STEP 1) VERIFY & SECURE NAME

Choose a Business NameThe first step is to secure the name. There are no requirements for designators like Inc., but there are some restrictions if you want to use certain identifiers. Also, the name you choose should be unique, unlike any registered business entity of any kind. Here’s a few resources:

STEP 2) APPOINT A REGISTERED AGENT

Choose a Registered Agent

A Registered Agent is an individual citizen of Texas or recognized/registered business entity in the state with a street address (typically non-P.O. Box) responsible for receiving and helping to handle/process all official documents on your non-profit’s behalf like state filings, legal notices, important tax forms, etc.

That said, you can hire a third party service and pay up to $160 a year or get an qualified registered agent free of charge when you incorporate with IncFile or Incorporate.com.

STEP 3) SELECT INCORPORATORS & DIRECTORS

Choose the Initial Directors

An incorporator is the individual(s) responsible for executing the Certificate of Formation (Step 5) with the state which declares the basics of your entity for the public record (including your brand name). Texas only requires one. Then, if your non-profit is run by directors vs. members, you’ll need to appoint at least 3 directors that oversees the non-profit until your initial meeting (Step 7) where official directors can be voted on.

This part can be somewhat complex because of the legal/tax nature of non-profits which is why it’s a good idea to either hire the best non-profit lawyer you can afford or work with professional service providers. They can help you understand the ins and outs of choosing initial directors and so much more depending on your needs and who you have on your team/board.

STEP 4) DRAFT NON-PROFIT BYLAWS

Register an LLC

In order to become an incorporated not-for-profit business entity (vs. unincorporated and zero legal protection), your brand will need official bylaws which not only govern the way it’s run but also provides a path to where it’s headed!

  • How exactly the non-profit is governed – by board (directors) or membership.
  • How meetings are held, voting procedures, electing officers or directors.
  • Keeping and managing records.
  • Adding/Amending bylaws and handling disputes.
  • Keep in mind that any changes to these bylaws will need to be reported.

To get started, check out this savvy Bylaws Template so you can get an idea for how they’re structured and how you can begin customizing the default corporate form to suit your non-profit. 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.

STEP 5) FILE CERTIFICATE OF FORMATION

Business LicensesOnce you and your team decide it’s time to form the initial corporation, file your non-profit Certificate of Formation with the state by mail, fax, or in-person. Plenty of further instructions are on the form, but the basic information asked should include:

  • The name, type, duration of existence, and statement of purpose (provisions for non-profit vs corp);
  • Complete names & addresses of registered agent (and office), incorporators, and directors.
  • Any specific provisions/bylaws set forth as part of the internal operations of your organization.
  • A stipulation of apportioning assets to any 501(c)(3) upon termination of your organization.

Filing Fee: $25

STEP 6) START A CORPORATE RECORDS BOOK

File Annual Reports & Publication Requirements

Where will your non-profit keep a record of all it’s critical paperwork so it can quickly show state or federal agencies that it’s organized and being run in a legal way? For example, if there was an audit. Along with “the cloud” and conventional filing cabinet folders, we advise having a physical records book as well.

This is where to keep copies of your Texas registration documents, major transactions, licenses and permits, minutes of meetings, important contracts, etc. You can find them at nearby office supply stores, grab one online through Amazon, or get sleek beautiful Corporate Kits which include records books/binders you can brand for as little as $99.

STEP 7) CONDUCT INITIAL MEETING

Hold a Meeting with Your Board of Directors

Now it’s time to conduct your first non-profit meeting which is going to be very organizational/foundational in nature. Don’t forget to record “minutes” of the meeting and have it signed by all attending directors. Here’s a Corporate Minutes Template to get the ball rolling. The Agenda should look something like this:

  • Take attendance and show you have a quorum (minimum number needed).
  • Appoint temporary officers, chairmen, secretary, etc.
  • Adoption of the bylaws set down in Step 4.
  • Where to set up a bank account (Step 10), file state reports, etc.

Those are the basics, but depending on the nature of your non-profit and how many members/directors are at the meeting there could be a lot more to discuss. It’s a huge move in the right direction though, so celebrate afterwards!

STEP 8) GET AN EIN

Get an EIN for Your LLC

What’s an EIN? For all legally registered business entities, as well as non-profit entities, they are a 9-digit federal “Employer Identification Number.” It’s used to track your business activity to ensure compliance, allow you to set up an official bank account, legally hire team members/employees, and so on.

While in the past it used to be a bit of a pain, these days you can get one quick, free, and easy by submitting an application online directly through the IRS Website.

STEP 9) HANDLE LICENSING & EXEMPTIONS

Small Business Taxes

Now’s the point to ensure your non-profit is 100% compliant in terms of not only licenses/permits, but state and federal taxes. You should be able to apply for tax exempt status now that the corporation is established.

  • Download IRS FORM 1023 – Application for the Recognition of Exemption under Section 501(c)(3).
  • Or Form 1023-EZ – streamlined form but must be under $50k annual gross receipts and $250k in assets.
  • Bookmark the TX Comptroller site and TXNP to get more state-specific info.
  • If you need help, check out Business License Research packages that take care of some legwork.

Also, you might want to bookmark the Dallas/Fort Worth (or another closer one) district office of the Small Business Administration and Sec. of State’s SOSDirect site as they’re going to have tons of valuable information and connections.

STEP 10) SETUP A BUSINESS BANK ACCOUNT

Best Business Bank Account

When you form a non-profit, it’s very important to keep all personal and business assets/accounts completely separate. So don’t take this lightly. Where should you start building the financial persona of your project/initiative? Who is offering the best overall services to corporate/non-profit clients, relative to location and other conveniences?

If you think it’ll be helpful, look into this short breakdown of Business Checking Accounts to start brushing up if all this is unfamiliar territory. Where your non-profit banks is a critical move, which is why it should be discussed at length in your initial meeting.

OPTIONAL) WORK ON A FUND-READY PLAN

Write a Business Plan

No matter what stage of non-profit development you’re in, if you plan on going “all the way” then you’re going to need to get down to some basics and plan accordingly. No serious initiative gets to extreme heights of impact without a game plan. That’s the honest truth.

What does this mean? It means a presentation/fund-ready plan that focuses on core fundamentals for the purpose of showing VC-types, lending institutions, potential partners, volunteers, donators, etc. Feel free to use LivePlan and the special discount they offer our readers to your non-profit’s advantage.

OPTIONAL) PUBLISH A RESPONSIVE WEBSITE

Build a Business Website

Start small, simple, and responsive then build over time only as your non-profit needs grow. Don’t spend $4000 on a site when you have no funding. Ideally, use volunteers and funding to build from a basic landing page or agency-style site into something much more extensive.

It’s about marketing potential. It’s about brand expansion. It’s about amazing impact and giving search engines a way to show your project or initiative to the world. If this is your first web design rodeo, consider using a website builder like Wix or Weebly, which completely simplify the process. Both are really easy to use and affordable.

Need Help Forming Your Organization?

Have a reliable non-profit filing service like Swyft Filings or LegalZoom do the work for you. Just answer a few questions about your organization and they’ll take care of the paperwork.

Visit Swyft Filings Or Visit LegalZoom

Note that this article on how to form a non-profit organization in Texas isn’t a legal document or legal advice. It’s for informational purposes and the information above is subject to change. For specific legal questions regarding how to form a non-profit organization in Texas or business in general, please consult with a non-profit/corporate lawyer or other accredited professional.