss such structure with a lawyer, particularly if they do not expect their members to actively participate in meetings and regularly exercise their rights to vote for members of the board of directors.

Public Counsel provides an Annotated Form of Bylaws for a California Nonprofit Public Benefit Corporation.

Separately articulated policies commonly supplement the bylaws in addressing key governance and management issues. For example, although not required by federal tax law, it is considered by many to be a best practice for any nonprofit to have an adopted conflict of interest policy. Additionally, if a nonprofit does not have a conflict of interest policy, it must describe its policy regarding conflicts of interest in the IRS Form 1023. Accordingly, it would be advantageous for most nonprofits to adopt a policy. The IRS provides a sample policy in Appendix A of the Instructions to Form 1023, which can be a helpful starting point though note that this sample policy does not necessarily account for state law requirements such as the procedural requirements under California law for approving certain self-dealing transactions involving directors.
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5. Take the initial board actions at a board meeting or by unanimous written consent of the directors.

The board should take the following actions:

(a) Adopt the bylaws and conflict of interest policy;

(b) Set the exact authorized number of directors if the bylaws provide for a range for the size of the board;

(c) Adopt a fiscal year (such as a year ending December 31 or June 30);

(d) Approve establishing a bank account;

(e) Approve applying for federal and state tax-exempt status;

(f) Approve reimbursement of startup expenses (if applicable); and

(g) Approve the compensation of the president (CEO) or the treasurer (CFO) and anyone performing the functions of such officers, like an executive director (if applicable).

The incorporator may have already taken some of these actions at the time that he or she appointed the initial board, in which case the board can review and confirm those prior actions if desired.

At this step, the directors may also complete some initial forms for the organization’s records (which may also be required of the corporation’s officers) such as their completed annual disclosure of any potential or actual conflicts of interests, which is usually required by any well-drafted conflict of interest policy, and also providing a signed written consent to receiving electronic transmissions from the corporation as required by California law in order to conduct official business electronically (e.g., receiving meeting notices by e-mail). 
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6. Obtain an employer identification number (EIN).

An officer or authorized third party designee may apply for and obtain an EIN online. 
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7. File the initial registration form (Form CT-1) with the California Attorney General’s Registry of Charitable Trusts.

The initial registration must be renewed annually, is required for the majority of nonprofit public benefit corporations, and must be filed within 30 days after receipt of assets. The CT-1 Form and Instructions are available online. The corporation’s articles of incorporation and bylaws should be included in the initial filing. For corporations that are in the process of applying for 501(c)(3) tax-exempt status, you can submit copies of the Form 1023 application and federal determination letter (Step 9) after receiving the determination letter to complete your filing with the Registry.
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8. File the Statement of Information (Form SI-100) with the Secretary of State.

The Statement must initially be filed within 90 days of the date of incorporation. This biennial filing requirement, which identifies the organization’s address, principal officers, and agent for service of process, can be filed online or by mail. (You can find information and instructions on completing the Statement of Information here.)
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9. Apply for federal tax exemption with the Internal Revenue Service (IRS) and receive a determination letter from the IRS.

Completing the Form 1023 application for exempt status under Internal Revenue Code (IRC) Section 501(c)(3) may be the most challenging part of the startup process. It is a legally-driven and comprehensive inquiry covering 10 Parts and 8 Schedules.

As of January 31, 2020, the IRS revised Form 1023 to be an online fill-in form that must be filed electronically at Pay.gov. While substantively the new electronic Form 1023 is mostly similar to its paper version predecessor, there are some new changes with the electronic form and e-filing process and some wrinkles that may be addressed in the future. Luckily, the IRS has added new tools and instructional videos to their website to help you understand the e-filing process. You will be required to create an account at Pay.gov in which you will be able to preview and download the form, save your progress, and return to the form at a later time. Please note that although you will be able to save your progress, the application will not allow you to advance to the next page until you have completed all of the questions on the current page, including entering required descriptions or explanations or completing required schedules.

A critical section for careful completion is Part IV, Narrative Description of Your Activities, which asks: for each past, present, or planned activity, include information that answers the following questions.

• What is the activity?
• Who conducts the activity?
• Where is the activity conducted?
• What percentage of your total time is allocated to the activity? (Combined time percentages should add up to 100%.)
• How is the activity funded and what percentage of your overall expenses is allocable to this activity?
• How does the activity further your exempt purposes?

