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Non Profit. Magnifying glass, stationery on the office desk.The answer to that question is remarkably simple but surprising to many: No one owns a nonprofit corporation. To understand why that is so, let’s compare nonprofit corporations to for-profit or business corporations.

Business Corporations

Imagine you buy 100 shares of common stock in a corporation on the New York Stock Exchange.  Congratulations!  You’re a shareholder.  Your 100 shares of stock give you specific economic and noneconomic rights.

Compared with corporations, limited liability companies are generally low maintenance, but not entirely maintenance free. A few requirements are imposed by statute, and the operating agreement may or may not create some additional formalities that must be observed. In addition, there are good practices that, in addition to observing the required formalities, help preserve the liability shield that protects the owners’ assets from creditors of the LLCs (or the “corporate veil”). Part I addresses the statutory requirements and the types of requirements that are sometimes found in operating agreements; Part II will address some best practices.

NOTE:  This post and Part II address only the requirements and best practices related to “corporate” governance, particularly those that are relevant to preserving the corporate veil.  For any particular LLC, there may be a myriad of other legal requirements and best practices related to other areas, such as employer-employee relationships and permits or licenses that are necessary to conduct the LLC’s business, that are not addressed here.

Statutory Formalities

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Secretaries of nonprofit corporations have the sometimes unenviable and unrewarding responsibility of making sure that minutes of meetings of the board of directors are taken and maintained.  Here are some practical tips and suggestions for writing the minutes that I have accumulated over time and revised over time.  These are not hard-and-fast rules, and reasonable people may disagree with me about some or all of them.

  1. Note whether the meeting is a regular meeting or a special meeting. A regular meeting is one that is scheduled by the board.  A special meeting is one called by an officer or one or more individual directors as authorized by the articles of incorporation, bylaws, or the state statute governing nonprofit corporations.  If it is a special meeting, note who called it and how.
  2. Note the date, time, and place of the meeting to show consistency with the notice of the special meeting or with the board resolution scheduling the regular meeting.
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