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    Difference Between Membership and Nonmembership Nonprofits

    In a formal membership nonprofit, the members have control over the direction of the organization. Learn about the difference between a membership and nonmembership nonprofit.

    Difference Between Membership and Nonmembership Nonprofits

    Difference Between Membership and Nonmembership Nonprofits In a formal membership nonprofit, the members have control over the direction of the organization.

    By Christine Mathias, Attorney

    Your nonprofit organization can have formal members or not, depending on how broadly you want to spread responsibilities and rights. In a membership nonprofit, voting members might appoint the board of directors, remove a director, change the bylaws, or dissolve the nonprofit. Certain services of the organization might be available only to the members, such as access to a retirement program or listing in a membership directory. By contrast, in a nonmembership nonprofit, the board of directors typically takes the above actions.

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    Whether to structure your nonprofit with members will depend on many factors, such as the size of your organization, its mission, and your appetite for complexity. The sections below explore these issues. We also discuss a middle ground, attractive to many organizations.

    Profit and Nonprofit Organizations

    A nonprofit is an organization that furthers a purpose other than making a profit, such as a charitable or recreational pursuit. (By contrast, a for-profit company like an LLC or a corporation focuses on making a profit for its owners and shareholders.) While a nonprofit can make a profit, the organization uses the money to further its purpose, instead of distributing it to the owners or members.

    Nonprofit Organizations That Are Typically Non-Membership and Membership

    Many nonprofits are public charities, which further a charitable cause such as an educational, religious, or scientific pursuit. Because of the difficulties in creating and managing membership nonprofits (discussed below), and because charities serve the general public instead of a limited number of members, public charities are commonly nonmembership organizations.

    Conversely, organizations that serve a limited number of people are likely to be membership organizations, such as:

    social and recreational clubs, such as country clubs or fraternities

    civic leagues and neighborhood associations

    business leagues and chambers of commerce

    teachers' retirement fund associations

    labor organizations, and

    veterans' organizations.

    Pros and Cons of Membership Nonprofits

    Whether it's to your advantage to have members will depend on several factors, such as the following:

    Your need for capital investments. Organizations that admit members explicitly encourage financial contributions and involvement from each member. Nonmember organizations rely more on donations from the general public, which requires the organization's staff to continually solicit donations and come up with new fundraising strategies.Your willingness to deal with complexity. A roster of voting members spells complexity—you will need to organize, woo, and count those votes, making it more difficult to make changes than if you were dealing with just a board of directors.Your willingness to risk losing control. Once you give members a vote, you've created the possibility that they will take the organization in a different direction than the founders intended. With a nonmembership nonprofit, however, the founders can maintain control by serving on the board of directors and recruiting other directors who agree with the mission and direction of the organization.

    Informal Membership Nonprofit Corporations

    The great divide in the nonprofit world is members or not, but there's a third way to run your nonprofit that borrows the term "member" for marketing and fundraising purposes. These nonprofit corporations have "members," but they're not official membership corporations like the ones we've been discussing. The informal members have no decision-making power within the organization (unless they serve on the board of directors).

    For instance, you might have heard Public Broadcasting pledge drives asking for members to join and donate to the station. Using "membership" as a way to raise money allows people or businesses to make monthly or annual donations in exchange for services like an insider newsletter or invitations to member-only events. And giving a donor the right to proudly claim and display "membership status" (on a tote bag, for example) can be a powerful donation motivator. Setting up an informal membership system does not require additional legal filings.

    What is the Difference between the Board of Directors and the Members?

    Every nonprofit organization (membership and nonmembership) has a board of directors, which is responsible for the overall management and direction of the nonprofit. In some nonprofits, the board and the members are the same people, with the same rights and responsibilities. More commonly, a membership nonprofit has a larger population of members who work with the smaller board of directors. The members might meet annually to vote on directors and set the goals for the year, while the board of directors meets monthly to carry out those goals.

    Source : www.nolo.com

    Chapter 10 Flashcards

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    Chapter 10

    What are the three types of interest group?

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    1) Membership Organization

    2) Nonmembership Organization

    3) Government Organizations

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    What are membership Organization?

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    Private membership organizations have individuals or businesses as members

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    Terms in this set (51)

    What are the three types of interest group?

    1) Membership Organization

    2) Nonmembership Organization

    3) Government Organizations

    What are membership Organization?

    Private membership organizations have individuals or businesses as members

    What are Nonmembership Organization?

    Nonmembership organizations represent individuals or single businesses and are not open to the general public

    What are Government Organization?

