I would like to use sole member bylaws to protect my interests as the founder of a 501(c)(3) nonprofit corporation but I live in a state that requires me to have at minimum three directors. Can I modify my bylaws to secure my position as the founder when I initially serve as the President/Chairman of the Board?
This question suggests the confusion that often exists between “members” of a corporation and its “directors” or “trustees.” Legal members of a corporation (not those who are called members only because they make contributions but those who have the right to vote on governance issues) have powers analogous to those of shareholders of a business. Members normally have ultimate control over the fate and direction of the corporation and normally elect or appoint the directors. The directors serve as the governing body and are responsible for the day-to-day operations of the organization.
I believe that all states allow a single member, although New York, and perhaps others, will allow a single member only if the member is an entity. New York requires at least three members if the members are individuals. The members usually elect the directors who govern the operations, but can usually remove any director who veers far from the interests of the members. The right to remove directors is the key to the effectiveness of “sole member” bylaws in protecting the interests of the founder. And the right of the sole member to veto any amendments to the governing documents is key to retaining the power. (See Ready Reference Page: “Sole Member Bylaws Can Protect Founder of Nonprofit”)
Many states, like yours apparently, require at least three directors, although some, including Pennsylvania, allow as few as a single director if it is provided in the bylaws. Most founders want a board to help run the organization and provide diverse perspectives on its operations, however, and do not worry about a minimum requirement. Whether you can serve as Chair of the Board and a paid CEO at the same time is also a question of state law. A few states may require a separation between the paid CEO and board chair, but it is legal in many states, probably most. Even if it is legal, though, it might not be the best idea. You want to be sure that the members of your board are psychologically invested in your success.