How to Develop a Board of Directors for a Nonprofit in Maryland

A board of directors is a requirement for the operation of a Maryland nonprofit entity. This elected group serves as the governance of your organization in everything from finances to the nonprofit’s mission.

Electing the right personalities to your board of directors is essential for your organization’s success. This guide will help you select your first board or grow an established board to better serve your nonprofit.

Check out our other guides for a look at how to form a nonprofit organization or how to select a board of directors in other states.

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Maryland Board of Directors Requirements

The Maryland General Corporation Law, Section 2-402, lays out the number of required directors for a board:

(a) Each corporation shall have at least one director.

(b) Subject to the provisions of subsection (a) of this section and except for a corporation that has elected to be subject to § 3-804(b) of this article, a Maryland corporation shall have the number of directors provided in its charter until changed by the bylaws.

(c) Subject to the provisions of subsection (a) of this section and except for a corporation that has elected to be subject to § 3-804(b) of this article, the bylaws may:

(1) Alter the number of directors set by the charter; and

(2) Authorize a majority of the entire board of directors to alter within specified limits the number of directors set by the charter or the bylaws, but the action may not affect the tenure of office of any director.

Putting It Into Practice

A Maryland nonprofit’s board of directors works as a support system for the organization. Its duties include financial management, structural guidance, the hiring of executive directors, and much more. While the board typically isn’t involved in day-to-day operations, it plays an active role in maintaining the well-being of the organization as a whole, its effectiveness, and its financial health.

A 501(c)(3) eligible nonprofit board of directors in Maryland MUST:

  • Have a minimum of three unrelated board members
  • Elect the following members: president, treasurer, and secretary

Recommended: Read our full guide on How to Start a Nonprofit in Maryland.

What Is the Function of the Board of Directors?

The General Corporation Law, Section 2-401 establishes the role of the board of directors in the following manner:

(a) All business and affairs of a corporation, whether or not in the ordinary course, shall be managed by or under the direction of a board of directors.

(b) All powers of the corporation may be exercised by or under authority of the board of directors except as conferred on or reserved to the stockholders by law or by the charter or bylaws of the corporation.

Putting It Into Practice

Before forming your Maryland nonprofit’s board of directors, it’s important to understand the role this group plays in the success of your organization. The general responsibilities of a board include:

  1. Enforcing the Organization’s Mission and Purpose: The foundation of any nonprofit is its mission so a board’s chief task involves upholding that mission as well as the organization’s purpose.
  2. Hiring a CEO/Executive Director: While your board of directors plays an instrumental role in the success and effectiveness of your nonprofit, it doesn’t participate in the daily operations. That makes it vital for the board to hire a CEO or executive director who will provide effective, day-to-day leadership.
  3. Incorporating New Members: A board also must source and incorporate new board members capable of effectively upholding the organization’s values.
  4. Assessing the Allocation of Funds: Careful distribution of assets within an organization ensures all areas receive adequate funding and thus supports the success of each aspect of a nonprofit’s mission.
  5. Generating Funds and Ensuring Financial Stability: Alongside verifying the appropriate distribution of funds, the board also has a responsibility to generate more assets to create a solid foundation for the nonprofit’s long-term financial stability.
  6. Supporting and Evaluating the CEO/Executive Director: A nonprofit’s board of directors not only serves as a support system for the CEO/executive director, but also assesses their job performance.
  7. Ensuring the Organization Follows Legal and Ethical Practices: It comes as no surprise that upholding the ethics of a nonprofit is essential to its success in achieving its mission. In this case, the board’s task involves ensuring the organization consistently follows legal and ethical practices across its operations.
  8. Generating a Positive Public Image: Building trust within the community not only attracts private investors, but also develops credibility among community members who may use the services your organization offers.
  9. Acknowledging and Addressing Conflicts of Interest: The Internal Revenue Service (IRS) requires nonprofits to develop a written conflict of interest policy that the organization’s board of directors will enforce. This prevents any board member from using their position in order to serve their personal interests.

Additional Legal Responsibilities

In Maryland, a nonprofit’s board of directors also must fulfill certain legal responsibilities. The three most common legal responsibilities of a Maryland nonprofit include duty of care, duty of loyalty, and duty of obedience.

  • Duty of Care: This involves making appropriate use of the assets held by the organization. Specifically, board members must ensure the use of such funds promotes the good of the organization and those who benefit from its services.
  • Duty of Loyalty: This involves acknowledging and disclosing any conflicts of interest as well as making decisions that benefit the nonprofit as a whole rather than a single board member.
  • Duty of Obedience: Board members also must ensure the nonprofit adheres to all applicable laws and regulations while operating under the mission and bylaws that form its foundation.

