Key Takeaways

  • A nonprofit charter (also known as articles of incorporation) establishes a nonprofit’s legal existence and outlines core information such as name, purpose, and structure.
  • Bylaws serve as the internal operating rules, detailing governance practices, meeting protocols, and member responsibilities.
  • For nonprofits, the charter is required for incorporation and obtaining tax-exempt status, while bylaws are essential for day-to-day governance.
  • A poorly written charter can result in legal conflicts or issues with the IRS, while outdated bylaws can hinder operational efficiency.
  • Some nonprofits also adopt constitutions or committee charters for specific governance functions, though these are not legally required.

Corporate charter and bylaws are two documents: namely the articles of incorporation and the insider regulations for the daily running of a corporation, both of which are required by the state for a corporation to get incorporated.

Charter vs. Bylaws

A charter is a legal document, which is created for a profit or nonprofit organization. It is often called “articles of incorporation,” and makes up the essence of the organization as a legal entity. The office of the secretary of state of the home state of an organization must be the authority to receive, process, and approve the organization's charter.

Bylaws are also legal documents that define the internal structure and guidelines of an organization. In other words, they create the framework for the governance of the inner workings and daily operations of the organization. Bylaws and charters play different roles in the running of an organization. Therefore, they're made of different components. The corporate formation procedure is incomplete until the company's bylaws are adopted, in some jurisdictions.

Components of a Charter

A charter has to include the organization's name and location. It also has to indicate if the organization is a profit or nonprofit organization. Furthermore, the charter describes the organization's board of directors and the structure of ownership of the organization. A profit organization's articles of incorporation (or charter) include the classes, number, and par value of authorized shares. The company's registered agent's name and address ought to be included as well.

Components of Bylaws

A company's bylaws are normally adopted by its board of directors at its foremost meeting. Bylaws are customized to suit the needs of a particular organization. However, all bylaws have certain standard features in common. Bylaws spell out the times and venues for the meetings of the company's board of directors and shareholders. Bylaws also provide the rules for the organized operations of the company.

For instance, they spell out the requirements for shareholders to vote when resolving disputes. State laws normally allow companies the freedom to draft their bylaws. For instance, Delaware says companies can write whatever they choose as their bylaws, provided they don't conflict with the laws of the state and the information in their other corporate articles.

Bylaws sometimes contain far more detail than charters. Some of the subjects covered by bylaws are as follows:

  • How should corporate directors be selected?
  • How should a corporate director be removed?
  • How should board meetings and shareholder meetings hold?
  • What are the obligations of corporate personnel, such as the CFO or the CEO?
  • How should officers and directors be paid?
  • How should executive decisions be made?

Bylaws can be as voluminous or as sparse as a company's board of directors chooses to make them.

Duplication

Some companies avoid duplication by not including what's covered in their articles in their bylaws. If any change occurs, duplicate information will constitute more work because they'll have to be updated as well.

Tax Exemptions

For nonprofit organizations that are looking to obtain tax exemption from the state and federal governments, incorporation is required, and the process of incorporation involves writing an organizational charter. Typically, the charter of an organization is written by an attorney. Even if an attorney is a member of an organization's board of directors, its charter is ideally prepared by the organization's appointed attorney who's usually a different person.

On the other hand, bylaws are written by the board of directors. Bylaws must be written to align with the charter. However, the opposite isn't true. Charters are generic, while bylaws are more particular. Since a charter is a pivot on which an organization's tax exemption depends, it has to be free of any hint of conflict of interest.

More on Charters and Bylaws

Whenever a conflict arises between bylaws and a charter, the charter wins. That's because the charter pulls more legal weight than the bylaws, which are generally drafted with less statutory guidance. Besides, since bylaws are usually made with greater legal flexibility, they're easier to amend than a charter.

For nonprofit organizations, when issues of bylaws versus charters arise, they're usually about which should be drafted before the other and never about whether they're both necessary. In every state, a nonprofit organization is required to have bylaws.

When bylaws are changed by a nonprofit organization and the changes result in a conflict, a court can resolve the conflict by interpreting the organization's charter. Therefore, a poorly drafted charter can get an organization in trouble.

What Is a Nonprofit Charter?

A nonprofit charter—often referred to as the articles of incorporation—is the foundational legal document filed with the state to form a nonprofit corporation. It formally establishes the entity’s existence and is typically required to obtain tax-exempt status under IRS rules. The charter sets forth critical information such as:

  • The nonprofit’s official name
  • Its legal address
  • The purpose or mission of the organization
  • Names of the incorporators and initial directors
  • Whether the organization will have members
  • A clause stating that the organization is not-for-profit
  • A dissolution clause, explaining how remaining assets will be distributed upon dissolution

Each state has its own requirements, and the terminology may vary (e.g., some states use "articles of incorporation" while others accept the term "charter"). Regardless of the name, this document is legally binding and public.

Constitution vs. Charter

Nonprofits sometimes refer to a “constitution,” especially those with religious or membership-based origins. However, in most U.S. jurisdictions, a constitution is not a legally required document for nonprofit formation. The legally recognized document is the nonprofit charter. While a constitution may serve an organizational or cultural purpose within a nonprofit, it does not replace the charter or bylaws and generally holds no legal authority unless incorporated into the bylaws.

Committee Charters in Nonprofits

In addition to organizational charters, many nonprofits adopt committee charters to govern the operations of specific committees, such as finance, audit, or governance committees. These are internal governance tools—not filed with the state—that define:

  • The purpose and scope of the committee
  • Membership requirements and qualifications
  • Roles and responsibilities of committee members
  • Meeting frequency and quorum requirements
  • Reporting obligations to the board

A well-crafted committee charter ensures clarity, accountability, and alignment with the organization’s broader mission and bylaws. It also helps committees operate effectively and independently, especially in larger organizations with multiple governance layers.

Frequently Asked Questions

1. What is the difference between a nonprofit charter and bylaws? The nonprofit charter (or articles of incorporation) is filed with the state to create the legal entity. Bylaws, on the other hand, are internal rules adopted by the organization to govern its operations.

2. Is a nonprofit charter the same as a constitution? No. A constitution may be used by some nonprofits for cultural or traditional reasons, but it is not a legal substitute for a charter. The charter is the official legal document required for incorporation.

3. Do I need a nonprofit charter to apply for tax-exempt status? Yes. The IRS requires a properly drafted charter to determine eligibility for 501(c)(3) tax-exempt status. The document must include specific language about the organization’s purpose and dissolution.

4. Can the bylaws override the charter? No. If there is a conflict between the bylaws and the charter, the charter takes precedence because it is filed with the state and carries greater legal authority.

5. What is a committee charter in a nonprofit? A committee charter outlines the purpose, responsibilities, and procedures for a specific board committee. It helps ensure the committee operates in alignment with the organization's mission and governance practices.

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