Establish bylaws and board policies
Bylaws define how a nonprofit organization will be managed and how it will run. They determine which staff and board members have authority and decision-making responsibilities and how those responsibilities should be carried out. They create a framework for the organization, and aid in resolving internal disputes. They also describe the rules for calling board meetings, and how and when board members are elected.
In addition to bylaws, it is advisable to have something at a lower level of formality, such as board policies. You might, for instance, adopt a Conflict of Interest Policy and set up a procedure for board members and officers to disclose whether they, or people close to them, may be in a position to benefit from something the nonprofit is doing. Having such a policy in place will assure funders that the chief officers of the nonprofit organization understand the importance of handling charitable dollars prudently and responsibly.
Resources on the Web: