Q: Is a board of directors necessary for a 501(c)(3) agency?
If an operating agency has a 501(c)(3) tax-exempt status, is it necessary to establish and maintain a board of directors, or can it continue operating without one?
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A:
Yes, if your agency has 501(c)(3) tax-exempt status in New York, it is required to have a board of directors. Both federal IRS rules and New York state nonprofit law mandate that tax-exempt nonprofit organizations be governed by a board. The board is responsible for overseeing the organization’s activities, ensuring compliance, and making key decisions about finances and operations.
In New York, the law requires at least three directors who are not related to each other. These directors have fiduciary duties to act in the best interests of the organization and are essential for maintaining good standing with both the IRS and the New York Department of State. Operating without a board could result in legal and tax-related issues, including the risk of losing your tax-exempt status.
Even if your organization is small or managed day-to-day by one person, having an active board is part of the structure that ensures transparency and accountability. You don’t need a large board, but it does need to exist and fulfill its legal responsibilities. It’s a good idea to meet regularly, keep minutes, and document decisions to stay compliant.
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