Developing Your First Board of Directors

If you’re still in the process of developing your Maryland nonprofit entity, choosing the right board members is key to ensuring the effectiveness and stability of your organization. Here are a few tips to help you get started:

  • Solidify Roles. Designating functional roles for individual board members — outside of your elected officer’s roles — can improve the board’s overall effectiveness and functionality.
  • Develop and Commit to Bylaws. Creating a set of bylaws to uphold the mission of your organization creates a strong foundation to guide board members’ decision-making. In addition, state law may require Maryland nonprofits to develop bylaws.
  • Prioritize Your Mission. Another beneficial strategy when choosing board members is to seek candidates with a passion for your organization’s mission and goals.
  • Acknowledge Any Conflicts of Interest. Conflicts of interest will inhibit a board member’s ability to effectively uphold the values and best interests of your organization. That makes it extremely important to assess potential or existing conflicts of interest when evaluating board members for your nonprofit.

Filling Board Vacancies

Vacancies in a Maryland nonprofit’s board of directors can be filled according to Section 2-407 of the General Corporation Law:

(a) (1) Except as provided in paragraph (2) of this subsection and except for a corporation that has elected to become subject to § 3-804(c) of this article, the stockholders may elect a successor to fill a vacancy on the board of directors which results from the removal of a director.

(2) If the stockholders of any class or series are entitled separately to elect one or more directors, the stockholders of that class or series may elect a successor to fill a vacancy on the board of directors which results from the removal of a director elected by that class or series.

(b) (1) Except as provided in paragraph (2) of this subsection or unless the charter or the bylaws of the corporation provide otherwise:

(i) A majority of the remaining directors, whether or not sufficient to constitute a quorum, may fill a vacancy on the board of directors which results from any cause except an increase in the number of directors; and

(ii) A majority of the entire board of directors may fill a vacancy which results from an increase in the number of directors.

(2) If the stockholders of any class or series are entitled separately to elect one or more directors, a majority of the remaining directors elected by that class or series or the sole remaining director elected by that class or series may fill any vacancy among the number of directors elected by that class or series.

(c) (1) Unless the corporation has elected to be subject to § 3–804(c)(3) of this article, a director elected by the board of directors to fill a vacancy serves until the next annual meeting of stockholders and until his successor is elected and qualifies.

(2) A director elected by the stockholders to fill a vacancy which results from the removal of a director serves for the balance of the term of the removed director.

Putting It Into Practice

When electing new members to your Maryland nonprofit’s board of directors, focus on finding individuals dedicated to your organization’s mission. Here are a few tips to consider as you begin your search:

  • Look to Your Volunteers. Volunteers who stand out can make excellent additions to a board of directors. These individuals already dedicate their time and energy to your organization and most likely will bring that same dedication and goodwill to your board.
  • Explore Candidates Among Loyal Donors. Donors represent another group to consider when electing new board members because they create the financial foundation for your organization. That means they have a track record of dedicating time and money to ensuring the success and sustainability of your nonprofit.
  • Expand Your Search. Diversifying your search to include outside groups can prove effective in creating a well-rounded board of directors.

What Are Elected Officers?

Section 2-412 further outlines the election of officers to the board:

(a) Each Maryland corporation shall have the following officers:

(1) A president;

(2) A secretary; and

(3) A treasurer.

(b) In addition to the required officers, a Maryland corporation may have any other officer provided for in the bylaws.

Putting It Into Practice

Elected officers are members of the board with assigned roles focused on regulating the day-to-day activities of the organization and maintaining its success. Each position should have a clear role defined in the organization’s bylaws.

The board of directors is required to nominate elected officers in Maryland. Elected officer roles can not only prove helpful in ensuring the effectiveness of the board of directors, but also provide a foundation of leadership.

The three elected officers required for nonprofits in Maryland include:

  • President: As the leader of the board, the president commonly has authority over key activities like signing contracts and hiring or firing employees. This role differs from the CEO/executive director position, which the board typically hires after assigning the president role. 
  • Treasurer: The treasurer is responsible for evaluating the financial health of the organization by keeping track of receipts and spending.
  • Secretary: This individual serves as the organizer of the board meetings, which may include scheduling the meetings, informing board members of the meeting schedule, planning the meeting agendas, and recording meeting minutes.

Note: In Maryland, one person can hold two or more elected roles. However, any documents requiring signatures from two elected officers will require two different people.

Conclusion

Forming a board of directors is an essential part of creating and operating a nonprofit in Maryland. Ideally, this group will advocate for your organization’s best interests in everything from finances to public relations. To form or expand a board of directors that will best represent your nonprofit’s needs, search for members who will uphold your organization’s mission and purpose.

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