To start off, give your Non-Profit a name. This name should be uniquely distinguishable, and it should not resemble, even closely or similarly, to any existing business entity name reserved or registered with the Secretary of State of Texas.
You can check for name availability through a preliminary name check by calling or emailing the Secretary of State’s Office. You can also check the name with SOSDirect.
A Name Reservation may be filed with the Secretary of State valid for 120 days. It can be filed online or through postal mail. A $40 filing fee should be paid.
A minimum requirement of three initial directors needs to be elected for your Texas Non-Profit. The director/s should be 18 years old and above or it can be another business entity. For cases where members manage the Non-Profit, there is no need to elect directors.
An agent for service of process has to be hired to receive legal papers in behalf of your Non-Profit in cases where there is a lawsuit involved or for instances when there are documents and requisites that the state needs from your organization.
The Texas Registered Agent can be an individual or another business entity in Texas. A physical street address must also be provided by the agent upon designation.
A Registered Agent service can cost up to $160 per year, but if you incorporate a Non-Profit with IncFile, you can get a free Registered Agent service.
A Certificate of Formation should be filed to be legally registered as a Texas Non-Profit with the Secretary of State.
Upon filing, the following information is necessary: name of the organization, notice that the organization is a Non-Profit, the purpose/s of the Non-Profit, name and address of the Registered Agent, name and address of each of the Non-Profit organizers, statement whether the Non-Profit will have members and whether management is to be assigned to members, number of initial directors, and the name and address of each of the directors. For further details on other information to be included in the Certificate of Formation, refer to provisions stipulated in BOC Sections 3.005 and 3.009.
Since the Certificate of Formation only includes minimal information in creating a Texas Non-Profit, there are several languages that need to be inserted in the certificate to obtain an IRS 501(c)(3) tax exemption status. These languages include:
An initial meeting with the board of directors you have elected should be immediately scheduled. This is to ensure that the board can decide on a number of agenda:
A minutes of the meeting recording the agenda and the actions taken by the board of directors should be immediately drafted and signed by the attendees.
A Corporate Records Binder is simply a file organizer that stores all the vital documents for your Non-Profit. Documents such as the Certificate of Formation copy, minutes of the meeting, legal notifications, and more.
A Corporate Records Binder can be bought at your nearest local office supply chain shop or you can order direct via Amazon.
A federal Employer Identification Number is for Texas Non-Profits. A 9-series unique number, your EIN serves as the distinctive identifier of your Non-Profit. Aside from this main purpose, the EIN is also used for various business transactions.
You cannot operate legally and be protected by the state without an Employer Identification Number, so it is a must that you obtain one. You can apply online through the IRS website for the easiest and fastest route to obtain a number.
When you’re forming a Non-Profit, it is a must to separate your personal finances from the business’ side of your finances.
Following this best practice, you need to operate a bank account for your Non-Profit. This also allows you to easily monitor cash flow and track expenses and finances where your business is concerned.
Recommended Resource: For the best business bank account roundup for your consideration, you can look into this guide.
As soon as the Non-Profit is formed, the next step is to file for federal and Texas tax exemptions by complying the following requirements:
The first step of filing for tax exemptions is to file Form 1023, or the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. This IRS form is composed of several pages’ long of document and requires a lot of information about your Non-Profit and its owner/s. Careful attention should always be exercised when filling out this form to avoid any mistakes that could delay the application for tax exemptions.
Form 1023-EZ is an alternative to this lengthy form. Also known as the Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, this form is shorter and requires fewer information than the 1023 form. However, only smaller Non-Profits are qualified to use this form, one with an accumulated asset of lesser than $250,000 and total yearly gross receipt amounting to less than $50,000.
The next step is to obtain several state tax exemptions like sales tax, franchise tax, and hotel tax. These exemptions should be filed through the Texas Comptroller of Public Accounts. Use Form AP-204 to file these exemptions through the Texas Comptroller only when you receive the federal tax exemption from the IRS. You can also contact your area’s tax appraisal district whether you can qualify for an exemption from property tax.
There is no need to file for additional requirements or state reports when planning to conduct fundraising activities within the state. However, better check with requirements from other states should your Non-Profit conduct out-of-state fundraising activities.
For Texas Non-Profits, there may still be a number of business licenses and permits you must procure despite your 501(c)(3) tax exemption status.
Taking care of all the requirements to obtain the necessary licenses should be among your priority list to ensure that you do not encounter any problems with the federal and state governments.
Recommended Resource: For professional help to gather all the required licenses and permits for your Texas Non-Profit, you can check this great resource package. If you’d prefer to do things on your own, this SBA resource guide is a valuable source of information.
The couple of steps below are an additional suggestion of best practices that will help bring your business to success. Although not mandatory, it is practiced by even the largest corporations.
A business plan is a blueprint of your business’ plan of action. It briefly outlines what the business is about, its goods/services, the objectives and goals of the business, and the steps outlining how to achieve those goals.
Contrary to belief that it is only technical business writers who can draft a solid business plan for you, business planning can be done with the help of the resources below.
Create a business website to not just establish a strong online presence but to ensure that you have a marketing tool you can effectively use to draw in prospective customers and increase sales and profit. A WordPress website can be started right now with the use of Bluehost’s one-click automatic installation.
Resource for Getting Started: For a simplistic way to getting started on a professional-looking business website today, use this step-by-step guide.
This Texas Non-Profit organization guide is only an informational article, and it should never be taken as a legal document or a legal notice. Seek the expert advice of a business lawyer for any questions in starting a Texas Non-Profit.