When forming a Non-Profit in California, you have to select a name for your organization first.
Your Non-Profit cannot be named anything similar to existing businesses in the Secretary of State’s records. For additional restrictions to naming conventions for Non-Profit Corporations, refer to this guide.
To ensure that the name you selected is not yet taken, go to the business name database and run a search. Additionally, a reservation for Non-Profit name can be done by sending a Name Reservation Request Form.
The next step to starting a California Non-Profit is to elect the initial list of directors and officers. Selecting California Non-Profit officers and directors is required by state law.
A minimum of one director is required to incorporate a Non-Profit.
A California Registered Agent is required of your Non-Profit Organization. The following state rules should be observed when hiring a Registered Agent in California:
1) A Corporation cannot be its own Agent; 2) Agents need to be a resident of California; 3) Agents need to have a street address, not a PO Box, in the state; and 4) Agents have to be be available during all office hours.
You can hire a Registered Agency and pay up to $160, or get an Agent for free when you incorporate your Non-Profit with IncFile!
Your Non-Profit Corporation is created by filing an Articles of Incorporation. Using the Articles of Incorporation form, you can file it with the Secretary of State of California.
Fill it out completely, following the instructions provided in the form as well. When you’re done, you can file the form through mail with the corresponding filing fee.
As the form itself does not automatically render your Corporation Non-Profit, the languages below should be included in your form:
Putting these languages will ensure that you receive tax exemption status from the federal and state government.
The first board of directors meeting is a crucial organizational meeting for your Non-Profit. At this time, the following things are decided:
A minutes of the meeting should be created and should be duly signed by the members of the board of directors.
A Corporate Records Binder should contain all your registration documents, compliance papers, business taxes, licenses, and all other important documents for your Non-Profit. A Corporate Records Binder is stored in the Non-Profit’s office.
Although not an explicit Corporate requirement, having one is highly advised. This can be bought at an office supply store or online through Amazon.
An Employer Identification Number (EIN) is a nine-digit number that identifies your California Non-Profit.
An EIN can be easily obtained via the online application at the IRS website or alternative options outlined in our California EIN guide.
When starting a California Non-Profit, you need to keep your business and personal finances separate by opening a separate bank account. This keeps all assets separate in the eyes of the state of California.
Another important thing to note is that opening a business account can help you keep finances on track. You should monitor the ins and outs, put the profits and assets where they belong.
There are many options available from Bank of America to Chase. For a quick outline of the best place to open a business checking account, check out this roundup.
To apply for federal tax and state tax exceptions, you must follow the steps outlined below:
The first step to obtaining a California Non-Profit tax registration exemption is to file a Form 1023 or the Application for the Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code.
This form is quite lengthy, so you should refer to the actual form for the instructions provided. Also, please fill out the form accurately to avoid any problems when filing your exemption. To qualify for an easier form for small Non-Profit Organizations you must have an annual gross less than $50,000 with assets less than $250,000. If you qualify for these conditions, you can use Form 1023-EZ instead.
For more information on the details of Form 1023 and Form 1023-EZ, you can refer to the actual forms or you can visit the IRS website.
As soon as a federal tax exemption is filed, the next step is to check for requirements in registering for Non-Profit taxes at the state level. This means you have to check the Franchise Tax Board to avail of tax exemptions.
California has fundraising policies that will affect you depending on the size of your organization and its activities. For requirements and forms on fundraising activities, you can visit the website of the Office of the Attorney General.
After taking care of tax requirements, you should also adhere to the business licenses and regulations that you need to adhere to. Depending on your industry and area, the requirements will differ.
For more information, visit SBA.gov or look into this package where professionals find all the specific requirements on your behalf.
Now that you have followed the steps above, you are an official Non-Profit organization in the state of California. Other than those 10 steps that are based on state guidelines, here are 2 additional steps based on best practices for starting a successful organization. Not required, but highly recommended.
Every organization has to deal with a lot of business risk; but many of these issues can be more easily solved or avoided if you have a business plan in place.
When you’re starting a Non-Profit Organization in California, you need to write a business plan. Use the references below to create a concrete business plan.
Before you start marketing your California Non-Profit, it is important to have a business website. This will give you added credibility and show future customers what you stand for.
Rather than hiring a professional designer, you can build a custom WordPress website by yourself with minimal tech skills. Learn how from start to finish through this simple setup guide.
This article is an informational guide only. Assuming that it is legal advice is strongly discouraged. Your lawyer is the expert to talk to when starting a Non-Profit organization in California or starting a new business in general.