Nonprofit Help Desk FAQ: Membership in Nonprofit Organizations
In my decades of working with Maine nonprofits, I have come across all manner of questions and confusion concerning membership. Do we have members? Should we have members? What does it mean to have members? Can we switch from a membership organization to a non-membership organization?
The purpose of this post is:
- To clarify the difference between casual usage of the word “member” and the legal definition
- To help nonprofits determine if formal membership is appropriate for their organizations
A Key Distinction
One key distinction to appreciate from the outset is that the term “member” has a specific definition under the Maine Nonprofit Corporation Act, as well as a more colloquial usage that may be different for certain organizations. Under the Nonprofit Corporation Act, a member is a person (either an individual or an entity) “having membership rights… in accordance with the provisions of its articles of incorporation or bylaws.” Thus, to determine if an organization has “formal members,” as I shall call them, one consults the Articles of Incorporation and Bylaws. Hopefully, these two documents are in sync on the issue, although occasionally an organization’s Articles will include formal members but the Bylaws will not, or vice versa. (Also note that “members” are different from “directors.” A Maine nonprofit corporation must always have a board comprised of at least three directors. But it may or may not have formal members. Creating some confusion, a director is sometimes referred to as a “board member,” but this is a casual usage and is different from a formal member of the corporation.)
Why Does it Matter?
For an existing organization, it is critical to know whether it has formal members because the Maine Nonprofit Corporation Act grants them certain rights, such as access to records and the calling of meetings. Typically, but not always, Articles and Bylaws give formal members the right to elect board directors. Occasionally, formal members also have rights to approve certain key decisions. Furthermore, the Maine Nonprofit Corporation Act requires a corporation to keep accurate formal membership records, which is essential as a practical matter because in the event of a membership vote, it is necessary to know how many members constitute a quorum and/or a majority. These calculations become impossible if no one can figure out how many members exist in the first place.
Is a Membership Structure Right for Your Organization?
As a general matter, when I am helping a nonprofit corporation start up from scratch I usually recommend not establishing formal members unless there is a good reason to do so. For example, certain founders want to purposefully cultivate a grassroots base of supporters who will play a role in decision making; formal membership makes sense in this context. But barring this exceptional circumstance, as a matter of simplicity, the fewer moving parts to an organization, the lighter the administrative burden and the less of a chance that something can go wrong. As a non-membership organization, there are only two key arms to the organization, the board and the staff. The principal arguments in favor of formal membership are that members make an organization more democratic and broad-based, and provide an additional check on a potential rogue board. Although this argument has merit in limited contexts, I have generally found that having formal members adds a third arm whose advantages often do not outweigh the drawbacks.
If your organization does have formal members, it’s important to make sure that the Articles and Bylaws provisions around eligibility, meetings, and the scope of decision making are crystal clear. I have seen a lot of confusing and unhelpful membership provisions over the years. And although lawsuits against nonprofits are quite rare, in the instances where they have occurred, muddled membership rights are often the source of the trouble.
When Provisions and Practice Don't Match
It is not uncommon for an organization to have been established with formal members years ago, without much thought given to the matter. Often, in the hustle and bustle of things, the membership aspect has withered away and the organization is no longer following its burdensome, albeit well-intentioned, Articles and Bylaws provisions on membership.
A Board in this position can do one of three things:
- It can amend the Articles and Bylaws so as to become a non-membership organization (although usually this step requires the vote of the members, so it can be easier said than done).
- It can change its practices so as to start complying with the membership provisions.
- A third and perilous option is to ignore the issue, and hope no one notices or cares.
"Informal" Members
Finally, a few closing words on “informal members,” i.e., individuals who are called “members” but do not have any decision-making or other rights under the Articles or Bylaws. This can be an effective fundraising practice, and is used by many museums and other institutions seeking to establish a sense of identity and continuity among its supporters. For example, you might join as a member of the Portland Museum of Art, affording you program discounts and a sense of pride in supporting the organization. But that doesn’t mean you get to show up at the next Board meeting and decide on whether to purchase a Renoir or a Rothko.
The distinction between “formal members” and “informal members” should be kept clear, so as to avoid confusion internally or with those individuals.
This post is part of a series to enhance understanding of the rules and regulations governing Maine’s nonprofit organizations. MANP contracted with attorney Rob Levin (www.roblevin.net), to draft this post, which is provided solely for informational purposes, and no one should rely on it as legal advice. You are strongly encouraged to consult a qualified attorney for advice on any particular situation.