    (or state and local interest groups) represent local government

    What do membership organization

    These groups represent a wide range of economic and noneconomic interests within the state

    Peak business organizations present a united front against policies harmful to businesses

    What are the three type of associations in membership organization

    1) Trade associations

    2) Retail Trade Associations

    3) Professional Associations

    What are trade associations?

    such as the Texas Oil and Gas Association—represent more specific business interests

    Multiple types of agricultural interests operate in Texas, including those that represent general farming interests, commodity groups, and suppliers

    What are retail trade associations?

    such as the Texas Automobile Dealers Association—protect their trades from unfavorable regulations and policies

    What are Professional Association?

    members typically hold a professional license, and the state regulates their scope of practice

    Some of the best-known of these groups represent physicians and attorneys

    Public school educators are represented by multiple interest groups

    What is another type of professional organization in Texas?

    Public-sector employee organizations are another type of professional organization in Texas

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    Membership Organizations

    Should we be a membership organization? How do we define the potential challenges and benefits before you invite members to your organization?

    Membership Organizations

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    The term membership is often defined very liberally; it has many meanings. Before you can answer your question “Should we be a membership organization?” you need to define your term.

    For example, are members going to be part of the structural element of the organization with controlling interests? Is your organization created solely for the benefit of its members? Is the organization going to function on behalf of its members? Will members be your financial supporters? Will your members be considered subscribers to your services? After determining what membership should mean, continue to define the potential challenges and benefits before you invite members to your organization.

    What is an informal membership program?

    An informal membership program is a practical way to integrate supporters or subscribers into an organization. Usually for a fee, members receive benefits such as newsletters, resources, priority registration for trainings, etc. These members have no say in the running or governing of the organization. They are normally interested in its mission and find the benefits package useful. This type of a membership program does not need to be defined in the official documents of the organization. For many organizations, it is a way to garner earned income.

    What is a membership organization with a public interest?

    Many philanthropic associations function on behalf of individual members by advancing a greater cause. Members often financially support the mission or volunteer their time. American Heart Association, Planned Parenthood, or parent-teacher associations are examples, where members do not benefit financially or professionally but gain as part of the targeted public.

    What is a formal membership organization?

    A formal membership organization is a nonprofit that grants its members specific rights to participate in its internal affairs. These rights are established in the articles of incorporation and defined in more detail in the bylaws. Usually in a formal membership organization, members elect the board and/or the officers; approve changes in the bylaws; and authorize major transactions such as mergers and dissolution of the organization. In short, members have a strong interest and voice in the future of the organization and not only in the tangible benefits that they may receive as members. For example, trade associations and business leagues are membership organizations in which the members rely on the organization to advocate for better business opportunities for their line of business.

    Why would you create a formal membership structure?

    A membership organization in a way is a ‘service’ organization: It looks after the needs of its members. As an organized force, it has more weight than the individuals it represents. Most formal membership organizations have a 501(c)(6) or 501(c)(4) status, which allows them to lobby without limit. Organizations serving the general public tend to be 501(c)(3) public charities with a limited lobbying allowance but the ability to accept deductible donations. A membership organization is structurally more complicated than a non-member organization, so it is important to understand the burdens and challenges that this choice brings with it.

    Structural elements of formal membership

    If you decide to create a formal membership organization, be attentive to these structural aspects:

    Bylaws

    It is necessary to describe the role of members in the articles of incorporation and bylaws. List categories of membership and their specific rights.

    Board membership

    Formal members have significant input in the governance of the organization by electing at least a portion of the board. The board functions as the governing entity for the organization. For any board to be effective, it is important to have a cohesive group of people who work well together. In purely representational boards, where members elect representatives from their own region or sector, consensus building can be challenging. It is important to seek competent candidates and inform members objectively on the qualifications of candidates and the need to elect qualified board members. It also is in the best interest of the organization to provide orientation and training to all new board members. Board members need to see the association as an entity, not as an agent for their particular constituents. Political favors and strict representational quotas may not produce an effective board. Elected board members need to be able to leave their personal and professional agendas behind and make decisions only for the best of the entire organization.

    Annual meetings

    During annual meetings, members cast their votes and elect new board members. It is often impossible to get the entire membership together at the same time so proxy voting is common. Preparing the slates and administering the meeting is a major task in a membership organization. The cost and time involved is one additional demanding feature of this kind of governance.

    Other challenges

    Building and cultivating membership also requires the organization to pay attention to successful member recruitment strategies, fine-tuning general member benefits, and determining a profitable member fee structure.

    Source : boardsource.org

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