Category Archives: Nonprofit Start-up

Three Things to Consider When Recruiting Your First Nonprofit Board of Directors

As we saw in our last post, the names of a new nonprofit’s board members need to be included in the formation documents you submit for incorporation. But finding these founding board members is often challenging. What are the most important considerations in choosing initial board members?

Sometimes the dialogue goes like this:

Founder:   “Jane, I’m starting a nonprofit that will serve the homeless, and I’d love to have you on the board.”
Jane:           “What a great idea, but I’m so busy, and I’ve never been on a board—what’s involved?”
Founder:   “Oh not too much—just a monthly meeting for an hour or so.”

WRONG.

Here are the right things to talk to your prospective board members about:

  1. Commitment is the fundamental expectation. Your prospective board member must be willing to commit to fully supporting the nonprofit—not merely by showing up for a one-hour monthly board meeting and providing an annual financial gift (although these are essential, of course), but to be there for the nonprofit throughout the year, actively participating in board meetings, committee meetings, and special meetings and events, always fully prepared and ready to work. Founders often seek politicians and well-known community leaders, and these folks can be great supporters—but can they commit the time needed to the nonprofit? Probably not.
  2. Board members must bring something to the table. Founders should seek board members who bring: (1) skills (decision-making, project management, or an analytical mind, for example), functional knowledge or subject matter expertise (e.g., finance, fundraising, etc.), and experience (in the nonprofit’s field, for example, or with nonprofits generally); (2) connections and networks, and a willingness to exploit these to advance the nonprofit in its work and fundraising; and (3) energy and motivation to get the nonprofit moving forward in its mission.
  3. Emphasize independence. Independence of directors takes two forms: (1) “independence of action,” meaning the director is unlikely to bring “baggage” in the form of conflicts of interest or potential conflicts; and (2) “independence of thought,” meaning the director is willing to think critically and analytically about any issue brought to the board without looking to see how others are voting or automatically siding with any other board member (as may happen when married couples serve on the same board).

If you as the founder can find a few people who meet these criteria, you will be on your way to building a strong and effective nonprofit board of directors.

The foregoing is provided for information and educational purposes only and does not constitute legal advice. Consult an attorney or accountant for advice regarding your organization’s specific situation.

Tax-exempt Status! Congratulations!

We are proud to announce that

the Legal Center for Nonprofits, Inc.,

has been recognized by the IRS as a

501(c)(3) tax-exempt charity!

But wait–we have more great news!

Congratulations to our Clients!

The following organizations have been recently recognized by the IRS as tax-exempt organizations:

Dudley L. Brown Post 2846 Veterans of Foreign Wars (Onset, MA)

Helfand Farm Community Gardens, Inc. (Dartmouth, MA)

Hemingway Language Institute, Inc. (Fall River, MA)

Marine Renewable Energy Collaborative of New England, Inc. (Marion, MA)

Mastery School of Independent Learning, Inc. (Fall River, MA)

Minuteman Chapter, Inc. (Dartmouth, MA)

Odie’s Place, Inc. (Dartmouth, MA)

SouthCoast Bikeway Alliance, Inc. (Taunton, MA)

 

 

 

 

Latest News from IRS on Tax-exempt Status Applications

I just returned from Washington DC where I attended Representing & Managing Tax-exempt Organizations, the annual nonprofit law conference presented by Georgetown University Law School.  This conference is always interesting as it brings together many nonprofit law luminaries, but it is also eagerly looked forward to because the IRS Exempt Organizations Director always presents the first session on the first day, offering news about IRS activities relating to tax-exempt organizations.

Tamera Ripperda was introduced as the new Director of IRS’s Exempt Organizations Division—she has been in the job just since January this year.  She began by acknowledging the lengthy wait time for determination letters, but then offered context for the wait.  On average, IRS receives 60,000 applications per year for exempt status.  This has been compounded by automatic revocation—organizations that have been automatically revoked must reapply for recognition as tax-exempt, and as a result, in the period 2011-2013, applications have been averaging 80,000 per year.  At the moment, IRS has 10,000 applications for reinstatement in hand.  Of the applications “in inventory” right now, 15% are over a year old.  Receipt of applications outpaces closure of cases.

Ripperda, however, brought some good news, stating that IRS is focusing on closing out the old applications ahead of the new, and expects that all of the old applications will receive a determination by this summer.  The goal is to achieve a 9-month turnaround for all applications—a vast improvement from the current 12 to 18-month wait, but still a far cry from the good ole days when the turnaround was 4 months.

