Nonprofit organizations are set up to achieve a social, charitable, or humanitarian goal. In order to achieve these goals, nonprofits need to enter into various contracts with vendors, partners, and donors. However, the question arises, who can sign these contracts on behalf of the nonprofit? In this article, we`ll explore the different roles within a nonprofit that have the authority to sign contracts.
Board of Directors
The board of directors is the governing body of a nonprofit organization. The board is responsible for making major decisions on behalf of the organization, including authorizing contracts. Typically, the board must approve any contracts that the nonprofit enters into. However, not every board member has the authority to sign contracts. Usually, only the president or another officer of the board is authorized to sign contracts.
The executive director is the top management position in a nonprofit organization. The executive director is responsible for the day-to-day operations of the organization, including signing contracts. Depending on the size and structure of the nonprofit, the executive director may have the authority to sign contracts within a set dollar amount. Any contracts that exceed that amount would require board approval.
Nonprofit organizations may appoint authorized representatives who have the authority to sign contracts on behalf of the organization. Authorized representatives may include staff members or volunteers. However, these representatives must be chosen carefully and be given clear instructions on the limits of their authority to sign contracts.
Nonprofit organizations may hire attorneys to represent them in legal matters, including signing contracts. Attorneys may have the authority to sign certain contracts, but this must be specifically outlined in the contract.
In general, it is important for nonprofits to establish clear guidelines for who can sign contracts on behalf of the organization. This can help prevent misunderstandings and disputes, and ensure that contracts are entered into in a responsible and transparent way. Nonprofits should also ensure that the contracts they enter into align with their mission and values, and that they are not entering into any contracts that could jeopardize their tax-exempt status. By following these guidelines, nonprofit organizations can ensure that their contracts are legally binding and in the best interests of the organization.