The Organizational Structure for Charity

If you're interested in starting a charitable nonprofit, you must set up an organizational structure before applying for a tax-exempt status with the IRS. The charity can stand on its own or be an arm of your existing business, but it must have a board in place and a staffing plan -- even if that plan is with volunteer staff.

Charities are special among nonprofits, allowing donors to write off all or most of their contributions on their taxes. Other nonprofits, such as trade associations or educational organizations, don't offer the same benefit to donors. The IRS puts strict regulations on what defines a charity, and that includes the basic organizational structure. The charity must have a board of directors in place before it applies for the IRS 501(c)(3) tax exempt status.

Although a charity can survive without paid staff, it must have a board of directors. This board must have at least three officers: a president, vice president and secretary/treasurer. It can have more officers and members, but those three are required. Board members assume some personal financial responsibility, meaning they can be held liable for the charity's unpaid debts in some cases. This gives the board some incentive to live up to its duty of managing the organization. The board members might be actively involved in the daily management, or they might let paid staff handle operations and require frequent program and financial updates.

Although the board of directors usually has the final say on major decisions, the board often turns management authority over to paid staff. An executive director is the main board liaison and shoulders much of the responsibility for daily management, but the charity might also employ a development director to handle fundraising, a program director to manage education or outreach and a volunteer manager, depending on how many people volunteer with the organization. The staff reports to the executive director, who reports directly to the board. These positions can also be held by volunteers; the board splits up duties to committees who make sure important tasks get completed.

For smaller charities who need staff support but can't afford full-time employees, management companies often are an affordable option. Depending on the charity's needs, the management company can provide administrative staff, program management, event planning or executive director services on a part- or full-time basis. When structuring the organization through a management company, the charity's board still has oversight responsibility. The board is assigned a representative from the company, which is usually the person who serves the function of executive director or an account manager. This person doesn't report directly to the board; she is an employee of the management company. However, she meets and communicates with the board regularly and carries out their wishes like regular staff would.

Volunteers are key to the success of most charitable organizations. They often serve as part of committees, such as for fundraising, finance or education. The committees are often structured so that they report to a board or staff member. Within the committees, there's typically a chairperson and vice chairperson who both lead the group. In addition to structured committees, there are often volunteer opportunities on an as-needed basis, such as greeting attendees at a fundraising event or pitching in at a community development project.