Nonprofit Members: Roles, Rights, and Legal Considerations
Discover everything you need to know about nonprofit members, their roles, legal rights, and how membership structures impact governance and funding. 6 min read updated on February 18, 2025
Key Takeaways:
- Nonprofit members can have significant decision-making power, similar to shareholders in for-profit corporations, but their rights depend on the organization's structure.
- Membership structures vary, including formal voting memberships and non-voting or donor-based memberships.
- Nonprofit corporations can be board-driven or member-driven, affecting governance and operational efficiency.
- Types of membership nonprofits include trade associations, religious organizations, and social clubs, while most charities opt for a board-driven model.
- Pros and cons of nonprofit memberships include increased engagement and funding potential but also legal complexities and challenges in governance.
- Membership dues and taxes—some membership organizations may be subject to taxes on dues if they provide benefits unrelated to their core mission.
- Steps to start a nonprofit membership program include defining membership tiers, setting bylaws, and determining member benefits.
- Legal compliance—state laws regulate membership structures, requiring clear bylaws and adherence to corporate governance laws.
- Transitioning to or from a membership structure is legally complex and should be carefully considered before structuring the nonprofit.
Nonprofit corporation members have a say in any major decision the company makes. They are very similar to a business corporation's shareholders and have the right to do the following:
- Choose the corporation's directors.
- Vote on the merger, sale, or dissolution of the company.
- Make changes to bylaws and articles.
What Is a Nonprofit Corporation?
Unlike other corporations, nonprofit corporations do not have shareholders or owners. They can hire employees and pay their directors, but they do not pay dividends or issue stock.
Nonprofit corporations offer the same limited liability and asset protection features of a normal corporation. However, a nonprofit's main goal is not to make a profit. In fact, any profits made by a nonprofit organization have to go towards furthering the company's goals. They are not distributed to shareholders as dividends. The majority of a nonprofit's activities and transactions shouldn't be commercial in nature.
To qualify as a nonprofit organization under IRS rules — specifically 501(c)3 — a corporation must exist for one of the following purposes:
- Animals
- Charity
- Education
- Literature
- Religion
- Science
- Testing for public safety
- Preventing cruelty to children
- Fostering amateur sports competitions, whether international or national
Types of Nonprofit Membership Structures
Nonprofit membership structures vary based on the organization’s mission and governance preferences. The main types include:
- Voting Membership Nonprofits: Members have legal rights, including electing board members, amending bylaws, and making key decisions. Examples include trade associations and professional organizations.
- Non-Voting Membership Nonprofits: These organizations offer member benefits (such as discounts or access to services) without granting governance rights. Museums and advocacy groups commonly use this model.
- Hybrid Membership Structures: Some nonprofits allow certain members to vote while keeping others as non-voting supporters, striking a balance between engagement and efficiency.
- Donation-Based Membership Programs: Supporters pay dues to receive perks, but they do not have formal voting power. This structure is common among public media and advocacy organizations.
Each structure comes with its own set of legal and administrative considerations, requiring clearly defined bylaws to manage membership rights and responsibilities.
Do All Nonprofit Corporations Have Members?
A nonprofit does not have to have members. Unless a nonprofit corporation chooses to have a membership structure, decisions will be made by the corporation's directors. This structure is often chosen for the sake of efficiency.
When a nonprofit is first formed, most decisions will be made by its founder and board members. Over time, the corporation may begin hiring employees to oversee operations, or it may opt for a membership structure that leaves decision making up to its voting members. One of the most important decisions to make when forming a nonprofit corporation is whether the organization will be member-driven or board-driven.
Legal Requirements for Nonprofit Members
State laws and the nonprofit’s bylaws determine member rights and obligations. Key legal considerations include:
- Membership Bylaws: Nonprofits must define membership rules in their bylaws, including eligibility criteria, voting rights, and meeting requirements.
- State Compliance: Some states mandate specific membership rights, while others allow full flexibility in structuring member governance.
- Dissolution Rights: In many states, members of a nonprofit have the right to vote on dissolving the organization.
- Tax Considerations: Membership dues may be subject to taxation if benefits provided do not align with the nonprofit’s tax-exempt mission.
- Fiduciary Duties: Members in governance roles may have fiduciary responsibilities similar to board members, depending on state laws.