Ripperda also discussed the new IRS Form 1023-EZ, that is expected to help ease the determination crunch by providing a much simplified process  for smaller nonprofits meeting specific criteria. Planned to be fully operational this summer, Ripperda said she anticipates 70% of applicants should be able to use it,  and it will significantly reduce the burden on smaller organizations.  At the same time, however, she alluded to a “back-end review process” IRS will use to look at compliance of those organizations using the 1023-EZ.

An eligibility worksheet will help nonprofits determine whether they  can usethe 1023-EZ.  The form itself will include self-attestations as to annual gross receipts, organizational structure, nature of activities, and the like. It can only be filed electronically, and will be automatically rejected if it is incomplete or the user fee is incorrect—this by itself will save IRS an enormous amount of time.

I will have more to say about the rest of the two-day conference, as well as a first take on 1023-EZ.  Stay tuned!

Getting the Right People for the First Board of Directors

When you begin to think about forming a nonprofit organization, one of the first things to consider is the people you will need to help you, and most importantly, the people who will work with you from the beginning, who most likely will evolve into your board of directors.

Nonprofit organizations are required by law to have boards of directors, who are charged with fiduciary duties of care and loyalty to the organization, and who have oversight over the entire operation of the nonprofit.

For most small start-ups, the first board of directors may not meet the textbook ideal.  Your first board may consist of you and a couple of friends and maybe a work colleague or two, if you’re lucky enough to have that many people at the outset.  Many boards start off with a husband and wife and a friend or another couple.  And while this initial group may be passionate and committed to the work of the organization, board development must not stop here.  More minds and hands will be needed, analytical thinkers, able—and willing—to ask the hard questions as the nonprofit grows and develops.

As you think about your nonprofit, you might begin by thinking, “Who do I know with deep pockets?”  But that isn’t the best place to start. Instead, think about the skills and abilities the nonprofit’s formation and operation will demand.  For example (and this is certainly not an exhaustive list):

  • Persistence, detail-orientation, zeal
  • “People skills”, entrepreneurship
  • Math skills, financial, bookkeeping, Excel
  • Time management, project management, organizational, planning
  • Persuasion, fundraising, sales
  • Supervisory, personnel/human resource management
  • Verbal, writing, communication
  • Technical, computers, email, word processing, spreadsheets, social media
  • Subject matter expertise

Do you have all these skills, personally?  Probably not; none of us have all of them.  But the Board of Directors—as a whole— needs to have all of them.

The question I am asked most often (after “Do you do grant-writing?”) is “How do I get board members?”  How do you find people with the skills you need?

Talk to people.  Board recruitment, at its most basic, starts with talking to everyone you know.  Notice those for whom your idea seems to click.  Don’t invite these people onto your board immediately.  Instead, start a list, noting the skills you believe they would bring to your organization.  Then follow up with them, invite them to coffee “for an update” or “to tell you more about what I’m thinking”.

Of course, much more must be done to recruit—and keep on recruiting—good board members, and indeed, entire books have been written on the topic.

One way to find both board members and volunteers is through posting your organization’s needs online.  For example, here in SouthCoast, through the region’s United Way agencies, you can post both your organizations volunteer needs and your activities.  Check out Volunteer SouthCoast here.

Once you’ve connected with people who might be good board members, you—or your present board, if it exists yet—should develop a process, rather like a job recruitment process, to get to know prospective board members better; this is especially important if neither you nor your current board members know the person well.  This might include a formal meeting, asking for a resume, maybe a questionnaire; it also might include having the prospective board member join a committee or help with a project, both good ways to assess a person’s fit with your organization. Only when you’re satisfied that the person will be a good addition to your board should you (or your board) invite him or her to join you.

While the need for board members may be critical, it’s important to move slowly, to ensure good fit and commitment—after all, this is someone you hope to be working with for a long time!

If you would like to learn more about boards of directors, I will be talking about nonprofit board governance at following upcoming programs :

  • Tuesday, March 18, at the Fall River Boys & Girls Club, 6:00 pm
  • Thursday, April 10, at the Waypoint Event Center, New Bedford, with Craig Dutra of the Community Foundation of Southeastern Massachusetts, 5:30 pm. Click here for more info.
  • Tuesday, April 22, at the Legal Center for Nonprofits, New Bedford, part of the Nonprofit Start-up Series, 6:00 pm. Click here for more info.