The Nonprofit FAQ

Is a Board Necessary?

A reader asked on September 14, 1999: "Is a board necessary? We have a small non profit association and are trying to locate information on whether or not we have to have a Board of Directors. We are not incorporated. Can you refer us? Thanks." Putnam Barber answered: Much will depend on what state you are in. Some provide for what are called "unincorporated associations." Others do not. In the second sort of state, you will probably not be able to open a bank account or do other business in the association's name without incorporating (or taking some other action to create a formal organization to act on the members' behalf -- some states permit other forms such as partnerships). Further issues have to do with taxes, insurance, and other "corporate" obligations. It is my impression that many states and localities make no special effort to deal with very small organizations, especially those where there is little or no financial activity. If the leadership of the organization is willing to go forward without the protections and guidance of the corporate form, and if there's not a lot of money changing hands, you can probably operate indefinitely without encountering any external requirements. But I question the wisdom of proceding in this way. The protections for leaders and members that are built into the corporatate form are significant. And thinking through issues in advance of difficulties can prevent a lot of unhappiness if things go awry. Many good ideas have come to woe over the years over disputes about who controls the affairs and the assets of the organization. Often, having clear rules on the books will prevent that from ever happening because people have confidence that affairs will always be handled in a straightforward and predictable way. If you do elect to form a corporation, then having a board -- or at least officers -- will almost certainly be required. If you want, you can probably have the board consist of all the members of the association or make other arrangements that suit the specific situation and goals of your group. You make these decisions as you draft your bylaws and articles of incorporation. These are the sorts of issues you will find discussed in a good book on forming a nonprofit. One that is often used is Anthony Mancuso's http://www.amazon.com/dp/0873379942/?tag=internetnonprofi">"How to Form a Nonprofit Corporation in All 50 States" published by Nolo Press. There is more information about this subject in the "Where to Start" article at the Nonprofit FAQ -- see http://www.nonprofits.org/npofaq/02/01.html Putnam Barber Editor, The Nonprofit FAQ :: http://www.nonprofits.org/ Posted 9/15/99; cleaned up 3/13/08 -- PB