Page 31 - Washington Nonprofit Handbook 2018 Edition

(iii) Recommended Additional Provisions

In addition to the required provisions, your organization may want to include

one or more of the following provisions in its articles of incorporation:

y Director Liability Limitations. This provision eliminates or limits the
personal liability of directors of the corporation for monetary damages
to the corporation for conduct as a director. The sample provision in
the form of articles of incorporation limits the liability of directors to
the extent permitted in Washington law. The Act forbids eliminating or
limiting liability for acts or omissions that involve intentional
misconduct by a director or a knowing violation of law by such director
or for any transaction from which the director will personally receive a
benefit of money, property or services to which such person is not
legally entitled.

y Indemnification. Under an indemnification provision, the corporation
promises to pay expenses, liabilities and losses incurred by a director
of the corporation in defending such director in any legal action in
which such person becomes involved because of actions taken in his
or her official capacity as a director of the corporation. A nonprofit
corporation may not indemnify a director found by a court to be liable
to the corporation. A sample indemnification provision is included in
the sample form of articles of incorporation.

y 501(c)(3) Requirements. An organization seeking federal tax-exempt
status under section 501(c)(3) of the Code must satisfy several
additional requirements in its articles. In addition to ensuring that the
purposes and dissolution provisions meet federal tax law require-
ments, the articles must prohibit the distribution of any net earnings
to members, directors, officers or other private persons and prohibit
the organization from carrying on noncharitable activities. It is also
recommended that the articles contain appropriate language with
respect to political action and lobbying activities. The form of articles
contains examples of such provisions. Again, the form articles of
incorporation available through the Secretary of State’s office do not
contain these provisions and, therefore, should not be used if you
intend to seek 501(c)(3) status for your organization, or if used should
attach these provisions. In addition, a fuller discussion of these
requirements is contained in Chapters 22 and 27-36.

WASHINGTON NONPROFIT HANDBOOK -20- 2018