The process of forming a nonprofit organization in Texas is similar to forming any other business entity. However, there are many types of nonprofit organizations, and if you plan to accept donations, there will be a few additional requirements for you to gain 501(c)(3) nonprofit status.
Create articles of incorporation and name directors
Articles of incorporation must be filed and include clauses to help ensure you will receive tax-exempt status. Articles of incorporation determine how your organization will be governed and its mission. This document is one of the most important formation documents for a nonprofit and is required by the IRS to be declared a tax-exempt entity.
The articles of incorporation also identify your registered agent, who will receive all legal communications for your corporation, and it identifies your directors. The state of Texas requires three directors minimum, one president and one secretary to serve on the board for this type of business formation.
Next, you will need to hold the first meeting of the nonprofit, where your board of directors will officially be elected and the organization’s bylaws will be adopted. The secretary will need to take a record of the minutes of the meeting and file them in the company’s corporate book.
Employer ID number and tax-exempt status application
Once required documents have been filed with the secretary of state, you must request a federal identification number through the IRS. You must also complete paperwork with the IRS for 501(c)(3) tax-exempt status. Texas requires that you file for tax-exempt status with the state, including sales tax and franchise tax exemptions.
Before your organization can accept any donations, you will need to register as a charitable entity with the secretary of state. Once approved, you will then need to make yourself familiar with ongoing business state requirements moving forward.
Your nonprofit organization comes with many advantages. Directors, trustees and other personnel enjoy the same liability protections as other entities and can even set up retirement plans for administrative members and employees.