When you're starting a non-profit, should you have family members serve on your board of
directors? Let's get into that in this video. Hey there welcome or welcome back! My name is
Amber Melanie Smith and I am a non-profit founder and executive director of the non-profit that I
started. I make these videos here on YouTube all about starting a non-profit or social enterprise,
helping each other, service, volunteering, etc. etc. I hope that you find this video
helpful and useful wherever you are in your own social impact journey. If you
are in the process of starting a non-profit and need a little extra support check out my website
FounderToFulltime.com. I've got a couple of great online trainings for you over there.
I hope that you find this video useful and helpful - don't forget to give it a like and subscribe to
my channel for more content like this! Alright, so I've heard from many people starting a non-profit
organization that they are recruiting family members to serve on their board of directors
the assumption is that having trustee mom or dad or sister on your board of directors is going to
help you keep control of the organization and its vision and never allow strangers to guide the
organization's vision astray but is having family serve on a board of directors a good idea as i
get into this topic further I do want to clarify that what I'm going to be talking about relates
specifically to 501c3 public charity organizations in the united states because to have that 501c3
tax-exempt status in the united states you have to be an organization that is considered publicly
supported which means the organization receives a substantial amount of its support from the public
so publicly supported organizations governmental units and or the general public and therefore the
IRS is also expecting that your nonprofit's board of directors is made up of members of
the general public all of that is to say this topic is not really going to be applicable to
family or private foundations who might be using their own resources or own funding to support the
causes that they care about since they aren't getting in or asking for money from the general
public excuse me they do not have to meet this criteria so you could and most likely would have
family members on a family or private foundation okay so let's jump in if you are doing the 501c3
route and you're thinking of or considering recruiting family members for your board
there are three main things you want to consider these three things are IRS rules and regulations
funder perception and interpersonal relationships let's talk about that number one thing IRS rules
and regulations the first thing to consider about whether to have family members serve on your board
is how that's going to be viewed and potentially penalized by the IRS so for the irs a family
member or anyone really considered a related member and we'll get into what that means here
in a moment is going to throw up a red flag if they see those folks on your board of directors
this could potentially prevent a new nonprofit from acquiring its tax-exempt status or could
increase scrutiny of established non-profits the irs defines related members as someone connected
to other board members through blood marriage or business connections blood relations is usually
parents siblings or grandparents marriage-based relationships are of course a spouse or in-laws
and even people with whom you have a business relationship could be considered a related member
by the irs usually someone who is a co-worker whom you serve on a business board with or
with whom you also share a large share of the company at a bare minimum the irs requires
that at least 51 of the board be made up of unrelated members the goal here of the irs is
of course to make sure that the general public and the community that a non-profit serves has
essentially a majority vote in how the organization is run as opposed to one person
or one person and they're related members and even to have a board meeting in which votes might take
place you have to have a large number of unrelated members present the main reason the irs cares
about this is because of conflict of interest the irs doesn't believe that people who are
related to one another are going to be able to act independently and without bias towards one another
board members are supposed to be acting with the organization's mission as its top priority
as opposed to the interests or priorities or preferences of individual board members and so
that's why they're concerned related to this is the irs's rules around private benefit someone
who is related to another board member wouldn't be able to participate in any votes that would
bring one of those other board members some kind of personal benefit such as voting to hire someone
that you're related to as a paid staff member that would be considered a conflict of interest
so let's say you're a non-profit founder and your hope is to one day serve as a paid executive
director or other type of staff member for the non-profit you would not be able to vote to hire
yourself or vote on what you could pay yourself other board members would have to vote to hire
you and what your salary would be and no one who is a related board member to you would be allowed
to participate in that vote due to these conflict of interest rules the second thing you need to
consider is funder red flags similar to the irs having family members on your board especially
if it's a significant number of them could throw up a red flag for funders and by that i mean grant
foundations donors or sponsors it is a common question these days of on grant applications to
ask for a list of the non-profits board members and what funders are looking for is to ensure
that of course the organization is led by members of the general community but also that there's a
lot of diversity on the board and that there are a lot of perspectives of those in the community
serving in the organization's interests so having one or more family members on your board could
signal to a funder that you don't necessarily have broader leadership broader representation
or broader perspectives from the community that you're serving only your family or your personal
connections are in the leadership and another practical matter to consider in the fundraising
realm is just social networks you're going to be most successful in raising money if you have
a lot of different people who each have their own social networks as part of the leadership
of the organization because then those people are going to be able to tap into their networks
and cultivate and curate donor relationships and be able to make those asks for funding support in
the future the smaller your social network is you know perhaps if you are serving alongside family
members on a board your whole family might know the same set of people but if you have a lot of
different people who are not connected the odds are higher that they're going to have reach into
various segments of the community and the third and final thing to consider is interpersonal
issues while this one is not related to tax or financial rules or anything like that i think
it is important to consider how serving on a board together could impact your personal relationships
for example how disagreements on a board of directors could spill over into family life
now don't get me wrong people who are related or not related are always gonna have disagreements
on a board of directors that's just life and we're all human beings but the difference is you don't
have to necessarily go home to or see the people on your board day to day and thus exacerbate
whatever disagreements were had I know I've heard some horror stories about family disagreements or
even friendships being damaged because of service on a board together so it's just something to
be thoughtful about and be prepared to navigate if you go in this direction I'm really interested
to hear if you've had experiences with either serving alongside family on a board or even
have heard stories from other organizations where family members or related members serve together
on a board what was the experience like what are some of your insights be sure to share those in
the comments below as i mentioned before if you are looking at starting a non-profit i've got
some great resources on my website founder to fulltime.com i hope that you check those out
i also have a newsletter for change makers and non-profit leaders around the world be sure to
subscribe to that the link is in the description below this video and you can opt out anytime as
well finally i have a Facebook group change the world or bust where myself and 3,000 other folks
around the world are chatting about how we're making a difference and supporting each other
so i hope that you can come on over and join us there i hope that you found this video useful or
interesting or helpful to you in some way please don't forget to give it a like and subscribe to my
channel for more content like this. I hope to see you next time once again I'm Amber Melanie Smith!
you