understanding the Non-Profit Board of Directors

Non Profit Corporate Bylaws Template - understanding the Non-Profit Board of Directors

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The board of directors of a for-profit corporation is quite similar to a nonprofit board, but there are a few leading distinctions. In general, the fact that both types of businesses are organized as corporations make them fundamentally similar. Members of each have the same fiduciary duties and they must attend to similar governance and operational tasks. Corporate boards are also responsible for complying with state and federal regulations of corporations, such as employment laws and the appropriate Irs filings.

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Non Profit Corporate Bylaws Template

The differences between for-profit and nonprofit boards stem primarily from the obvious differences between for-profit and nonprofit businesses -- their purpose for existing. For-profit corporations exist to make a profit. They can alter or modify the direction of the business at will, because anything they do to improve profitability meets the stated purpose, to make money. Nonprofits, however, must serve a public-service purpose, such as contribute education, address the ill-effects of poverty, or serve some other charitable purpose. Nonprofits are accountable to the public, work for the public, and must use all wage over the set expenses to meet their stated purpose. To that end, there are some variances in the way a nonprofit board is advanced and run that keep the venture in line with its purpose.

Board of Directors Compensation

First, the members of nonprofit boards are not commonly paid for their service, whereas for-profit board members typically are. The volunteer capacity of a nonprofit board member does not reduce their accountability or increase their liability protections. In fact, because the nonprofit board members essentially work for the public, their actions can be scrutinized even more carefully than for-profit board actions. Those who volunteer to serve on nonprofit boards tend to have a personal connection to the efforts of the organization. They are willing to put in the hours to lead to solving the qoute at hand, with no payoff except the delight of charitable work. For-profit board members are also stockholder, or owners of the business, who are driven by maximizing the behalf for their own gain.

Board of Directors is Hands-On

Generally, members of for-profit boards set the standards for the business (profitability goals, etc.) and leave the actual sales efforts to the appointed Ceo and his staff. Nonprofit board members are thinkable, to be far more hands-on in developing the funding strategies of the organization. They should solicit funds from their own contacts as well as be involved in major fundraising events. For many nonprofits, the efforts of the board members contribute the bulk of capital on which the club operates.

Nonprofit menagerial Director

In for-profit corporations, the Ceo commonly sits on the board of directors. Because all board positions are paid, there is less friction in regards to the board handling the Ceo's wages and job performance. In addition, the Ceo and board members all directly benefit from the corporation's profitability. In a nonprofit corporation, the menagerial director is normally the highest-ranking member of the club who is in fact paid. They are also hired and managed by the board, but since the purpose of a nonprofit does not directly benefit the menagerial director or board, it makes sense that the menagerial director not be a member of the board. That is, the unpaid board members are better able to make the best decisions for the club without the inclusion of the only participant with a personal stake -- such as the menagerial director and their salary.

Maintaining Nonprofit Status

The other obvious inequity between for-profit and nonprofits are the tax exemption and charitable status available to nonprofits. The board of a nonprofit is responsible for establishing and maintaining each status. One leading issue is to monitor the members' self-interest in the activities of the organization. That is, a board member can ageement to do work for (and be paid by) the organization, but only within speculate and only if the club can show it did its due diligence before agreeing to the contract. For example, if a board member is hired to design and carry on the organization's website, there must be evidence that the board member was excellent after right consideration, and that hiring the board member is the best option for the nonprofit.

Because of the underlying differences between for-profit and nonprofit corporations' purposes, there are a few distinctive differences in the way these boards are run. Overall, however, the board members preserve very similar responsibilities and tasks...after all, business is business no matter where the profits go!

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