Starting your nonprofit
There are several things to consider when you start a non-profit, especially if you plan to form a 501(c)(3) organization.
Creating a mission statement
When you create your mission statement, begin with a broad view of what you want your nonprofit to accomplish, then pare it down to specifics. The process may feel a bit repetitive at first, but this will help you make sure you don't leave out any important details.
501(c)(3) and other types of nonprofits
Texas recognizes several types of non-profits, including educational. charitable, scientific, religious, healthcare and veterans organizations. None are automatically tax-exempt. To achieve this status, non-profits must file Form 1023, an Application for Recognition of Exemption, with the IRS.
Considerations for starting a nonprofit
- Only your corporation's assets or property are vulnerable to your nonprofit's lawsuits or creditor claims. The personal property of trustees, officers and managers is not at risk.
- Planning a nonprofit requires significant time and effort.
- If control, autonomy, and independence in running your organization are important to you, nonprofit status may not be right for you.
- Meeting Texas' incorporation filing requirements takes time and money.
Requirements and mandatory forms for creating a nonprofit
- File a Certificate of Formation, which is similar to Articles of Incorporation, with the Secretary of State, using Form 202.
- If your nonprofit was initially incorporated in a state other than Texas, file a Nonprofit Corporation Application for Registration using Form 302.
- File a Consent of Registered Agent to Appointment, using Form 401-A.
- If you want to reserve a business name, file a Name Reservation, using Form 501.
- If your nonprofit was initially incorporated in a state other than Texas, file a Name Registration, using form 502.
- If your nonprofit will use an assumed name, file Assumed Name Form 503.
- File a nonprofit periodic report, or informational report, if requested, using Form 802. The Secretary of State can't request an informational report more than once every four years. If an informational report is requested, you must file it within 30 days, or forfeiture of your nonprofit status and possibly involuntary termination can result.
How to retain your nonprofit status
After you achieve nonprofit status, you must turn your attention to keeping it. This involves filing your Certificate of Formation for a Nonprofit Corporation, the Consent of Registered Agent to Appointment, the Nonprofit Corporation Application for Registration, and keeping current with your nonprofit periodic reports or informational reports.
Tax-exemption and other benefits
Federal tax exemption:
- To obtain status as a 501(c)(3) corporation with exemption from federal income taxes, file Form 1023, Application for Recognition of Exemption with the IRS.
- To retain your tax-exempt status, file Form 990-N, Form 990-EZ or Form 990 with the IRS, depending on your non-profit's annual gross income.
State tax exemption:
- Meet the requirements of Texas Comptroller of Public Accounts to obtain tax-exempt status.
- The Secretary of State's Form 202 meets minimum state law requirements for tax-exempt status.
What it costs to form a Texas nonprofit
- The Lone Star State charges a $25 filing fee for non-profit Certificates of Formation.
- It costs $5 to file a Consent of Registered Agent to Appointment,.
- It costs $5 to file a Nonprofit Periodic Report.
- The IRS charges an $850 application fee to nonprofits with annual revenues exceeding $10,000. If you expect that your nonprofit's revenues will be less than that, the fee is only $400.
Texas & national nonprofit resources
Texas Association of Nonprofit Organizations (TANO): TANO's site provides technology, organizational development, professional development, program services, risk management and library resources.
North Texas Nonprofit Resources: "Grant Central Station" has provided grant writing, fundraising and development consulting services to North Texas nonprofits since 2004.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.