At Chisholm Law, we understand the complexities of nonprofit incorporation, maintenance, compliance, and more. From selecting the appropriate nonprofit designation and meeting eligibility requirements to organizing all necessary documents for tax-exempt status, there are many steps and details to consider when forming a Texas nonprofit corporation.
One such detail of this includes establishing and adhering to bylaws. Every state may have different requirements regarding nonprofit bylaws, and Texas is no exception.
In this guide, we’ll answer all your questions about Texas nonprofit bylaws requirements and explain how Chisholm Law can help ensure you have everything you need.
Does Texas Require Bylaws for Nonprofit Corporations?
Texas does require bylaws for all nonprofit corporations that must be adopted at the first organizational meeting of the organization’s board of directors. However, the Texas Secretary of State doesn’t require nonprofits to file their bylaws with the state. The requirements for nonprofit bylaws are outlined in the Texas Business Organizations Code.
What are Nonprofit Bylaws?
Nonprofit bylaws in Texas serve as the guiding principles that govern the internal operations and management of your nonprofit organization. These bylaws establish the framework for how your organization will operate, outlining key aspects from the organization’s mission to its governance
structure, decision-making processes, and procedures for conducting meetings and managing finances.
While the specific requirements regarding what needs to be included in your nonprofit bylaws may vary from one state to the next, nonprofit bylaws typically include:
- Mission and Purpose: Bylaws should define the nonprofit’s mission and objectives, clarifying the causes it supports and the methods it will use to achieve its goals.
- Governance Structure: Bylaws should outline the organization’s leadership structure, including the roles and responsibilities of the board of directors, officers, and committees. They specify how board members are elected, their terms of service, and the procedures for removing or replacing board members.
- Meeting Procedures: Bylaws should establish guidelines for conducting board meetings, including how meetings are called as well as the procedures for voting on various matters that may arise throughout the lifecycle of the organization.
- Financial Management: Bylaws should list the procedures for managing your organization’s finances, including budgeting, accounting, and financial reporting requirements. They may also specify the authorization required for certain financial transactions. These details can come in handy when it comes to compliance and maintaining your nonprofit status.
- Conflict-of-Interest Policy: Bylaws also typically include a conflict-of-interest policy, outlining procedures for disclosing and managing conflicts of interest among board members and officers.
- Amendment Procedures: One of the most important features of bylaws is they generally outline the procedures for amending the bylaws themselves, specifying the process for proposing, reviewing, voting on, and adopting amendments.
Why are Bylaws Important for Texas Nonprofits?
Bylaws serve as the cornerstone of governance and operational framework for any organization, offering a roadmap of activities and so much more. You can think of bylaws as your Texas nonprofit’s rules, regulations, and code of conduct, so set those expectations for board members and the organization as a whole from the very beginning.
Bylaws can be amended (or changed) later through a voting process. This process itself can be detailed within the bylaws, providing a clear roadmap for future updates.
Additional reasons why you should consider writing bylaws for your Texas nonprofit include:
- Designate Roles: Bylaws outline the leadership hierarchy, including the roles and responsibilities of the board of directors. This transparent system fosters trust and accountability.
- Ensure Operational Transparency: Bylaws detail procedures for meetings, voting, and financial management, promoting transparency among stakeholders.
- Mitigate Legal Risks: Bylaws serve as a legal document verifying your nonprofit’s legitimacy, protecting it from potential legal disputes, and ensuring compliance with state regulations. Adhering to bylaws can also help in securing Texas state tax exemptions.
- Facilitate Decision-Making: Bylaws provide a structured framework for decision-making processes, ensuring fairness and efficiency in your organization’s operations.
- Demonstrate Credibility: Bylaws showcase professionalism and transparency, instilling confidence in donors and collaborators who want to read up on your organization’s mission and goals.
- Guide Operational Processes: Bylaws establish a framework for conducting meetings, managing finances, and resolving conflicts, promoting order and efficiency.
- Protect Your Organization: Bylaws serve as a legal reference point, providing clarity in case of disputes and mitigating potential legal issues.
If there are ever any questions, disagreements, or uncertainty regarding procedures at your Texas nonprofit, you can always refer to these bylaws
What Happens if a Nonprofit in Texas Does Not Follow its Bylaws?
Though the Secretary of State does not maintain Texas bylaws, it does not mean your nonprofit is automatically exempt from submitting them altogether. Any nonprofits that are required to publicize them for Internal Revenue Service (IRS) tax-exempt status must adhere to whichever bylaws they’ve presented to the IRS. Otherwise, you may risk:
- Loss of Tax-Exempt Status: Breaching bylaws may jeopardize your organization’s tax-exempt status with the IRS, leading to financial implications. The IRS requires adherence to bylaws for maintaining tax-exempt status.
- Legal Challenges: Deviations from bylaws can result in lawsuits from stakeholders or legal entities, potentially damaging the organization’s reputation.
- Loss of Trust: Consistently flouting bylaws erodes trust from donors and the public, making it challenging to secure funding and support.
- Difficulty Amending Bylaws: Bylaws help to maintain compliance. Without them, you may complicate future amendments, hindering the organization’s adaptability.
Want to learn more? Explore all of our nonprofit formation services:
Why You Should Work with a Nonprofit Attorney to Create Bylaws in Texas
If you ultimately decide to create your Texas nonprofit bylaws, then it may be worth working with an attorney to get the job done. Here are just a few reasons why:
- Experience in Nonprofit Law: Having a legal team behind you ensures compliance with Texas regulations and IRS requirements.
- Future-Proofing Your Bylaws: Attorneys can draft adaptable bylaws to accommodate organizational growth and changes.
- Time and Resources Saved: Developing clear and comprehensive bylaws is essential for any nonprofit organization.
- Peace of Mind: Knowing your bylaws are legally sound allows you to focus on your organization’s goals.
While not technically required by the state of Texas, bylaws serve as the cornerstone of your nonprofit organization's governance and ensure compliance with IRS regulations. To ensure their effectiveness, we recommend working with a nonprofit law attorney during the drafting
process. This collaboration brings you the peace of mind that comes with having a legally sound document safeguarding your organization's operations and decision-making processes.
Get Help with Your Nonprofit Bylaws Today
Making sure you have drafted thorough bylaws without leaving out anything important can be a challenge. Thankfully, Chisholm Law will ensure that your Texas nonprofit bylaws comply with all legal requirements set out by the IRS.
Schedule a consultation with Chisholm Law to receive personalized guidance and support tailored to your organization's needs.
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