Can A 501(c)(3) Organization Have Members?

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While running a charitable organization like a nonprofit is an admirable venture, it can be fraught with questions about the legal ins and outs. Can a 501(c)(3) have members? Who owns a nonprofit organization? How does an organization protect itself? Let’s get to the answers to these questions and more below. 

What is a 501(c)(3) organization?

A 501(c)(3) is a tax exemption status within the United States of America and recognized by the Internal Revenue Service (IRS). Organizations that fall under this category are frequently charitable organizations like nonprofits and include religious groups and scientific or educational organizations. 

Can a 501(c)(3) have members? 

In short, yes. However, the long answer is a bit more complicated. Unlike corporations, these organizations don’t have stakeholders but must still have a board of directors and officers, including a president, treasurer, and secretary. Members are explicitly not owners, though they do frequently have the ability to vote on sales, mergers, board members, and other high-stakes decisions. 

Do I have to offer membership? 

This depends on your area! Some states automatically offer the option of a membership for all 501(c)(3) organizations, and others are a bit more nuanced. Be sure to check with your local laws and the IRS for answers about your specific organization. 

What is the benefit of maintaining a 501(c)(3) status? 

The reason that organizations go through the hassle of achieving and maintaining a 501(c)(3) status is because it provides tax exemption from the Federal Government in the United States. This means that you get to use the hard earned dollars that you've raised - whether it be from memberships, donations, or another source - to achieve your Organization's stated mission.

What do I have to do to be tax-exempt? 

In order to maintain a 501(c)(3) tax-exempt status, organizations must first keep detailed documentation. Keeping good records helps protect your organization’s status, especially if you’re making money from avenues other than fundraising or membership dues. You may need to continue to register with your government as a charitable organization and have regular board meetings. There are limits on what nonprofit organizations can and cannot make money from, so be sure you’re well versed in these areas to protect your organization.

Additionally, once you've achieved your status - a big part of maintenance is "following through". Essentially, you've made a commitment to push forward on your stated mission and you've detailed the governance for how you'll do so. So be sure to follow through with good governance, whether that means hosting an Annual General Meeting (AGM), or however you've chosen to keep keep stakeholders involved and informed.

Conclusion

Once again, with a resounding 'Yes' - a 501(c)(3) organization can certainly have members. And choosing a membership model is a very common approach for both governance and funding when it comes to setting up a nonprofit organization.

Next Steps

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What other questions do you have about 501(c)(3) organizations? Let us know!

Disclaimer: So, we didn’t go to law school. Sorry, mom! This post is purely for informational purposes and not to be taken as legal advice. 

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