How to Form a Nonprofit Board of Directors: The Basics, Duties, and Responsibilities

These qualities typically stem from a nonprofit’s board of a directors. The board oversees the nonprofit and are ultimately the individuals responsible for the nonprofit’s work, finances, and general wellbeing. Because of this, it is paramount for any nonprofit to understand the basics, roles, and responsibilities of a board of directors before building or rebuilding their own.

What is a Nonprofit Board of Directors?

Like any business, a nonprofit needs leadership; this leadership comes from a nonprofit’s board of directors. Ultimately, the board members are fiduciaries for the nonprofit, meaning that they must act and serve in the best interest of the nonprofit. As fiduciaries, board members guide the nonprofit toward a sustainable and successful future through logical, ethical, and legal management of the work, employees, volunteers, policies, and fundraising. All in all, the board does everything it can to advance the mission of the nonprofit.

The Duties of the Board of Directors

Legally, a board of directors has three duties. Each duty serves a vital purpose for the nonprofit and arguably for society as a whole.

1. The Duty of Care: A nonprofit board member must take care of the nonprofit, ensuring proper use of all assets, including facilities, people, and good will.
2. The Duty of Loyalty: A nonprofit board member must also ensure that all of the nonprofit’s activities and transactions are furthering its mission. They must recognize and disclose any potential or actual conflict of interest and make decisions in the best interest of the nonprofit, not in the best interest of an individual board member or any other individual or group.
3. Duty of Obedience: Lastly, a nonprofit board member must ensure that the nonprofit obeys any applicable laws and regulations related to its operation, follows its own bylaws and policies, and maintains the advancement of the purpose and mission of the nonprofit.

The Responsibilities of the Board of Directors:

Members of a board of directors for a nonprofit have a number of responsibilities. These responsibilities include the following:

1. Hiring and Determining Compensation: While the board leads the nonprofit through foresight, oversight, and insight, a nonprofit requires employees, including managers for the day-to-day operations. Although the board can leave a portion of this to a hiring manager or human resources employee, there is still some involvement by the board that must occur, especially when starting a new nonprofit.
2. Fundraising: Board members must oversee, craft, and even manage funds and fundraising campaigns. Ideal board members play a large role in fundraising efforts, working to maximize donations for their cause.
3. Financial and Business Planning: Whether with expansion or how to best spend donation funds, a board must plan in accordance with their duties and mission. This planning can take a number of forms, but generally, it is all of the essential due diligence and preparation one must do to ensure continued success.

Considerations for Forming a Board of Directors

Before choosing members and forming a board of directors, one must make certain considerations to determine who will best serve the nonprofit. First, a potential board member must be prepared to accept the legal, fiduciary duties and responsibilities that come with serving as a board member; this includes the duties of care, loyalty, and obedience. Second, a potential board member should share the founder’s vision and have comparable passion for the mission or cause. A potential board member should also bring something valuable to the team, such as a diverse or unique skill set or perspective that only they can provide. Lastly, each potential board member must be able to contribute to the plan of business, governing documents, and be willing to take on additional responsibilities if necessary.

Aside from choosing the best member for a board, one must also ensure that they follow state laws while forming their board of directors. Certain states require a minimum number of directors, but one must have at least three board members when filing for 501(c)(3) tax status.

What to Look for in a Nonprofit Board Member

Although board members will serve a nonprofit in different ways, there are certain characteristics to look for and avoid in potential board members.

Great board members will do some of the following:

1. Say things like, “Thank you for the opportunity.”
2. Bring passion with them to meetings, events, etc.
3. Exercise care for others.
4. Be unassuming.
5. Serve the community.

Not so great board members will do the opposite:

1. Say things like, “This will look great on my resume.”
2. Act as dead weight.
3. Not care for others.
4. Be judgmental.
5. Serve themselves.

To create the best possible board of directors for a nonprofit, one must look for the characteristics of a great potential board member and avoid opposite characteristics.

Forming a Board of Directors is Serious Business

The reality for any nonprofit is that the board of directors can absolutely make or break a nonprofit. The board serves as the leaders of the nonprofit, ensuring the mission. To do so, they must maintain their duties – the duties of care, loyalty, and obedience. However, these duties are not a board’s sole responsibility. The board of directors must also provide foresight, oversight, and insight for their nonprofit to maintain the mission. This can often include managing and approving staffing and fundraising. By being so vital to the nonprofit, one should consider each potential member carefully and truly analyze what a potential member can add to the nonprofit and its mission. In doing so and choosing the best members possible, a nonprofit can succeed, often far beyond what one dreams.

For more advice, and guides on how to make the most of your nonprofit board, check out our article about Nonprofit Board Roles and Responsibilities. At Nonprofit Megaphone our mission is to make your mission a success.

By Richard Morris