Goshen, IN asked in Business Law for Indiana

Q: Is your llc prohibited to work with a nonprofit if you sit on their board?

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1 Lawyer Answer
Michael Ray Smith
Michael Ray Smith
  • Indianapolis, IN
  • Licensed in Indiana

A: Not necessarily, but it is an area of concern. It creates a conflict of interest on the board of directors that must be handled appropriately. The conflict needs to be disclosed to the rest of the board, and the arrangement needs to be approved by the remaining disinterested directors or by a committee of disinterested directors. They should consider whether there are alternatives that don’t involve a conflict of interest and gather information (such as other proposals) to ensure the nonprofit corporation is paying no more than fair value. The nonprofit should have a policy in place to deal with conflicts that is similar to the IRS model policy, and it should be followed, and the organization should consider seeking legal advice.

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