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Non Profits: The Three Duties

September 29, 2018

Some general basics to keeping your nonprofit legally squeaky clean!

 

Disclaimer: The following information does NOT constitute legal advice and is only for general educational purposes.  Each situation is different and specific legal issues usually require additional research and investigation, so do not rely on this article to address a particular legal issue; use this as a starting point to gain a general understanding.

 

Introduction: The Three Duties

 

Non Profits have many legal requirements, but there are three basic duties: Care, Loyalty and Obedience. If you stick to these, you'll avoid SO many problems.

 

1.  Duty of Care

 

The Duty of Care means that board members, officers and key personnel need to carry on their duties in good faith and with the care that an ordinarily prudent person in a similar position would exercise (Duty of Care). So, how do you do this? The people running the nonprofit need to pay attention, hold regular meetings, take minutes, know what's on the agenda before you come to a meeting, and discuss the agenda at the meeting,before you vote on anything. Read contracts before you sign them for the nonprofit, learn all you can about your nonprofit. Finally, you are allowed to talk to professionals such as accountants and lawyers to obtain any knowledge you don't have.

 

2.  Duty of Loyalty

 

The Duty of Loyalty requires that you avoid both ACTUAL and APPARENT Conflicts of Interest. What's a COI? It means avoid anything that benefits you or your pet projects and people at the expense of your nonprofit. What's the difference between an "actual" and "apparent" COI? An actual one is a conflict is real time that is clear cut. For instance, if you manufacture widgets, and you're a board member on a nonprofit that needs widgets, if you sell your own widgets to the nonprofit your in, that's an actual COI and needs to be addressed. An apparent COI is a bit more gray - for instance, if your nonprofit is helping another nonprofit you're on, it's not necessarily a COI, but could be.

 

3. Duty of Obedience

 

The Duty of Obedience means you need to follow your nonprofit's mission. This means, if your nonprofit is raising money to explore outer space, then probably helping Earth's oceans, as lovely as that is, could be out of your mission. On the other hand, if your nonprofit is dedicated to growing new forests, then helping wildlife is probably ok.

 

Conclusion

 

There are many other duties and requirements, but if you follow these rules, you'll stay out of most trouble and be very successful! Remember, "do well, while doing good!"

 

For more information, read my complete article:

https://www.lanerlegal.com/single-post/2016/07/08/NonProfit-Nuances-The-Three-Duties-Care-Loyalty-and-Obedience

 

 

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