Before You Begin
Consider Forming a 501(c)(3)
To form a nonprofit corporation in Texas, follow the steps below. It is also advisable for your Texas nonprofit to obtain a 501(C)(3) status from the IRS, as this will enable federal tax exemption for your Texas nonprofit corporation. Learn more about 501(c)(3) nonprofits here.
To start a 501(c)(3) nonprofit corporation in Texas you must:
You will need the following documents:
- Form 202: Certificate of Formation - Nonprofit Corporation (Instructions) (Form)
- Bylaws and Conflict of Interest Policy (Instructions) (Templates)
- IRS Form SS-4: EIN Application (Instructions) (Form)
- IRS Form 1023: 501(c) Application (Instructions) (Form)
In addition, most 501(c)(3) charities in Texas will also want to apply for state tax exemptions using the Texas Application for Exemption.
Forming a Nonprofit in Texas is easy, just follow these 4 steps:
Step 1: Name Your Texas Nonprofit
The name you select for your nonprofit will establish its brand. It is the first thing most people will learn about your organization. It is important to pick a name that both aligns with your mission and follows the rules of naming in Texas.
To learn more, read our How to Name a Nonprofit in Texas guide.
Nonprofit Naming Guidelines
- The name you pick for your organization must not include:
- Words related to the United States Olympic Committee such as: 'Olympic', 'Olympiad', or 'Citis Altius Fortius'.
- Terms associated with financial institutions such as 'Bank', 'band and trust', or 'trust company'
- Any words or terms that could be considered grossly offensive
- The name need not include an organizational designation such as "Inc.", "Ltd.", "Incorporated", or "Company"
- You can read the Secretary of State's official guidelines for the complete rules on naming a Texas-based organization.
Is the Name Available?
The name of your nonprofit must be distinct from any existing corporations in Texas. To check availability and secure your corporation’s name we recommend the following resources: Use theBusiness Entity Search to make sure the name you have selected has not already been taken.
Is the Website Domain Name Available?
If you plan to have a website for your organization, you will want to make sure that a suitable URL is currently available on GoDaddy.
You may want to buy any URLs you are interested in, to make sure they are available when you are ready to finalize and create your website.
Step 2: Appoint A Texas Registered Agent
A nonprofit corporation in Texas is required to have a registered agent with a Texas address.
What is a Registered Agent? A registered agent is an individual or business entity responsible for receiving important legal documents on behalf of your business. Think of your registered agent as your business' point of contact with the state.
Who can be a Registered Agent? A registered agent must be a resident of Texas or a corporation, such as a registered agent service, authorized to transact business in Texas. You may elect an individual within the company including yourself.
NOTE: A registered agent must have consented to being the designated registered agent for your organization before you can file the Articles of Formation.
Step 3: Select Your Board Members and Officers
The directors of a nonprofit are responsible for overseeing the operations of the organization. The directors come together to form a board.
Features of directors:
- All the directors of an organization together form the board of directors.
- The power and influence of the directors over the organization is as the board of directors, the directors do not have authority as individuals.
- The board typically creates the policies that govern the nonprofit. The board of directors also oversee management-level hiring like that of the officers.
The officers of a nonprofit (such as the president or the secretary) are individuals with responsibilities, and the authority to execute based on their job descriptions.
Together, the officers and the board will come together to make up the organizational structure of your nonprofit.
An officer may also be on the board of directors and serve both roles if allowed to do so by the organizational bylaws created by your team.
The organization structure of your nonprofit in Texas MUST include:
- At least 3 directors not related to each other
- A president
- A secretary
NOTE: The president and secretary positions cannot be held by the same person.
To learn more, read our guide on how to select board members for your nonprofit.
Step 4: File The Texas Certificate Of Formation
To become a nonprofit corporation in Texas you must file Form 202, the Certificate of Formation for nonprofit corporations.
Here are the sections that you will need to complete.
Section 1: Entity Name and Type
Enter the name you selected in Step 1.
Section 2: Registered Agent and Registered Office
The registered agent can be any entity registered to do business in Texas or any person who is a resident of the state. Your organization cannot act as its own registered agent.
Any person you designate as the registered agent must have explicitly consented to act as the registered agent for your organization, but you do not need to include proof of such consent with your Form 202.
Enter the information of the registered agent you selected in Step 2.
Section 3: Management
At least 3 directors will need to be named.
When filling the form do not use any prefixes such as “Mr.” or “Ms.” and only use the suffix box for titles of lineage such as ‘Jr.’, ‘Sr.’, or ‘III’ but not for designations such as M.D. or Ph.D.
