Drafting your California nonprofit’s bylaws and conflict of interest policy

Bylaws provide a framework for how your California nonprofit will be governed and outline key provisions such as board composition, officer roles, decision-making processes, and membership requirements. A conflict of interest policy sets forth guidelines for identifying, disclosing, and managing situations where board members, officers, or key individuals may have personal or financial interests that could potentially interfere with their ability to act in the best interests of the organization. Both of these legal documents are essential governance tools that must be drafted with care. These important legal documents help maintain your California nonprofit’s integrity, promote ethical behavior, and safeguard your organization’s mission and interests. To help you get started, we have broken this process down into three easy-to-follow steps.

STEP 1

Choose your nonprofit’s officers

While it is possible to form a California nonprofit on your own, consulting with an attorney or legal professional experienced in nonprofit law is advisable to ensure compliance with all relevant requirements.

The expert attorneys at Ambika Law, PC are ready to help.

In a nonprofit organization, officers are individuals who hold specific leadership roles within the organization's governing structure. These roles are essential for managing the organization's day-to-day operations, implementing strategic decisions, and ensuring that the organization functions effectively in pursuit of its mission. 

California law requires nonprofits to have three officers in the following roles:

• A president or chairperson to lead the board of directors and oversee the nonprofit’s operations

  A secretary to maintain accurate records, documentation, and communication within the nonprofit

  A treasurer or CFO to ensure the organization's fiscal health and stability while maintaining transparency and compliance with financial regulations

Every nonprofit organization has different needs and you may choose to select additional officers to serve in your organization beyond those required by California law. Working with an attorney experienced in California nonprofit law will help ensure your organization is structured for lasting success and the right individuals are placed into officer roles.

STEP 2

Craft your bylaws

Bylaws are a set of rules and regulations that govern the internal operations and management of your California nonprofit by establishing the framework for how the organization will function. This important legal document codifies your nonprofit’s structure, decision-making processes, and operating procedures. Bylaws serve as your organization's primary governing document and are typically established at its inception or during its early stages. Public Counsel provides sample annotated bylaws that can provide an excellent foundation for crafting your own bylaws.

Your organization’s bylaws should include the following:

• The specific powers assigned to the nonprofit’s board of directors and individuals serving as directors

• How the nonprofit’s directors are selected

• How the nonprofit’s board of directors may take an action

• How the nonprofit’s board meetings are called, noticed, held, and conducted

• The nonprofit’s officers, as well as their duties and responsibilities

• Whether the nonprofit has voting members or is a non-membership corporation

• What committees (both board authorized and advisory) will help fulfill your nonprofit’s mission

• The level of indemnification provided by the corporation to protect its directors, officers, employees, and other agents

• Any financial or other reports that will be required by the nonprofit’s board, directors, or other executives

Bylaws are legally binding and must be followed by your nonprofit’s board of directors, members, and officers. It is important that these legal documents are drafted with care and consideration for your nonprofit’s long-term goals and needs. Working with an attorney experienced in California nonprofit law will help ensure your nonprofit is successful and compliant with all legal requirements.

STEP 3

Draft your conflict of interest policy

A conflict of interest policy is a set of guidelines and procedures that helps identify, disclose, and manage situations where board members, officers, or key staff may have personal, financial, or other interests that could potentially influence their decision-making or compromise your nonprofit's mission and integrity. The primary goal of a conflict of interest policy is to ensure that leaders act in the organization's best interest and avoid any conflicts that could undermine their fiduciary duty.

To draft your California nonprofit’s conflict of interest policy, take the following steps:

Review the National Council of Nonprofits ‘Conflicts of Interest’ guide for best-practices and sample policies

Draft your organization’s conflict of interest policy, ensuring the policy complies with all local, state and Federal requirements

Review the instructions and submit IRS Form 1023

A clear and well-defined conflict of interest policy can help your California nonprofit promote transparency, accountability, and ethical behavior among its leadership. Working with an attorney experienced in California nonprofit law will ensure that your organization’s conflict of interest policy is drafted to best protect your California nonprofit and its legacy from harm.