Fiduciary Responsibility of a Nonprofit Board

In addition to the responsibility to act ethically, there are three main fiduciary duties board members must comply with.

Ready to start your business?

Trustpilot star rating bar
fiduciary responsibility of a nonprofit board

Contents

Updated on: October 27, 2023
Read time: 3 min

The board of a nonprofit organization is responsible for managing the financial aspects of the organization and making primary decisions for the nonprofit.

Because they act on behalf of the organization through a position of trust, the members are called fiduciaries. They have three main fiduciary duties: the duty of care, the duty of loyalty, and the duty of obedience.

Business people sitting and standing around a table collaborating

Board members' roles

The board makes all the decisions that direct how the organization operates and, as such, is ultimately responsible for how the organization performs.

Board members manage the organization's assets, oversee fundraising, perform audits, hire and fire staff, prepare reports, disburse funds, and perform any other responsibilities required to fulfill its mission and goals. They must perform these tasks with integrity and honesty.

Duties of a board member

Each state has different laws that govern what board of director members must do and what their roles are, but, in general, a board member has three duties to fulfill:

  • Duty of care. Board members are responsible for having the same duty of care about the organization that a prudent and ordinary person would. This means that they need to show up, participate, remain informed about all aspects of the organization, and take appropriate actions to help the organization meet its goals and thrive. The duty of care requires them to read and understand financial reports, track spending, and participate in strategic planning. The board members are also responsible for making sure the nonprofit's records are kept accurately and preserved.
  • Duty of loyalty. Nonprofit board members must also be loyal to the organization itself. This means working in its best interest and not using it for their own personal or professional gain. If a board member has a conflict of interest, they must disclose it.
  • Duty of obedience. Board members are also required to show the duty of obedience, which means they need to be aware of the laws that affect the organization and ensure that they follow them. They must fully understand and follow all of the organization's own governing documents, such as the bylaws, and are also responsible for helping the organization carry out its stated goals.

While these duties may seem onerous, serving on a nonprofit board can be a gratifying experience. Working with other board members can be fun and enjoyable as you work together to help the organization achieve its goals and make a difference in the world.

Liability for board members

All board members are expected to understand and uphold their duties. Ignorance of what is required is not a defense, which is why it is a good idea for boards to regularly review their responsibilities and evaluate how well they are upholding them.

Board members who breach their fiduciary duties can be held personally liable, particularly where there has been an abuse of fiduciary duty.

Ready to start your business?Form a Nonprofit
Twitter logoFacebook logoLinkedIn logoReddit logo

This article is for informational purposes. This content is not legal advice, it is the expression of the author and has not been evaluated by LegalZoom for accuracy or changes in the law.

79 days ago
Trustpilot star rating bar

Gail Vyeda Deserves Recognition — Outstanding Support!

I had the absolute pleasure of working with Gail Vyeda through LegalZoom’s Concierge service, and I cannot say enough good things about her. Gail is knowledgeable, patient, professional, and genuinely caring. From the very beginning, she made me feel supported, heard, and confident in the process of forming my nonprofit. She explained everything in clear terms, walked me through each step, and made sure I understood what was being filed and why. Even when I had questions outside the typical scope, she went the extra mile to help — always with kindness, clarity, and grace. She made what could’ve been a stressful experience feel seamless and empowering. Gail is exactly the kind of person who deserves to be recognized and promoted. Her dedication and warmth represent LegalZoom at its best. Thank you, Gail — you made a big difference in helping me bring my nonprofit vision to life! — LaTonya White, The Legacy Impact Fund (DBA Big Gló Foundation)

LaTonya White
100 days ago
Trustpilot star rating bar

The couple of representatives I spoke…

The couple of representatives I spoke with while in the process of registering my nonprofit and applying for the 501(c)3 status were professional, friendly, knowledgeable.

Charles McGee
145 days ago
Trustpilot star rating bar

LegalZoom has been a great source to…

LegalZoom has been a great source to work with. I would recommend anyone to utilize Legal Zoom who is starting a nonprofit. Very seamless and courteous! The customer service they have been providing has been excellent!

Gabrielle Johnson
192 days ago
Trustpilot star rating bar

Willie is the man!!

Willie did a great job answering all my questions and helping me understand different aspects of what what happens when starting my nonprofit with Legalzoom. Great customer service experience!

Cody Daniels
206 days ago
Trustpilot star rating bar

In the avalanche of many questions, Ana was there to guide me

Ana provided detailed information to my questions about a nonprofit. She was helpful and patient with me. She extended herself to keep in touch and work with me when I am ready. Thank you!

Ms. Maria
208 days ago
Trustpilot star rating bar

Incredibly helpful!

I called with some questions and received such helpful information! My nonprofit partner and I feel confident in moving forward with Legal Zoom services for our women centered nonprofit.

Andrea
221 days ago
Trustpilot star rating bar

Being a business owner of two businesses...

Being a business owner of two business. A for profit and now a nonprofit LegalZoom has made the business registration process effortless and seamless all while keeping my submitted documents legal with the state. I highly recommend any entrepreneur who's filing your business on your own to let LegalZoom do the handwork for you. They are fast, accurate, and efficient.

Eujon S. Hughes, M.Ed.
235 days ago
Trustpilot star rating bar

Gerald was extremely helpful to me in…

Gerald was extremely helpful to me in getting my order processed. He made it easy for me to just answer a question and continue with the process of setting up my nonprofit.

Allison Melendez
253 days ago
Trustpilot star rating bar

Outstanding Work

The professionalism of the team coupled with the speed of getting the nonprofit paperwork accomplished and through the system was excellent. I am very grateful. This is my second time working with Legal Zoom. Thank you very much.

Mary G
Rated4.6out of 5 based on23,759+ reviewson

Showing our favorite reviews