Form 1023 also requires information regarding (a) organizational structure; (b) compensation and other financial arrangements with officers and directors, and certain highly paid employees and independent contractors; (c) members and other individuals and organizations that receive benefits from the organization; (d) organizational history (e.g., an organization that was spun off or previously fiscally sponsored by another organization may need to complete an additional schedule as a successor organization); (e) specific activities; and (f) actual and/or projected statement of revenues and expenses (which should be consistent with any identified activities).

Part VIII is designed to determine the organization’s classification as either a private foundation or a public charity. Public charity status is generally the more favorable tax status, but requires an organization to meet certain requirements. For most organizations, this means passing a public support test over an ongoing five-year measuring period. For organizations that will receive a large bulk of their support from few sources over their first five years, monitoring and managing of the public support ratio may be critically important. Public Charity Status Simplified (a little) is a helpful online resource from Insight Center for Community Economic Development.

If you think that your nonprofit will not bring in gross receipts of more than $50,000 per year during the next three years, and has not had gross receipts of more than $50,000 in any of the past three years, you may be eligible to file Form 1023-EZ. The full criteria are explained here. Like Form 1023, the 1023-EZ must be filed electronically. You can find instructions at this site.

The filing fee for Form 1023 is currently $600. The filing fee for Form 1023-EZ is $275. Fees are paid online here. 
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10. Apply for California tax exemption with the California Franchise Tax Board (FTB) and receive an affirmation of exemption letter from the FTB.

Organizations with a 501(c)(3) federal determination letter can request California recognition of tax exemption under California Revenue & Taxation Code section 23701d from the FTB by filing Form 3500A along with a copy of the IRS determination letter. You can find instructions here.The FTB will generally recognize the organization’s exemption from state income taxes as of the federal effective date. An organization that does not have a 501(c)(3) federal determination letter is otherwise required to file the more complicated Form 3500 for state income tax exemption. There is no fee for Form 3500A and a $25 application fee for Form 3500.
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Bonus: Additional Resources

• IRS "StayExempt.org" especially for 501(c)3s
• Nolo Press: How to Form a Nonprofit Corporation in California
• California Attorney General’s "Guide for Charities"
• Nonprofit Kit for Dummies
• Why Join the California Association of Nonprofits

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Do you need to work with an attorney to start a nonprofit?

Although the majority of nonprofits are set up without the help of lawyers, it's easy to make mistakes that become costly to correct later (such as unwisely creating voting membership structures, adding unlawful provisions to template bylaws, violating the commerciality doctrine, etc.). We recommend having experienced professionals involved -- such as attorneys, board members with nonprofit incorporation experience, and experienced consultants. Don't discount the value of a knowledgeable attorney. You can find a list of firms and consultants who are CalNonprofits members in the Professional Directory online. (Search for "Starting a Nonprofit and Staying Compliant.")
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What are some alternatives to starting a nonprofit?

Now that you know how to start a California nonprofit, you should thoughtfully consider whether this is the right choice for your ideas and for the public benefit. There may be other ways to carry out your dreams, including working under the umbrella of an existing nonprofit. One often-overlooked alternative is fiscal sponsorship, a relationship that may allow a group to house a charitable project within an existing nonprofit with the ability to spin it off at a later date. For more information on fiscal sponsorship, see Fiscal Sponsorship Basics from the Bar Association of San Francisco. Very small operations may consider forming themselves as an unincorporated association. You may also find that starting a for-profit company will serve your purposes better than a nonprofit structure.

Once you have started your nonprofit, be sure to look at CalNonprofits' Nonprofit Compliance Checklist, a regularly updated listing of all the federal and state forms required from nonprofits, including links to all the forms.
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ABOUT THE AUTHORS: Emily Chan and Gene Takagi

Attorneys Emily Chan and Gene Takagi wrote this guide for the California Association of Nonprofits as part of their commitment to pro bono work and community service.

Emily Chan is of counsel with Adler & Colvin and a former recipient of the Outstanding Nonprofit Lawyer – Young Attorney award recognized by the Nonprofit Organizations Committee of the American Bar Association. Gene Takagi is a principal attorney of NEO Law Group, a part-time lecturer at Columbia University, and a contributing editor of the Nonprofit Law Blog.

You can reach Emily at www.adlercolvin.com or 415-421-7555
You can reach Gene at www.neolawgroup.com or 415-977-0558
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