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Is Board advisory only in sole member corporation?

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Is Board advisory only in sole member corporation?

In a sole member corporation, does the Board of Directors simply serve in an advisory capacity? Where can I get a sample set of bylaws that shows how this works?

The Board of Directors of a sole member corporation has the same rights, obligations, and fiduciary duties as the board of any other nonprofit corporation; the only difference is in the way the board is selected.  Instead of being elected by a whole lot of members in a membership corporation with multiple members, such as a civic association or a state association of nonprofit organizations, or being selected by the board itself in a self-perpetuating board structure, the directors are elected by the sole member of the corporation.  Sometimes the sole member is the parent organization in a multiple-entity hospital or social service system of agencies.  Sometimes it is the founder as an individual.  In any case, the board has the full power and responsibility for the operation of the organization.

You can see some of the techniques for protecting the sole member in the Ready Reference Pages on the website. (See Ready Reference Page:  “Bylaws Function As ‘Constitution’ of Nonprofit Corporations” and "Sole Member Bylaws Can Protect Founder of Nonprofit") The bylaws in the Ready Reference Page are obviously more complex, but you will get some ideas from the sample.

I don’t recommend that you draft your own bylaws, however, unless you are a lawyer familiar with the field.  If you are structuring an organization that you would like to be your career, it’s worth a few dollars to see that it really protects your interests.

Tuesday, August 10, 2010

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