In most states, a non-profit organization is considered a legal entity capable of suing and being sued. Thus, a non-profit must abide by its contract, and exercise the same duty of care as any other business would in the same situation.
When Are Directors, Officers, and Members of a Non-profit Liable?
Just as in most corporate settings, directors and officers of non-profit organizations are given great discretion to manage their organization. The business judgment rule protects non-profit directors and officers when making decisions on how to best manage the non-profit organization. Therefore, a director or officer for a non-profit will be held liable only in rare circumstances, such as acting in bad faith.
As for members, most states will not allow individual members of a non-profit organization to be liable for the actions of the non-profit. On the other hand, a non-profit will only be liable for the actions of its members if they are acting as an agent for the non-profit organization within the course and scope of the organization. Thus, a member that is responsible for breaking the law will be personally liable unless they are acting as the agent of the non-profit.
How Can Non-profit Organizations Limit Liability?
There are several steps a non-profit can take to limit its liability including:
- Buying liability insurance
- Using limitation on liability clauses in contracts
- Having clear policies and procedures
How Can a Lawyer Help?
If you are a non-profit organization and a lawsuit has been brought against you, an experienced business attorney can advise you of your legal rights and defenses.