WEBVTT

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Hello, this is Eliza Kragh here today with Mark Apodaca, who is an expert Professional Registered Parliamentarian.

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We have an exciting topic to discuss today and will cover governance documents.

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Hi Mark, thank you for your time. Please share about governance documents today.

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I will be showing a triangle and will name each part of it, then take it down and discuss it in detail.

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Beautiful!

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These documents apply to corporations, non-profits, partnership businesses, and some government entities and universities.

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They all have governance documents.

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For today, I am focusing specifically on non-profit organizations.

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First, you can see the top of the pyramid.

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Laws or statutes - state level.

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Next is Articles of Incorporation,

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then Bylaws,

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Special Rules of Order, Rules of Order, Standing Rules, and Policies and Procedures,

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and last one on the bottom are Customs.

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Laws at the top are the most important and have the highest authority.

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I'm going to stop sharing now.

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Okay.

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Every state has its own non-profit laws.

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They are not the same and they're all different.

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What is New Mexico state law for non-profits is not the same as MN or MT or KS.

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Each has their own with their own legislative passing laws.

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These are the most authoritative laws.

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The second one is the Articles of Incorporation.

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If you want to set up a 501(c)(3) non-profit organization, you must file Articles of Incorporation with the Secretary of State.

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Most states around the country require it to be filed with the Secretary of State, but some have exceptions.

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In the Articles of Incorporation, you identify the name of the organization, the mission and purpose, and who the directors of the organization are.

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Most of the time you will name three directors.

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Directors do not have to be president or vice president.

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Directors can be anyone.

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An important point when filing Articles of Incorporation: you must have a paragraph with specific IRS clauses.

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The reason is when you file a 501(c)(3) application, the IRS requires a copy of the AOI and bylaws.

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If it does not show two important clauses, then the IRS will not accept your application for 501(c)(3).

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So make sure to include these clauses.

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Often times, the state will give a template to fill out, but that is not good enough

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because many people use that template, submit it, and get denied because it doesn't include what the IRS requires.

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So when you file AOI, make sure those clauses are included.

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With the AOI, you send it to the Secretary of State who will check to see if the AOI and state law are in compliance with no contradictions between them.

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If the Secretary of State finds that a clause conflicts with state law,

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they will deny and send it back saying they do not accept it because the state law says otherwise.

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This means you need to change that and ensure nothing conflicts with state law to get approval.

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So AOI is the second highest authority under state law.

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The third one is Bylaws.

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The Bylaws cannot conflict with the AOI and cannot conflict with the state law either.

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The fourth one is Special Rules of Order.

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I will give you one good example.

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You go to a business meeting as a member and someone makes a motion, it's seconded, and debate is open.

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Each person can debate for 10 minutes.

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10 minutes, two times.

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That means I can debate in support, then someone debates against, and each time is 10 minutes.

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If no one else new wants to speak in support, then the same person can speak again a second time for 10 minutes.

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Suppose you had 200 members in a meeting and each has 10 minutes...

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Meeting drags on.

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It drags on all night and all day.

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So Special Rules of Order must be passed by the members.

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If you want to limit debate to 3 minutes per person, one time each for support and against, alternating, and then call for a vote...

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That is called Special Rules because it will override Robert's Rules of Order.

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If you do not have that, then you follow RONR.

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Then the next authority we have is Rules of Order.

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That can be Robert's Rules of Order, Newly Revised.

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12th edition.

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12th edition,

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which is this book.

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If your bylaws state that RONR is your parliamentary authority, then you need to follow the book.

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Some organizations, though not many, use a different book.

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Standard Code of Parliamentary Procedure.

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Other organizations use different parliamentary authorities.

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Yes, this is from the American Institute of Parliamentarians.

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That is different from the National Association of Parliamentarians.

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Many parliamentarians know both books.

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I am a member of both organizations.

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Some parliamentarians are certified in both.

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Again, the parliamentarian gets a copy of the bylaws and reads it,

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and if it states RONR, they follow it.

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If it states AIP with the Standard Code of Parliamentary Procedure, then you follow that.

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Sometimes organizations will use the Standard Code for Rules of Order that will supersede RONR, which can happen.

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The next one is Standing Rules, Policies, and Procedures,

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investment policies, finance policy, etc.

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At that level, do not put them in the bylaws.

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The bylaws explain the structure of the organization.

