Administrative expenses and promotional expenses, including compensation of employees and independent contractors, must be commensurate with the organization’s financial resources and capabilities. If an organization raises funds for a charitable purpose but consistently uses virtually all its income for administrative and promotional expenses with little or no distribution to the charitable purpose, the board of directors has failed to exercise due care.
The corporation may or may not have members. In a membership corporation, the members have the exclusive right to elect directors, amend articles and bylaws and vote on a merger or dissolution of the corporation. Instead of members, a nonprofit corporations may have a perpetual board of directors or board of trustees.