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May founder pass nonprofit to new board?

Your Legal Questions Answered

May founder pass nonprofit to new board?

A founder and director of a small 501(c)(3) corporation will be "dissolving" the entity after 25 years, but would like to pass on the name and nonprofit status to a new slate of directors who share a similar mission. Are there legal matters to contend with in this situation, or is it a simple matter of electing a new board?

From a legal perspective, this is a simple transaction.  The founder and current director select a new group of directors to carry on the mission and then resign to enjoy their new retirement.  There is no “dissolution,” no change of name or exempt status, no outward change that would necessarily affect the other stakeholders in the organization. 

The psychological issue for the founder and the other director is whether they are willing to let go of “their” organization.  Do they need to stay around as “emeritus” directors, with their names on the letterhead and perhaps even status as continuing directors or advisory board members?  Do they leave totally when they get their proverbial gold watches?  Do they continue to help with fundraising?  Do they have different psychological needs that the new board has to satisfy differently?

There are no absolutely right or wrong answers to these questions.  But understanding the needs and desires of those leaving the organization can help make the transition more likely to be successful.

Tuesday, September 19, 2023

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