Failure to comply with these legal requirements can lead to disputes or loss of tax-exempt status, making it essential to consult an attorney when drafting bylaws.
Member-Driven vs. Board-Driven Structures
A nonprofit corporation can choose to be governed by a set of voting members or by a self-perpetuating board.
In a member-driven organization, members can vote on changes to the board of directors and adding or removing individuals from the board. This works well for organizations who want a democratic structure where each member has a say in what happens. The following types of nonprofits are typically member-driven since their primary goal is to serve their members:
- Chambers of commerce
- Churches
- Social clubs
- Trade associations
A board-driven organization has no members or members with limited rights. If a corporation does not have a membership structure, its board will be self-perpetuating instead of being elected by members. In this setup, board members elect their replacements themselves, and the board of directors is the highest authority in the nonprofit corporation. They will make all of the major company decisions, while day-to-day operations are overseen by officers such as a secretary, treasurer, and president. Most charities choose a board-driven structure.
It is possible for an organization to have non-voting members and still be governed by a self-perpetuating board. In this case, members may receive certain benefits in exchange for paying dues — such as free admission and gift shop discounts for becoming a member of a museum — but do not have voting rights.
Benefits of a Membership-Based Nonprofit
A membership-based nonprofit offers several advantages, including:
- Stronger Community Engagement – Members feel more invested in the organization’s mission.
- Steady Revenue Stream – Membership dues provide consistent funding.
- Democratic Decision-Making – Members have a say in major governance decisions.
- Volunteer Support – Engaged members often contribute time and expertise.
- Increased Advocacy and Outreach – Members can serve as brand ambassadors, expanding the nonprofit’s reach.
Despite these benefits, managing a large membership base requires significant administrative effort and clear governance policies to prevent conflicts.
Disadvantages of a Membership Structure
Before choosing a membership structure, nonprofit corporations should consider the potential downsides:
- Voting members have certain rights under state law that give them a lot of control over a corporation. If your corporation will have members, it is important to spell out their rights so that you don't create voting members unintentionally.
- A membership structure is difficult to undo. Once you have established members, it may be impossible to remove them without their consent.
- Voting members make governing a nonprofit more complicated. Instead of simply keeping track of board of director meetings, you will also have to maintain up-to-date rosters of voting members and records of their meetings.
- Corporations with voting members can be less stable. If you set the bar for membership too low, it can be easy for factions to develop and change a nonprofit's entire direction. All they have to do is sign up more members who agree with them until they have enough votes to see their vision through.
A highly publicized example of the last issue played out at the Sierra Club. Although most of the club's oldest supporters were against an anti-immigration agenda, the faction pushing for it nearly succeeded. Supporters were encouraged to pay their $25 so that they would be eligible to vote at the annual membership meeting. Ultimately, the attempted takeover was unsuccessful, but it was a good reminder of what can happen.
Transitioning to or From a Membership Structure
Nonprofits considering shifting to or from a membership model should be aware of key challenges:
-
Converting to a Membership Model:
- Amend bylaws to define member qualifications, rights, and voting powers.
- Register new members and establish dues or contribution expectations.
- Adjust governance structures to accommodate member involvement.
-
Transitioning Away from Membership:
- Notify existing members and obtain consent (often required by law).
- Follow state regulations to legally remove membership structures.
- Ensure continued financial support if membership dues are a primary revenue source.
Because restructuring a nonprofit’s governance model can have legal and financial implications, consulting an attorney is recommended.
Frequently Asked Questions
1. Do all nonprofits need to have members? No, many nonprofits operate with a board-only structure. Membership is optional and depends on the organization's goals and legal requirements.
2. Can nonprofit members receive financial benefits? No, nonprofit members do not receive dividends. However, they may receive perks like event discounts or exclusive access to resources.
3. What are the key differences between nonprofit members and board members? Members (if voting) elect board members and influence governance, while the board manages daily operations and strategic planning.
4. How do membership dues impact a nonprofit’s tax status? If membership dues provide benefits unrelated to the nonprofit’s mission, they may be subject to unrelated business income tax (UBIT).
5. Can a nonprofit remove a member? Yes, if bylaws outline procedures for removal, such as violations of rules or non-payment of dues. However, state laws may impose restrictions.
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