Since this document will become public record you may want to use a post office box address rather than a residential address to maintain privacy.
Enter the information of the directors selected in Step 3.
Section 4: Membership
Select the box appropriate depending on whether or not your nonprofit corporation will have members.
Section 5: Purpose
Describe the purpose of your nonprofit organization.
In order to qualify for 501(c)(3) status, the organization’s purpose must explicitly be limited to one or more of the following:
- Testing for public safety
- Fostering national/international amateur sports competition
- Preventing cruelty to animals/children
NOTE: You can read the IRS guidelines here.
Section 6: Supplemental Provisions/ Information
Use this section of the articles of formation to formally state what the assets of the organization will be used for, and what will happen to the assets if the organization is dissolved.
To be eligible for 501(c)(3) status, you must convince the IRS that the organization’s assets will always only be used for the purposes approved under 501(c)(3) rules. To this end, you must include provisions ensuring that in the event your organization is dissolved, the assets of the organization will be used towards tax-exempt purposes.
Section 5 of this sample document provides an example of these provisions required for 501(c)(3) eligibility.
Section 7: Organizer
The organizer, commonly known as the incorporator, is the person who completes, signs and submits the certification of formation. This person does not need to be a part of your organization. This can be you or a lawyer helping you with the process of formation.
Section 8: Effectiveness of Filing
This section allows you to determine when you want your nonprofit corporation to officially form.
Option A: your organization will officially form when the secretary of state files your certificate of formation.
Option B: allows you to select the start date which can be up to 90 days after filing.
Option C: allows your corporation to officially form after the occurrence of a specific event up to 90 days after filing. An example of an event could be raising a certain amount of money, etc. (You must describe the event and explain how it will affect the incorporation procedures. In addition, you will need to file a statement with the secretary of state within 90days of filing form 202 regarding the event.)
NOTE: It is probably best to pick either option A or B.
Section 9: Execution
When you sign and date the form you are affirming everything written in the form. You are also affirming that the registered agent you have listed has already consented to be the registered agent for the nonprofit organization.
You can submit your Certificate of Formation in one of three ways: online, by mail, or in-person.
The filing fee is $25.
- Personal checks or money order must be made payable to the "Secretary of State"
- Filings paid by credit card will require a 2.7% convenience fee. Paper forms must also submit a Payment Form.
- Accepted credit cards include American Express, Discover, MasterCard, Visa, or LegalEase debit cards
- Cash payments are accepted for in-person filings
Submit 2 copies of the Certificate of Formation (the original plus a copy) to the mailing address found below:
Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
Submit 2 copies of the Certificate of Formation (the original plus a copy) to the office address found below:
James Earl Rudder Office Building
1019 Brazos St
Austin, TX 78701
Nonprofit Formation FAQ
How long does it take to process Form 202?
If you file online it typically takes about 2 business days. If you file by mail or in-person you may get a response in 5-7 business days. If you have filed by mail or in-person you can choose to pay an optional expedite fee of $25 to cut down on the processing time.
How do I contact the Secretary of State for more information?
You can call for information at (512) 463-5555 or visit them at their website.
Nonprofit Operating Procedures and Housekeeping
Draft Bylaws And Conflict Of Interest Policy
There are two documents that will be central to the running of your nonprofit:
Bylaws: These are the rules that determine how your organization will be governed and run.
You can think about it as a constitution for your nonprofit. It makes the rules and priorities clear for everyone involved.
In your bylaws be sure to include:
- How the nonprofit will be governed – the role of directors and officers
- How meetings are held, voting procedures, electing officers or directors.
- How records will be kept and managed
- How disputes will be handled
- How bylaws will be added amended in the future
NOTE: Keep in mind that the bylaws will supplement any rules set forth by the federal government or the state.
Ready to get started? Check out these bylaws templates which you can customize to suit the needs of your organization.
The Conflict of Interest Policy: These are the rules set to ensure that decisions being made for the nonprofit are based on what is best for the organization, and not being motivated by what is best for individuals.
Under Appendix A the IRS provides a sample Conflict of Interest Policy.
NOTE: You will want to have both these documents drafted before for your first organizational meeting
Conduct An Organizational Meeting
An organizational meeting is the first official meeting of your nonprofit! Some of the things that are discussed in a typical organizational meeting:
- Taking attendance to show you have a quorum (minimum number needed)
- Appointing temporary officers, chairmen, secretary, etc.
- Adoption of the bylaws
- Adoption of conflict of interest policy
Don’t forget to record “minutes” of the meeting and have it signed by all attending directors. Here are some corporate minutes templates to help you get the ball rolling.