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Policies and procedures need to be separate documents.

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The last one is Customs.

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It is something that has been used for many years.

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But again, if you go to a business meeting and find a custom that conflicts with RONR,

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RONR beats customs and you must follow RONR,

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except sometimes people will elevate customs into Special Rules of Order.

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It happens.

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I want to clarify.

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Your bylaws are a legal document - a legal document.

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I've been in court where a judge asks me to be an expert witness.

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I have to explain what the bylaws say and interpret them so the judge can see all perspectives because it is a legal document.

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Another good example related to the triangle:

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One organization established in their AOI that they would have members,

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then when they created their bylaws, they also included members, just like the AOI.

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Years later, the board decided they did not want members anymore.

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So they amended the bylaws and removed members, but the AOI was never amended.

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So they were in conflict.

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That caused a conflict.

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Some members notified me that this couldn't be done because they never voted on removing members.

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I asked to see the minutes.

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That is why minutes are very important because they are a legal document too.

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They could not provide me with any minutes.

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There was no record of members voting and approving the removal of members.

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That means the AOI was more authoritative than the bylaws,

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which means the organization had to revert to having members because there was no record in the minutes that members voted and approved the change.

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Again, if it is not in the meeting minutes, then it never happened.

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Right.

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That is the bottom line.

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It is important that members of any organization, whether a state agency or an affiliate,

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understand these important governance documents.

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Another interesting example is when COVID happened, which had a significant impact.

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I went to an annual meeting for an organization and was approached about whether their Zoom meeting was valid.

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Why?

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Because their bylaws were silent about having meetings through video conferencing.

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But their state law already allowed it.

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They had included this provision before COVID, so the meeting was legally permitted.

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Another state did not have it in their laws.

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Robert's Rules of Order states that if video conferencing is not in the bylaws, you cannot have one.

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It must be in the bylaws, so many legislators across the US started adding amendments to their state laws to include video conferencing.

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So they could proceed with their meetings.

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But that one state already had it in there before COVID.

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There are variations in how to approach this. When I'm asked to serve as parliamentarian,

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I have to find out which state the organization is incorporated in,

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and if they provide that information, I will look up the non-profit laws in that state to read them.

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I will ask for a copy of the AOI, though many organizations don't keep a copy.

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That is an important document.

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If I receive these documents, I will review them to see if there are any conflicts.

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I review the bylaws, review any other rules, standing rules, etc.

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I must see the whole picture before my assignment to work as a parliamentarian.

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All governance documents should be there, minutes too.

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I make sure everything is available and check if there's anything from previous business meetings that must be added to the bylaws.

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I've encountered one or two organizations that did not keep good meeting minutes.

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There were many amendments to the bylaws going back 10 or 12 years, but no record in the minutes.

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That means the current bylaws are void because there is no record of the amendments in the minutes.

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You have to go back to the bylaws from 12 years ago and follow those.

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I have seen many organizations that don't realize the importance of these valuable documents.

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So that is my message about these documents.

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I would appreciate some clarification. Now that you've mentioned each state needs to review their state laws,

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one good example would be that each state determines how often a non-profit must host a business meeting.

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Some require meetings every year, some every two years.

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Is that why it's important to review the state laws?

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Yes, if your state law says you must have an annual meeting, that means every year.

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If you do not follow that, you are breaking the law.

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Okay.

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But if your state law says it's left up to the organization to decide depending on their bylaws,

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then the bylaws can state every two years and that's acceptable.

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But if state law clearly states that an annual meeting means every year, you need to call for a meeting annually.

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Okay. So again, that's why it's important to review the laws.

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Now with AOI, you mentioned that it's really important to include the mission of the organization,

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IRS information...

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Clauses.

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Clauses must be in there.

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The specific code.

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And must have a board of directors. All that information needs to be included in the AOI. Is that correct?

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In the past, they would name the positions of board members.

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Now that's not the case anymore; it's in the bylaws.

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So if your state law says you must have the president, vice president, secretary, and treasurer, then it's required.

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If your bylaws have president, vice president, and secretary/treasurer combined,

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the AOI and bylaws are in conflict.

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Conflict.

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because there are two separate positions in AOI and it's one position in the bylaws.

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Today's AOI would not typically include the positions.

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In the past they did, but not anymore,

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at least in the states I've worked with.

