Tuesday, January 10, 2017

Non-Profit Series: 3. Who Runs a Corporation?

Written by Sagan L. Carman-Downer

If you’ve decided to operate your non-profit organization as a formal corporation, you will need to consider how it will be structured in order to carry out its purpose. A non-profit corporation doesn’t necessarily have owners to make decisions and put them into effect, so it is important to understand how these things will get done. Typically, a corporation is run by individuals serving in one or more of three roles: on the board of directors, as an officer, or as a member.

You have probably heard these terms before, but knowing the role of each can help you decide who will fill these positions. Put in very simple and broad terms, the board of directors makes the decisions, the officers carry out the decisions, and the members vote for the board of directors. Below is a bit of a closer look at each role.

Board of Directors
The board of directors is made up several individuals that are selected by the group of people starting the corporation. Some states require a minimum number of directors to serve on the board, in Nebraska the minimum is three. The board of directors provides oversight of the corporation by making decisions that they believe will help achieve or further its purpose. The board can do this by directly making decisions about operations, or by delegating the authority to others. For example, the board of directors may choose the recipient of a scholarship they are awarding, or they may authorize a subcommittee or officer to make the decision.

Officers carry out the decisions made by the board members for which they are given authority. A key point of distinction is that they can only take actions as directed by the board or as specified in the articles of incorporation. So, while they still have authority to make decisions, it is only to the extent the board or articles allows them to. Officers often include a president, secretary, treasurer and vice president. The role of each will be defined by the articles of incorporation or the board of directors. Typically, the president presides over meetings, the secretary prepares minutes of the meetings, and the treasurer keeps track of the corporation’s funds.

A corporation may choose to have members, but is not usually required to. If there are members, they are typically the ones that vote on the board of directors. Their role is to vote for directors that they believe will make decisions they agree with. Members may be required to pay annual dues, volunteer a certain number of hours for the corporation, or meet other requirements set out in the articles of incorporation or as decided by the board of directors.

Ideally, each of the three groups work together to make sure the corporation runs smoothly to provide a public benefit. Keep in mind, though, that this is a brief description of each of these roles, meant to provide a general description and understanding. Their specific authority and duties and may differ depending on your state or what type of non-profit you operate.

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