Updating the by-laws of your nonprofit organization is an important part of ensuring that your operations remain compliant with legal requirements and reflect any changes in the organization's structure, mission, or goals. By-laws serve as the foundational rules that govern how your nonprofit is run, so it's crucial to review and update them regularly as your organization grows and evolves. Here's a step-by-step guide on how to update your nonprofit’s by-laws.
Step 1: Review the Current By-Laws
Before making any changes, it's important to thoroughly review your existing by-laws. Look for sections that need updating due to changes in your organization's structure, leadership, or operations. Common areas that may require updates include:
Board composition: Changing the number of board members, terms of office, or board member roles.
Voting procedures: Adjusting how votes are conducted (e.g., in-person vs. virtual voting).
Conflict of interest policies: Ensuring compliance with state and federal regulations.
Mission or focus area: If the nonprofit's mission or activities have shifted.
Membership policies: Changes in eligibility or rights of members.
Step 2: Check State Laws and IRS Requirements
When updating your by-laws, be sure to check any state-specific laws and IRS regulations to ensure compliance. Nonprofits are subject to state laws, and some states have specific requirements for what must be included in your by-laws, such as:
How often the board must meet
Minimum and maximum number of board members
Requirements for certain types of voting (e.g., majority or supermajority votes)
Financial reporting or audit procedures
Additionally, if your nonprofit is a 501(c)(3), you should ensure that any changes are consistent with IRS requirements for tax-exempt organizations.
Step 3: Propose Changes and Gather Input
Once you’ve identified the changes needed, it’s time to propose them to your board of directors. A good practice is to distribute a draft of the proposed changes to the board well in advance of the meeting where the revisions will be discussed. This gives board members an opportunity to review and suggest further revisions.
Make sure to:
Document the proposed changes clearly in writing.
Highlight the sections that will be affected and explain why the changes are necessary.
Depending on your current by-laws, you may also need to involve other stakeholders (such as members or key staff) in the revision process.
Step 4: Hold a Board Meeting to Approve the Changes
Once the proposed changes are finalized, they should be approved by the board of directors. Typically, the board will need to vote on the changes, and a quorum must be present for the vote to be valid. According to your current by-laws, the process for approval may require:
A majority vote or supermajority vote.
A special meeting or a regular board meeting.
If your by-laws require a meeting to approve the changes, make sure you properly notice the meeting and allow sufficient time for board members to consider the revisions.
Step 5: Record and Implement the Changes
Once the board has approved the changes, ensure that they are properly recorded. Update the official by-law document and maintain it as part of your nonprofit’s legal records. The updated version should include:
The date of approval for the changes.
A record of the board meeting minutes where the changes were approved.
After approval, update your internal documents, policies, and practices to align with the new by-laws. For example, if the changes affect the board’s structure or voting procedures, make sure that those changes are implemented right away.
Step 6: Notify Stakeholders and Regulatory Agencies
In some cases, you may need to notify regulatory agencies about changes to your by-laws. For example, if your nonprofit is a 501(c)(3) organization, the IRS may require you to submit an updated Form 990 if significant changes to the by-laws occur, especially if they affect your nonprofit’s governance.
In addition, inform your members (if applicable) and other key stakeholders about the changes, especially if the revisions impact how the organization operates or their role within it.
Step 7: Keep Updated By-Laws on File
Make sure that the most recent version of your by-laws is kept on file and accessible to your board members, staff, and legal advisors. It’s a good practice to review your by-laws at regular intervals—usually every 2 to 3 years—and update them as needed to reflect any changes in your nonprofit’s activities or governance.
Final Thoughts
Updating your nonprofit’s by-laws is an important task that should be handled with care. By ensuring that your by-laws reflect your current operations and comply with state and federal laws, you help to set your organization up for long-term success.
InstantNonprofit provides all formation customers with a set of legally sound by-laws.