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Nonprofit Governance: How to Structure A New Nonprofit Organization

By: Jess Birken

Tel: 612-200-3679
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When starting a new nonprofit, most founders are focused on their mission. Who are they going to be? What kind of work will they do? What impact are they going to make? But those aren’t the only things nonprofit founders need to decide. They also need to decide on the structure of the nonprofit and how it will function, too.

But most founders don't really understand their options and how each will (or won't) work with their idea. This is completely understandable! How would you know advanced baseball about governance and structures of nonprofits? Most founders know their mission – not the ins and outs of nonprofits and small business law.

One of the biggest questions for nonprofit founders is whether the new organization will have members or not. A lot of the time, people don't really understand the different types of member organizations, or whether they should have members at all. Understanding the differences here and making the right choice for a nonprofit can save the new board a lot of confusion and difficulty down the road.

Here are four different types of nonprofits, with and without members, for you to consider:

Option 1: Non-Voting Members

The first type of organization has members that do not vote. You may not know it, but you know these orgs. This is the kind of membership you see when you join public radio, your local zoo, or become a supporter of World Wildlife Federation. You pay some money to join, and you get some benefits for becoming a member. Usually that’s something like going to the zoo as often as you want, or just getting the warm, fuzzy feeling from supporting public radio or a cause important to you. As a member, you don't vote for new board members or anything else.

That's the first (and simplest) version of a membership organization. Members get to join, but that's it. They don't get any special rights – they just get the good feelings and maybe an awesome tote bag.

Option 2: Voting Members

In a voting member organization, members DO get to vote on things (shocker, right?). Often, you have to meet certain eligibility criteria to become a member of the nonprofit. You’ll see this kind of thing for organizations like a trade association or a neighborhood association. For example, if you live in the neighborhood, you can become a member of the neighborhood association. If you are a heating and cooling contractor, you can join the association of heating and cooling contractors. If you don't live in the neighborhood, or you're not a contractor, you're not eligible to become a member of those organizations.

If you are eligible, you can join and pay your dues. There may be a variety of benefits for joining (like the non-voting set-up), but benefit is that you get to vote on certain things. Usually, you get to vote on things like updating the governing documents of the nonprofit or who will serve on the board of directors. And in this type of membership nonprofit, usually it's required that all directors on the board must be a member in good standing – that is another major difference from the non-voting orgs, where board members don't necessarily have to be members.

Voting members have special rights under the law. They have things that they can do legally, depending on what's written in the state statute. In some states, voting members can get a petition together to remove board members or call a special meeting without the board's approval. They might have other rights, too, depending on what state you live in.

Because of all this, I generally don't recommend creating a voting member organization unless it's really necessary for the operation of the nonprofit. If the members have a bunch of legal rights they don't really need to have, it can complicate things or create unnecessary drama down the road.

The thing to remember is you can engage as much as you want with your members in a non-voting member organization. Non-voting members can be deeply involved with the nonprofit, giving feedback or sitting on committees or serving as volunteers. But as soon as they become voting members, they have legal rights the board needs to contend with. So, I just recommend that you think carefully before deciding to have a voting member organization.

Option 3: Hybrid Organizations

The third option for membership is a hybrid org. This is basically a combination of the two types of membership orgs we've already covered: the nonprofit has some voting members and some non-voting members. I tend to see this structure in things like a youth athletic league. The youth athletes are voting members, and everybody else (parents, supporters, boosters, etc.) do not have a vote. For example, we have a high school robotics team. The kids that are on the robotics team are the voting members and they get to vote on certain decisions, like whether to compete in a specific tournament. Parents and other individuals can join the organization to support the team, but they don't get a vote. Hybrid organizations are unusual, but it is possible in specific circumstances.

Option 4: Board-Only Organization

The last option, of course, is a board-only nonprofit, meaning there are no members at all. The board makes all the decisions and works with staff or volunteers or partners to serve the mission. This option simplifies things even more than the non-voting membership option since the nonprofit doesn't have to maintain a member database at all.

The board-only option is the best choice for many new nonprofits, but sometimes people talk themselves into a membership-based org anyway. They think, "I want people to give monthly and make a sustainer contribution" or "I want them to feel like they're part of something."

If that’s what you’re thinking, I have good news for you! You don't need to have voting or even non-voting members to do that. You can still ask people to “become a supporter” or “join the movement” or “be part of the crew.” You don't have to bake in a bunch of complex governance to do that. Leave that up to your marketing and fundraising efforts instead of baking it into the structure of the nonprofit.

Now what?

Lots of folks assume once they choose to go the nonprofit route, that's the end of the big decisions. But choosing an organizational structure that works for your new nonprofit is crucial. While it can be easy to make changes early on, things can get sticky if you try to remove your voting membership as time goes on. The members would have to vote to approve that change, which can be tricky. The best thing is to get advice up front so you can make sure that your governance structure is the right fit for your mission.

Looking for advice on your new nonprofit? Schedule a Nonprofit Strategy Session today to get your questions answered and set your new organization up for success!

Jess Birken is the owner of Birken Law Office, a firm designed to help nonprofits. Ideal Client Engagements are nonprofits looking for a strategic partner who will give pragmatic advice and keep business operations on track so the mission work stays a priority.

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