Originally written by Joshua Hofer, SDSU Extension Community Vitality Field Specialist.
The world of protocol and legal issues can be an intimidating place. Lawyers, the courtroom, intimidating big books filled with laws, rules and regulations – yikes! Just like any industry, the nonprofit industry has its quirks, rules and legal compromises developed over time. There is a lot to know.
For those of us not involved in nonprofits or engaged in another capacity, there are also good reasons to be informed on nonprofit legal issues. According to the Internal Revenues Service in 2016, the nonprofit sector contributed an estimated $1.047 trillion to the U.S. economy, comprising 5.6% of the country’s gross domestic product (GDP). An estimated 25.1% of U.S. adults volunteered in 2017, contributing an estimating 8.8 billion hours (Nonprofit Sector in Brief 2019). A lot of our lives in the United States interact with the nonprofit sector.
So, having a basic understanding of how they work is in all our interests! In our module this fall titled “Technically Speaking: Understanding Bylaws and Legal Text,” (part of our Building Successful Boards series), we will look at some of the bedrock ideas to know about nonprofits today. Here is a sneak peek!
Topics Covered
Understanding the State and IRS
The first thing we outline is the structure in which nonprofits are formed and operate. You’ll learn about the role of the secretary of state’s office in South Dakota, the Internal Revenue Service (IRS) and all the parties of authority when operating a nonprofit in the United States.
Rules, Rules, Rules…
Solid communication is based on agreements between parties. You agree to speak, I agree to listen. But who makes the rules and why do we follow them? Here we’ll dig into “bylaws.” The word “by-law” comes from Old Norse or Old Danish: byr “place where people dwell, town, village” + lagu “law.” So, as you can imagine, the structure has evolved over a very long time – just like our protocols and processes in the nonprofit industry have! Who speaks, and when? How do we operate? How did we come by those decisions – and why?
“You’re Just Saying That Because…”
So, you’re asked to serve on the local fair board, but you run a concessions company and that fair represents 35% of your annual gross revenue. It is very significant to your business.
What should you do? What are some things to consider? What is legal? What is not? And what should you be aware of?
This is what is referred to as conflict of interest, and it can be one of the trickier things for nonprofit boards to handle.
When you join a board – one of your duties as a board member is the duty of loyalty – first and foremost to the organization! Where does that leave your priorities? How can you reconcile the difference?
Building Highly Effective Boards
All this and more will be explored in “Technically Speaking: Understanding Bylaws and Legal Text.” It may seem intimidating now, but after this module you’ll be armed with the fundamentals and understanding you need to, not only survive, but thrive in the nonprofit sector!
Sources
NCCS Team. The Nonprofit Sector In Brief 2019. National Center for Charitable Statistics, 6 Apr. 2020.
