California Non-Profit Bylaws

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California laws regarding nonprofits relate to organizations that fundraise or operate in California. California law requires nonprofit organizations to have bylaws, or rules by which the organizations operate as part of their corporate records. Requirements for bylaws are stated in the California Corporations Code. This set of laws governs nonprofit and for-profit corporations.

Nonprofits maintain their bylaws, operating agreements and any amendments to these documents. The organization is not required to file bylaws with the Secretary of State.

Articles of Incorporation

A nonprofit must file its articles of incorporation, usually a single legal document that creates the organization. The organizers must file the articles with the California Secretary of State and pay a filing fee. The board of directors may include some information about the nonprofit in the articles of incorporation rather than in the bylaws.

Statement of Information

A statement of information provides information about what the organization does and how it operates. A California nonprofit must file a statement of information within 90 days of registering with the Secretary of State. It must then file a statement of information every two years thereafter during a specific six-month filing period. This period is tied to the original registration date.

Required Contents for Bylaws

The nonprofit's bylaws must state the number of directors of the corporation or the method of determining the number of directors. Alternatively, the bylaws must state that the number of directors shall not be less than a stated minimum nor more than a stated maximum, with the exact number of directors to be fixed, within limits specified by approval of the board or the members in the manner provided in the bylaws. The corporation may have one or more directors.

The bylaws must contain provisions not in conflict with state laws or the organization's articles of incorporation. These should cover how to manage the activities and conduct the affairs of a California nonprofit. The bylaws should include the time, place and manner of calling, conducting and giving notice of member, director and committee meetings or of conducting mail ballots.

Information About Directors, Officers and Members

The bylaws may contain information about the qualification, duties and compensation of individuals on the board of directors. The bylaws may provide the time of the board members’ election. They may also state the requirements of a quorum for directors’ and committee meetings and contain information about the appointment and authority of the board.

The bylaws may also contain information about the appointment, duties, compensation and tenure of officers of the corporation. Further, the bylaws may contain information about the mode of determining the members of record. The bylaws may also contain information about the making of reports and financial statements to members and information about the setting, imposing and collection of dues, assessments and admission fees.

The bylaws may share information about the manner of admission, withdrawal, suspension and expulsion of members and contain information about how voting regarding members should take place. The bylaws may contain provisions about how the corporation deals with business affairs in an emergency.

Other Items Covered in Bylaws

Additionally, bylaws may cover the name and purpose of the organization, what employees the organization intends to hire, and how the organization intends to protect employees and board members from lawsuits. The bylaws may also discuss where the nonprofit will keep resources that it uses to conduct its activities, such as libraries, or tools that it uses to perform everyday tasks. The bylaws may also cover where the nonprofit’s book and record of the bylaws themselves will be stored. They will also cover how they themselves can be amended.

Definition and Requirements for Nonprofits

A nonprofit is a corporation or organization that does not realize monetary profits. Nonprofits have exempt status from paying federal income taxes to the Internal Revenue Service (IRS). A nonprofit corporation may file Form 199 with the California Franchise Tax Board (FTB) every year, although it likely will be exempt from paying state taxes. A nonprofit must maintain its records with the Attorney General’s Office, the Internal Revenue Service and the California Secretary of State.

Charitable Purpose Unnecessary

A nonprofit can have a charitable purpose, but is not required to do so. The term “charitable” covers relief of the poor; advancement of religion, education or science; maintaining public buildings and monuments; lessening neighborhood tensions; eradicating prejudice; defending civil rights; and fighting the deterioration of communities. Nonprofits that are not charitable organizations include religious, scientific, literacy and sports-related entities.

Steps to Create a Nonprofit

There are 10 basic steps to creating a nonprofit in California. First, the organizers should decide on a name for the nonprofit. They should engage in a name search on the state’s registry of charitable organizations to make sure no other organization has the same name. They should then draft and file the articles of incorporation and statement of information.

After the organizers form and register the corporation with the California Secretary of State, they must obtain the necessary licenses or permits to operate the nonprofit. A nonprofit is not exempt from obtaining the proper licenses or permits to engage in certain activities. This is true even though the nonprofit may not make any money from offering such services.

Once the business entity is formed or registered with the California Secretary of State, it must obtain the necessary licenses and/or permits. The website CalGold provides organizers with the correct business license and permit requirements. CalGold contains an online database to share information about agencies that issue business licenses and permits from all levels of government.

Election of Directors and Holding First Board Meeting

The organizers should then appoint the board of directors. At this point, the members of the board may act rather than the organizers. The organizers and the board can be the same people or different people. The board members should then draw up the bylaws and the nonprofit’s conflict of interest policy.

A conflict of interest policy protects a nonprofit from losing its tax-exempt status. The policy guides the board members and officers so they will act appropriately upon encountering a conflict. The policy also provides procedures to allow individuals with a conflict of interest to be excused from voting.

The members should then hold a board meeting to take the initial board actions, such as electing officers and planning the nonprofit’s first fundraising drive.

Registration for Taxes

Then the nonprofit should obtain an Employer Identification Number (EIN) from the IRS. Next, the nonprofit should file the organization’s initial registration form with the California Attorney General’s Registry of Charitable Trusts. The members should later file a statement of information with the California Secretary of State and then file for a federal tax exemption with the Internal Revenue Service and a state tax exemption with the California Franchise Tax Board.

Three Common Types of Nonprofits

The three common types of nonprofits are: public benefit corporations, mutual benefit corporations and religious corporations. Most of the registered nonprofits in California are public benefit corporations. A public benefit corporation serves the purpose of creating a general public benefit, such as a clinic that serves the health needs of a community. A public benefit corporation cannot distribute profits or dividends to any person.

A mutual benefit corporation is organized for the benefit of its members and may not be formed solely for charitable purposes. Examples include a private club, like a golf club, and a trade organization such as an association of importers.

A religious corporation is organized for religious purposes. It is not required to register or file annual financial reports with the Attorney General’s Registry of Charitable Trusts. A religious organization may also be formed as a sole corporation or a corporation specific to religious purposes.

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