Drafting Purpose and Mission Language for the Articles of Incorporation
The “purpose” clause is one of the most important provisions in a nonprofit organization’s Articles of Incorporation. This language satisfies a core legal requirement while also establishing the organization’s main mission and permissible range of activities. However, it can be deceptively challenging to get this language right.
Ideally, an organization should strive to craft purpose language that simultaneously:
Satisfies the requirements of the organization’s tax-exempt status;
Captures the essence of the organization’s intended mission; and
Provides the organization with flexibility to evolve over time without frequently amending the Articles.
There are many examples of nonprofit purpose clauses on the internet, including templates made available on state corporation websites, IRS publications, and self-help filing services. These examples can be very helpful but require careful adaptation, as few off the shelf templates succeed in all three of the goals described above.
For example, the sample purpose wording provided by the IRS in the Form 1023 Instructions does a good job of illustrating the requirement that a 501(c)(3) organization’s Articles of Incorporation must limit the organization’s purposes to those described in section 501(c)(3) of the Internal Revenue Code:
“The organization is organized exclusively for charitable, religious, educational, and scientific purposes under section 501(c)(3) of the Internal Revenue Code, or corresponding sections of any future federal tax code.”
However, this language is very generic and does not communicate anything about the organization’s actual mission and program goals. While this language is often sufficient for legal purposes, having more targeted purpose language can help communicate to Board members, grantors, and other members of the public that the organization has a clear focus. Moreover, some states require (or strongly encourage) nonprofits to include a specific purpose in their Articles of Incorporation in addition to general purpose language like the IRS sample.
On the other end of the spectrum, some organizations describe their purpose in terms that are too rigid and specific. This is a common mistake of organizations that use template Articles of Incorporation with prompts like “The purposes for which the corporation is formed are as follows: ____.”
The natural response to this prompt is to describe the organization’s specific mission statement. The problem is that this approach can be interpreted as limiting the organization’s goals and activities only to those that are specifically stated, which restrict an organization’s ability to refine its goals and activities in response to changing circumstances.
Further, while the Articles of Incorporation can be amended as needed to modify the purpose language (except to the extent the ability to amend is restricted in the Articles itself), frequent amendments should be avoided when possible. The main reason is that Articles amendments must be filed with the state government and reported in the Form 990. The state government filing fees can add up to a significant expense and having numerous amendments to the Articles can create a confusing public record.
Planning Tip – A nonprofit organization’s mission statement is used for many different purposes, such as governing documents, the Form 990, state registrations and filings, the organization’s website, and in donor communications and fundraising materials. Make sure to have different versions of your organization’s mission statement with varying lengths (short, medium, and long) and tones (formal and legalistic vs. informal and catchy) so you always have a version that is appropriate to the context and fits within the applicable space/word limits.
The approach I typically favor is to start with generic sample language that satisfies IRS requirements, followed by a specific but non-binding description of the mission. For example, the purpose clause in the Articles of a 501(c)(3) cancer research organization might read as follows:
“The organization is organized and shall be operated exclusively for charitable, educational, and/or scientific purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). These purposes may be pursued through programs and activities including, but not limited to, funding and/or conducting scientific research into the cause and treatment of cancer and related diseases.”
Certain situations may call for the use of more or less detailed language in the purpose clause, but the above approach strikes the right balance for many organizations.
