Virginia Laws Regarding Nonprofit Organizations

By Wayne Thomas

In Virginia, nonprofit organizations are referred to as "nonstock corporations": no dividends may be paid to directors or officers of the corporation beyond reasonable compensation for their services. The formation and operation of all nonstock corporations is governed by the Virginia Nonstock Corporation Act, which provides specific rules with regard to naming the corporation, adopting bylaws and holding organizational meetings.

Purpose

In order to be considered exempt from Virginia sales and use taxes, your organization must qualify for the federal income tax exemption. To be eligible, the IRS requires that the nonprofit must further a charitable, educational, scientific or religious purpose. Examples of qualifying nonprofits include those dedicated to eliminating discrimination, assisting the homeless, maintaining public buildings and combating juvenile delinquency.

Articles of Incorporation

The process for officially forming a nonstock corporation in Virginia begins with filing articles of incorporation. State law requires that the articles specify a corporate name, which cannot be the same or deceptively similar to another business operating in the state. You can search for the availability of any name through the State Corporation Commission's website. The articles must indicate the name of your corporation's registered agent and provide an address where official correspondence from the state may be sent. Virginia law requires that at least one director be appointed, with the director's name and address included in the articles. Once this document is completed, you file it with the commission along with the required fee.

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Bylaws

As part of the formation process, Virginia law requires that your nonstock corporation draft bylaws. Bylaws describe how the nonprofit is to be governed and provide an internal management protocol, specifying the election process for directors, the size of the board, how meetings are called and how grant monies will be distributed. There is no set requirement for the content contained in the bylaws, but no provision may conflict with any provision of the Articles of Incorporation. The bylaws need not be filed with the state, but must be maintained at your principal place of business for public inspection.

Organizational Meeting

In addition to drafting the bylaws, a nonstock corporation is required to hold an organizational meeting. The bylaws will be adopted at the meeting, along with the appointment of any initial directors not named in the articles of incorporation. Other actions that must be approved at the meeting include choosing a bank, setting the corporation's budget for the upcoming fiscal year and adopting a conflict of interest policy. Conflict of interest policies prohibit directors from benefiting privately from actions taken by the nonprofit.

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What Belongs in the Bylaws?

References

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