Federal law currently permits organizations to qualify for tax-exempt status with a single director or trustee. The Panel on the Nonprofit Sector has recommended that Congress amend the federal tax code to require that each organization, with certain exclusions,1 have a minimum of three members on its governing board to be recognized as tax-exempt under section 501(c)(3) of the code.
State laws in this area vary depending on whether the organization is established as a corporation or a trust. The Revised Model Nonprofit Corporation Act stipulates that a board of directors must have a minimum of three members. It sets no maximum number and allows an organization to set and change the number of directors in its bylaws, so long as there are always at least three directors in place. In practice, some states require only one director for nonprofit corporations, and some also permit the formation of a corporation sole.2 One state,
1 Excluded would be houses of worship and specific related institutions, specified governmental instrumentalities, and other organizations relieved of this requirement by the IRS.
2 Generally corporation sole pertains to houses of worship and is a form of religious organization consisting of one person only, and his or her successors in some particular station, such as the bishop or rector of a church. As a corporation sole, certain legal capacities and rights are granted in perpetuity to the individual by right of the particular station he or she holds
These questions – from the Principles Workbook (PDF) – are intended to prompt discussion about the principle, assess the polices and practices of your organization, and encourage your organization to take steps to identify where improvements should be made.