Not-for-Profit Corporate Status and Bylaws

Not-for-profit or nonprofit entities are entities that require registration with federal and state governments and have many of the same trappings as business entities. Nonprofit status does not mean that your organization can escape the need for proper corporate governance. Below we offer a brief overview of the function of nonprofit corporate bylaws in Illinois. For assistance in forming your nonprofit or help with any nonprofit governance matters, contact a dedicated Illinois nonprofit attorney.

Defining “bylaws”

Bylaws are the internal rules and procedures that dictate how a nonprofit corporation will operate and how it will be governed. Bylaws are essentially the nonprofit’s operating manual. The board will create bylaws when the organization is established. They supplement the rules established by state law and dictate how your nonprofit will be run.

Bylaws will typically cover issues such as:

● The existence as well as the duties and responsibilities of nonprofit corporate officers and directors;
● The number of directors on the board, how they will be elected, their term length, how they can be removed, and procedures for the appointment of officers;
● Procedures for board meetings including how and when they will be held and who has the power to call meetings;
● Conflict of interest policies and procedures;
● How grant money will be distributed; and
● Other essential corporate governance matters.

Tips for bylaws and maintaining nonprofit corporate status

State nonprofit laws will generally address nonprofit governance matters, including those that must be reflected in bylaws. Bylaws, however, do not have set requirements except as set forth in applicate state law. For example, Illinois law requires at least three (3) members of a not-for-profit corporation’s governing board. Therefore, bylaws must comply with that requirement as to the number of board members (e.g., directors, trustees, elders).

Your nonprofit can choose your own rules, provided they do not violate state law and are included in your bylaws. Your bylaws should be specifically tailored to the needs of your organization. They should include only the fundamental rules of your organization that are likely to remain static. Information that is likely to change frequently, such as job descriptions for staff, fundraising or marketing guidelines, etc., should not be included.

Bylaws do not need to be made public except as required for state charitable registration and application for tax-exempt status. For example, the State of Illinois requires that you submit your bylaws and articles of incorporation to the Charitable Trust Bureau when you register as a charitable organization. Public disclosure of bylaws helps transparency and creates an incentive for your board members to take them very seriously. Public bylaws increase your organization’s accountability and ensure the trust of donors, supporters, and beneficiaries.

To maintain 501(c)(3) tax-exempt status with the IRS, your nonprofit must file an annual return, which includes such information as “structural and operational changes.” This means that if you change your bylaws, you must inform the IRS on your annual report. If your organization is exempt from the annual return, you can and should still notify the IRS of any structural changes.

Our Experienced Illinois Non-Profit Lawyers are Here to Help You Further Your

Mission
If your church, religious organization, or other nonprofit organization faces legal issues in Illinois, get a knowledgeable and thorough opinion on how to proceed by contacting the Chicago nonprofit attorneys at MacDonald, Lee & Senechalle, Ltd. in Hoffman Estates at 847-310-0025 and in Des Plaines at 847-298-5030.