2 min read
Your nonprofit must be established as a member or nonmember nonprofit. And you have to decide that choice when you're drafting your Articles of Incorporation. This Task weighs the pros and cons of membership nonprofits.
**First, note a key misunderstanding: “members” of a nonprofit, as defined by your state, are similar to shareholders of a corporation. But unlike shareholders, they can’t profit from the nonprofit. They do, however, have voting rights and can determine the directors and overall direction of the nonprofit.
This is compared to how some nonprofits will have members in a more figurative sense, like a nonprofit with a “Young Friends” or a zoo with “members” in which you’ll pay an annual fee to get discounts and invites to exclusive events. This is not the type of member we’re referring to in this discussion.
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The most important right a member has is voting rights. They’ll elect and remove directors. They can also amend the articles of incorporation or bylaws and vote on important decisions.
States vary in formal membership rights, but formal members have a great deal of power in the nonprofit’s functionality.
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Most nonprofits do not have members. Members can add an extra layer of complexity, paperwork, and risk for your nonprofit. Smaller nonprofits don’t see the need to give formal members such tremendous influence over the organization in the form of voting rights.
Instead, most smaller nonprofits have directors that elect other directors when transitioning (compared to members being the parties that vote for the directors). The preferred alternative is to have a non-voting membership of “supporters” that help in the mission and pay a membership fee.
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Some nonprofits see a formal membership as a benefit to the organization. This makes the most sense when the nonprofit is serving the members as opposed to the public. Think "golf club" or a niche association.
If you’ve determined that your organization will have a formal membership, you must outline the specific voting rights of your members and include the information in your articles of incorporation and bylaws. In your bylaws, you must also include:
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Chris Daming, J.D., LL.M. : Oct. 10, 2024
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