NOTE: This meeting must occur before your organization can apply for 501(c)(3) federal tax exempt status.
Get An EIN
An EIN or Employment Identification Number (also called a Federal Tax Identification Number or Federal Employment Identification Number), is used to uniquely identify a business entity. You can think of the EIN as a social security number for your nonprofit.
The EIN is required for your organization whether or not it will have any employees.
The EIN will be used for things like:
- Filing for 501(c)(3) status
- Opening a bank account
- Applying for tax-exempt status
- Submitting tax returns
Once your nonprofit is formed, you can apply for an EIN for your nonprofit via Form SS-4.
NOTE: If you use a nonprofit formation service, EIN assistance might already be included in the package.
Open A Business Bank Account
You will typically need to take with you the following items to open a bank account for your nonprofit:
- The EIN for the nonprofit
- A copy of the nonprofit’s bylaws
- A copy of the Certificate of Formation
If your nonprofit has several directors or officers, some banks may also ask for proof that you are authorized to open the account on behalf of the nonprofit.
There are many great options when it comes to picking a bank. Here are the reviews of the top 5 business bank accounts we recommend.
NOTE: It is always best to call ahead. Your bank may require some additional documents.
Start a Corporate Records Book (Optional)
As a nonprofit corporation, your organization will need to keep track of many important documents. This includes documents such as:
- Certificate of Formation
- Tax forms
- Nonprofit bylaws
- Meeting minutes
We recommend starting a dedicated corporate records book early so that as you start receiving these critical legal documents, they can be kept organized from the very beginning.
While you can keep track of everything using supplies from any office store, it may be easier to use a pre-assembled kit that has the things you need in one place. Blumberg and Bindertek have some options specifically designed to meet the needs of nonprofit corporations.
How to Apply for Tax Exemptions
Your nonprofit organization must apply to both the IRS to be exempt from federal taxes, and to the Texas Comptroller of Public Accounts for exemption from state taxes.
NOTE: In Texas, you do not need to be exempt from federal taxes in order to apply for exemption from state taxes.
Applying for Exemption from Federal Taxes - 501(c)(3) Status
Before your nonprofit can apply for 501(c)(3) status it must:
- File the Articles of Formation with the required provisions (As covered in Step 4, Sections 5 & 6)
- Adopt the bylaws and the conflict of interest policy
- Have an EIN number
There are two exceptions:
- If your organization’s annual gross receipts are below $50,000 then you may be able to file Form 1023-EZ (fee: $275). Check your eligibility here.
- If your organization is a religious institution or has annual gross receipts in each taxable year of no more than $5,000 you may be considered tax-exempt without filing Form 1023.
NOTE: Religious institutions and organizations with gross receipts under $5,000 can still choose to file Form 1023. This would give them a determination letter that specifies that contributions to the organization are tax-deductible.
Applying for Exemption from State Taxes
Once you have received your 501(c) determination letter from the IRS, you can file for state income tax exemption using form AP-204.
To file to obtain sales tax exemption fill out Form AP-205, Application for Exemption - Charitable Organizations
Nonprofit Tax FAQ
When should an organization apply for federal tax exemption?
Form 1023/1023-EZ must be filed within 27 months from the end of the first month your organization was created.
How long will it take for the IRS to process Form 1023/1023-EZ?
Soon after sending your application you should receive an acknowledgment of receipt of your application.
If your application is simple and complete, IRS will send your determination letter within:
- 90 days for Form 1023-EZ
- 180 days for Form 1023
If you have not heard from them by that time you can call (877) 829-5500 to enquire about your application.
Protect Your Nonprofit
Get Business Insurance
As with any other business, there may be risks involved in running the nonprofit. Getting insurance for your nonprofit allows you to focus on your passion while minimizing your liability.
Here are some of the common types of insurance you may want to consider for your organization:
- General Liability Coverage
- Directors and Officers Coverage
- Social Service Professional Coverage
Your coverage needs will vary based on your organization and the work you do.
Properly Sign Legal Documents
There will be times when you will be signing a document on behalf of your nonprofit. It is important that these times are easily distinguishable from when you are signing a document as an individual. If a document isn’t properly signed, you might suddenly find yourself personally responsible for something the organization should have been liable for.
To avoid such confusion we recommend you and all the members of your organization follow the following format:
- The official name of your nonprofit
- Your signature
- Your full legal name
- Your position in the organization
How To Keep Your Nonprofit Compliant
Get A Registered Agent
Nonprofits that have incorporated are required to maintain a registered agent with an office address in Texas. If the agent or the office address changes, you must file Form 401 with the Secretary of State to effect a change to the Certificate of Formation.
