Establishing the Nonprofit Board of Directors

The Role of the Board of Directors

Having the right Board of Directors is one of the most important initial decisions a nonprofit makes. It is essential to consider your board as a team. When identifying board prospects, finding candidates with the expertise to help the organization fulfill its mission and annual goals is a good idea. Look for candidates with diverse skills and experience to help fill any gaps and expand on your mission. Ideally, your Board members should have key business skills and be willing and able to help make challenging business and financial decisions. The goal should be to build a board that will provide a diverse skillset that will help support all areas of your nonprofit, including finance, fundraising, governance, and programs.

Key Traits of Desirable Board Members

1. Knowledge: Each board member should know appropriate and ethical governance practices. Choose individuals with expertise and experience in the nonprofit sector who have demonstrated mindfulness for compliance.
2. Skills: Members of the Board should contribute something to the organization's operation. Select individuals who have skills in accounting, law, or business administration. You will also want individuals with experience in your specific activities. For example, suppose you are an educational program. In that case, you may include a teacher or school administrator on your board.
3. Resources: Individuals who have vast resources are essential board members. Consider people who have financial resources and connections throughout the community. For example, do you know any local politicians or people in high-ranking positions in local corporations? These are great people to consider for board positions as they may bring access to opportunities and potential donors.
4. Character: Nonprofits must observe the highest standards to retain the trust of the donating public and the confidence of those they seek to help. The board provides the public face of the organization and its behavior. As such, individual board members must be exemplary. The last thing you want is for one of your board members to get caught up in a scandal bringing undue attention to your organization. Further, many states ask about the criminal record of board members. While not always a deal-breaker, knowing your member's history is essential.
5. Passion: The organization's mission should guide every decision the board makes. Therefore, each board member should articulate and demonstrate a genuine love for their primary purpose and encourage their fellow members to show the same commitment. Their passion will translate into their volunteer work and promotion of the organization to their friends and family.

Don't Be afraid to Say No

Board Requirements

The IRS generally requires a minimum of three board members. The required board roles include President, Secretary, and Treasurer. These positions, known as officers, must be filled by different people in compliance with the IRS rules. While you might want to do all of the work for your organization, it's essential to find a team of people who share your vision and the workload.

While three people are the minimum, a Board of Directors can have as many members as it desires. We suggest five (5) to seven (7) voting board members as a healthy number for most small to mid-size organizations. There can also be a nonvoting advisory board that's not official, other than they provide valuable insight to the organization. When considering the number of board members, know that more can cause additional challenges down the road, so be mindful and make sure the team is the right size to move your organization forward.

Board Member Term-Length

The IRS does not dictate board term length. What is important to remember is that board service terms aren't intended to be perpetual and are typically one to five years, with three being the most common. The Nonprofit Bylaws should outline service terms. A subcommittee typically nominates new board members with a final vote by the existing board members.

Annual Meeting Requirements

The IRS expects (and state law usually dictates) that a board of directors should meet at least once a year, and best practices suggest four times a year. During these meetings, the board will review and approve annual 990 filings, study and pass yearly budgets, and vote on critical operational and strategic decisions requiring votes.

Compensation

Nonprofits should generally not compensate persons for service on the board of directors. Nonprofits may reimburse reasonable expenses for services provided by officers and staff. Board members should be volunteers. While board members can fulfill paid staff roles (if they exist), the majority of board members (51% or more) cannot receive any compensation from the organization. For example, in an organization with three board members, one person can also serve as the organization's Executive Director and draw a salary. The other board members can only receive compensation if they fill employee roles.

Board Mix

The majority of board members (51% or more) cannot be related by blood or marriage. If an organization has a three-person board, no one related is permissible. There are different rules for Private Foundations, which are explained later in the guide. The IRS does not want a conflict of interest to occur where a select few family or business associates are essentially controlling the organization. Remember, a 501(C)(3) should be in the public's best interest.