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What Defines a 501c3

A 501c3 is a designation for a nonprofit organization in accordance with federal law. While the I.R.S. designates 29 types of nonprofit organization that are exempt in some way from federal taxes, 501c3 specifically denotes an organization that is either religious, charitable, scientific educational or one of several other humanitarian purposes. Two of the key benefits of registering as a 501c3: tax exemption and the ability to conduct charitable activities outside of the United States (other U.S.C. designations are limited to the United States).

501c3 Organizations and Their Board of Directors

Whether the organization is a recent startup or an established 501c3, it’s pivotal that a nonprofit board have a strong board system in place. Different from corporate boards, the board of directors for a 501c3 are often referred to as “trustees.”

Trustees are tasked with manning the helm of the organization from the ground up. This can often include determining the value statement of the organization, making sure fiduciary responsibilities are being managed, aligning management appropriately to the goals of the organization as well as making sure that the organization has the funds and resources it needs to accomplish its mission.

Nonprofit boards typically have three or four officers. The officers are voted on by the rest of the board. They hold a higher degree of responsibility than other board members. The organization’s bylaws should spell out a description of each officer’s role, duties and responsibilities.

What Is the Function of a Nonprofit Board of Directors?

All nonprofit board members are responsible for ensuring that the organization’s programs and activities are in accordance with the nonprofit’s mission, purpose and bylaws. Anyone can serve on a nonprofit board of directors. Best practices for nonprofits suggest that boards choose individuals within their communities who have passion and experience that supports the nonprofit’s mission statement.

501c3 Boards Vs. Corporate Boards

One of the key differences in how a nonprofit board executes versus a corporate board is in ownership. While a corporation may be publicly or privately held, the members of the board may also have stock or ownership that aligns their interests with that of shareholders. For example, a family-owned business may have a family member who is also part owner on the board or in an executive role. Nonprofit organizations, however, do not have any direct ownership or fiscal ties to the members of their board.

Another key differentiator of nonprofit boards versus corporate boards are overall objectives. While a corporate board is beholden to driving revenue growth for a corporate board – whether the company is public or privately held – a trustee on a 501c3 is responsible for working with upper management to execute the companies strategic vision and accomplish their goals.

However, in terms of accountability and overall duties, nonprofit boards function quite similarly to corporate boards.

Nonprofit Meeting Procedures

Nonprofit board meetings do not differ that much from those of a corporate board meeting. The end goal, the things discussed and the amount of members of the board, usually make up the largest difference between the two entities. Regardless of the board’s focus, nonprofit meeting procedures follow very closely to those of a corporate board meeting. They use Robert’s Rules of Order as a basis, meeting minutes are required and technology is a preferred element in the boardroom to streamline the meeting and ensure a smooth and uninterrupted process.