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Nonprofit Membership Organizations: Advantages, Disadvantages, Member Rights, and Washington State Statutes

Nonprofit membership corporations play a vital role in our communities by bringing like-minded individuals together to pursue shared goals and objectives. In Washington, nonprofit membership corporations are governed by the Washington Nonprofit Corporation Act (RCW 24.03A) (the “Act”), which outlines the legal framework for nonprofit corporations. Under the Act, there are two different types of nonprofit structures.  One of the structures is comprised of members; the other structure does not.  Each of these different structures have different benefits and drawbacks.  This article will delve into the world of nonprofit membership organizations, highlighting the advantages and disadvantages, member rights, and the role of current statutes in Washington.

A nonprofit’s articles of incorporation or bylaws should clearly indicate if the corporation has members or not. RCW 24.03A.315. The rights of members as well as the corporation’s duties to its members should be reflected in the nonprofit’s articles of incorporation or bylaws. RCW 24.03A.340.   RCW 24.03A.010

Statutory Member vs. Non-statutory Member

It is important to distinguish between members, as defined by the Act, and participants who may support or subscribe to the organization and its programs.  If a nonprofit is not intentionally formed as a nonprofit corporation with membership, the Act does not apply, and its “members” do not have any rights to the control of the corporation, even if the corporation calls its participants “members.” The Act only applies to a nonprofit corporation which provides for members in its articles of incorporation.  However, if the nonprofit corporation was formed before January 1, 2022, the nonprofit corporation has members only if the articles of incorporation are silent on the existence of members, the bylaws provide that there is at least one class of member and that class of member as the right to select or vote for the election of directors or delegates or to vote on at least one type of fundamental transaction for the corporation. A fundamental transactions is defined as an amendment of the articles or bylaws, merger, sale of all or substantially all of the assets, domestication, conversion, or dissolution of a nonprofit corporation. RCW 24.03A.010 (31)  Throughout the rest of this article I will refer to statutory members as “Members,” with a capital “M,” and non-statutory members as “members,” with a lowercase “m.”

What is a Statutory Member?

In Washington state, Members in nonprofit organizations have five important rights.  First, Members have the right to vote on fundamental transactions, reference above, or selecting or, electing the board of directors, or the officers of the nonprofit corporation. Second, Members have the right to access records of the nonprofit corporation, this typically includes financial statements, meeting minutes, and bylaws. Third, in many organizations, Members have the opportunity to run for leadership positions, including the board of directors, officers, or other decision-making governing bodies.  And finally, nonprofit corporations must treat all Members fairly and equally, without discrimination based on factors such as race, gender, or age.

A nonprofit membership corporation also has certain duties to its Members which the board of directors and officers need to keep in mind.  Membership nonprofit corporations need to keep records of their board minutes, articles of incorporation, any amendments to the articles of incorporation, bylaws, any amendments to the bylaws, accounting statements, communications to Members, financial statements, lists of the current directors with addresses, list of the current officers with addresses, and lists of members at the principal place of business and be reasonably available for inspection by Members.  Members do not have a fiduciary duty to the nonprofit, unlike the nonprofit corporation’s directors and officers. The Act also establishes a requirement for an annual meeting of Members during each fiscal year with procedures for proper notice and for voting.

Advantages and Disadvantages of Statutory members?

Nonprofit corporations are often created as membership corporations when its mission is based on the active participation of a large group of people. These nonprofit corporations may also seek to raise funds from their Members and may even encourage them to actively volunteer in the activities of the nonprofit corporation.  The advantages of forming a nonprofit corporation as a membership organization may include . However, there may be several disadvantages to forming a nonprofit corporation as a membership organization. Usually.

Nonprofit corporations with Members offer numerous , including , and access to resources. However, nonprofit corporations with Members come with their share of disadvantages, such as membership fees and potential bureaucratic obstacles. The rights of Members in these organizations are protected by statutes; the Act plays a critical role in governing nonprofit corporations with Members operations. Members should be aware of their rights, actively participate in the nonprofit corporations the Members are part of, and work to ensure that these nonprofit corporations continue to serve their interests and goals effectively.

This blog is for general information purposes only and should not be relied upon as specific legal advice. This article, or contacting Apex, does not in any way form an attorney-client relationship. If you have any questions or would like to learn more, please contact us or visit our blog. You might also like to read, Nonprofit Member Inspection, Eliminating Statutory Membership, and What Are the Changes to Members Rights from the 2022 Washington Nonprofit Law Update?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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