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But it is important to include the IRS clauses.

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I used a template the first time, sent it to the Secretary of State, and it was approved with no problems.

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I got copies of the bylaws and AOI, sent them to the IRS for their review and approval for 501(c)(3).

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They did not accept it and said I must insert specific clauses, so I added them to the AOI.

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I sent it back and it was approved.

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Okay.

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Just put in the IRS code.

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When an organization wants to approve AOI, what kind of vote is required for that to happen?

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AOI?

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(Nods in affirmation)

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I have experienced two different approaches.

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One way is a group gets together and they want to establish a non-profit organization.

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They vote as a group, of course, by majority.

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Normally all agree that they want the organization.

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Then once they all agree, vote, and pass, they fill out the AOI application to submit it.

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The other approach that I have seen is when an organization

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finds three people that want to establish a non-profit.

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Those three, since state law requires three.

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So they apply for AOI with their three names, get approved, and announce to the community that they've established a new non-profit and will have a general meeting.

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The purpose is to develop the mission, vision, values, and bylaws together.

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People that want to join become members, pay dues, and start forward progress. Then that group develops everything with the bylaws.

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Then you have everything you need to send to the IRS to submit for 501(c)(3).

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So I have seen both approaches.

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Either way.

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What if the organization wants to amend their AOI? What kind of vote is required for that process?

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Two-thirds (2/3).

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With previous notice?

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Previous notice with 2/3 or majority of the whole membership.

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Either one of those.

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If you amend the AOI, you have to amend the bylaws if necessary.

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Because they cannot conflict.

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Both.

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Okay, so now the next document are the bylaws.

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The bylaws will explain the structure of the organization, and expand on the responsibilities and duties of each board position.

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For the bylaws, what is the voting process to accept them?

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For the first time or to amend?

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For the first time and then to amend.

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For the first time, it will be majority of the votes.

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Then to amend is two-thirds unless your bylaws say otherwise.

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One organization required eighty (80) percent approval to amend.

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Another organization required one hundred (100) percent, which means if one person voted against it, the whole proposal fails.

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Normally two-thirds (2/3) according to Robert's Rules of Order is required to amend.

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At the beginning, the members review it which requires majority, and then later change it to two-thirds (2/3).

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You're right that the bylaws explain the structure, the responsibilities of the board and officers.

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Some bylaws, for example, will list the specific duties for the role of Secretary and that's it.

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Some organizations have a list in bylaws but need to go to the policies for a detailed list of responsibilities.

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So the policy is separate from the bylaws.

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The function and responsibilities of the Secretary in the bylaws might state to pass out the minutes,

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keep a record of the names of all the members,

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and to make sure that the minutes be posted on the web or distributed to all members.

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If your bylaws say the minutes need to be sent by mail to all members,

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then if you post on the web and not send it out, you violate the bylaws.

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So the clause in the bylaws must be specific, like "the minutes will be posted on the web within 10 days after the board meeting."

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It must be specific and not broad.

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I have seen many bylaws that are very vague and they cause a lot of problems and mistakes in interpretation.

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I have seen some bylaws with 30 to 40 pages with many of them mixing policy and procedures together.

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You want to separate them, as shown in the triangle with the bylaws, and move policies down to their proper level.

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Another important thing to include in the bylaws would be the membership dues - how much it costs?

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And also, if the members want to amend the membership dues, that requires a two-thirds (2/3) vote?

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Bylaws, again, define the structure, with different categories:

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regular members, senior citizens, hearing members, and so on - all those categories.

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The fees and dues are in the standing rules.

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In the standing rules and not in the bylaws?

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No, the standing rules will list them.

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I look at the National Association of Parliamentarians and their bylaws are silent on dues.

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The standing rules will have it since the board themselves can adjust the dues.

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So if during a business meeting, a motion to increase the dues by $5 is passed, it will go into the standing rules and modify it.

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The bylaws stay the same.

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That is a very common thing that I've noticed in various state associations - their bylaws include their member dues.

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So that was good to clarify.

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It says they will pay their member dues, but how much is in the standing rules.

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Thank you for the clarification.

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You also mentioned that if you want to vote electronically, you must include that in the bylaws itself.

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If it is not in the bylaws, then you cannot.

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Paper voting by ballot ensures privacy so people will not know who voted for what.

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If the bylaws state you must use ballots, you