NOTE: Failure to do so may result in termination of the corporation.
File Required Periodic Reports
The secretary of state may require your organization to file a report, no more than once every four years. If a report is required, the secretary of state will send a notice to the registered office with instructions on when the report is due.
NOTE: Failure to file a requested report may result in the termination of the corporation.
Pay Your State Franchise Tax
Every nonprofit corporation in Texas needs to pay a franchise tax unless the organization has received an exemption from the Texas Comptroller of Public Accounts. Click here to determine whether your organization can apply for exemption from the franchise tax.
NOTE: Even after applying for exemption, your organization must keep paying the franchise tax until the exemption has been approved.
For more information, you can call the Texas Comptroller at 1-(800)-252-1381 or email them at firstname.lastname@example.org
Determine Texas Business Permits and Licenses
As a nonprofit in the state of Texas, your organization will not need a general business license.
If your organization will be selling goods or services, you will need a Texas Sales Tax Permit from the Texas Comptroller’s Office. You can easily fill out this application online.
If your nonprofit is a charity, it is very likely that it is automatically exempt from registering with the Office of the Texas Attorney General. There are two main exceptions to this rule:
- If your organization will be raising money for veterans, you must register with the Texas Secretary of State using Form 3501, Veterans Organization Solicitation Registration Statement and Form 3502, Veterans Organization Solicitation Bond. The cost associated with this will depend on the nature of your organization and how many counties your organization plans to solicit. This status must be renewed every year, due on the date of registration.
- If your organization will be engaging in phone solicitation to raise money for law enforcement, you will need to go to the office of the attorney general and pay a $50 filing fee. In addition, a $50,000 surety bond will be required if your organization will be retaining the services of a commercial telephone solicitor.
You can read more about the Texas Law Enforcement Telephone Solicitation Act (LETSA) and how it affects your organization here.
Public Inspection Rules for 501(c)(3) Organizations
Organizations that have been granted the 501(c)(3) status are required to disclose the following documents to the public when requested:
- Annual returns for 3 years after the due date (this includes returns like Form 990, 990-EZ, 990-PF, and any Forms 990-T)
- All Form 990 Schedules (except portions of Schedule B), attachments and supporting documents.
- Application of exemption and all supporting documents such as Form 1023
- The official paperwork from the IRS that shows that your organization has tax-exempt status.
The following do NOT need to be shared with the public
- Portions of schedule B of Form 990/990-EZ that identify the contributors. ( You only need to disclose the amount contributed and the nature of the contributions)
- Any unfavorable rulings such as an earlier denial of tax-exempt status.
- Any information the IRS has said you can withhold. This may include things like sensitive patents and trade secrets.
How long do I have to produce these documents if requested?
Ideally within the same day. If your organization doesn’t have an office or maintains limited hours during parts of the year, the information should be made available within two weeks.
Do I need to provide copies of the documents?
If someone asks for copies in person or in writing you must provide them with copies.
Can I charge for copies?
You can charge a reasonable amount for making copies of the documents requested.
NOTE: It may be easiest to have the documents available on your website so that anyone who requests copies can be sent to the site. This allows you to stay compliant without having to spend a lot of time dealing with document requests.
Annual Returns for Tax-Exempt Organizations
Most tax-exempt nonprofit organizations are required to file an annual return with the IRS (Click here for a list of exceptions).
Which form you should use to file the annual returns depend on the annual gross receipt amounts for your organization.
‘Gross receipt’ is defined by the IRS as “the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses”
- For gross receipts < $50,000 --- File 990-N
- Gross receipts <$200,000 and total assets <$500,000 --- File 990-EZ
- Gross receipts > $200,000 or Total assets > $500,00 --- File 990
For any questions, you can call the IRS at
- (800) 829-3676 (Form-related questions)
- (800) 829-1040 (General information)
When is form 990 due?
You have a little over 4 months after your taxable year comes to an end to file Form 990. It is due on the 15th day of the 5th month. So if your taxable year ends on Dec 31st, your form 990 is due on May 15th.
NOTE: If your organization fails to file form 990 for 3 consecutive years, it will automatically lose its tax-exempt status.
Report Unrelated Business Income
If your organization has a gross income of >$1000 from a trade or business that is not related to the stated purpose of the organization, then it must file Form 990-T to pay tax on that income.
If you expect to pay $500 or more for the year in taxes on unrelated business income, your organization must pay a quarterly estimated tax on the unrelated business income using Form 990-W.