California Nonprofit Corporation Law
Many types of groups organize under the California nonprofit law to get recognition for their endeavors, safeguard officers and directors from liability and become eligible for public and private grants. California nonprofit organizations play a significant role in enhancing communities, neighborhoods and counties statewide. They provide a wide variety of services, including assisting with natural calamities, providing housing assistance to the homeless, supporting the arts and protecting human rights.
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Types
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Current law allows for 27 types of organizations, including business associations, fraternal organizations, social and recreation clubs, religious organizations and holding companies for pensions, and mutual insurance companies.
Forming the Nonprofit
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Select a name for the entity. Make it unique and not misleading relative to names of other California corporations. Prepare the articles of incorporation. Use the form provided by the state; follow the directions for creating the document. File the articles of incorporation with the Secretary of State. Create the bylaws for your nonprofit entity. The bylaws must outline the organization's internal laws and procedures. The law also mandates that a copy of the bylaws always remain at the principal place of business.
Prepare a public disclosure document called the Statement of Information and file it with the Secretary of State. The document must state the purpose of the organization and the names and addresses of the officers. Also include the nonprofit's principal address and the name and address of the agent responsible for accepting legal and tax documents for the organization. Get an Employer Identification Number (EIN).
The incorporating officers and/or directors must hold a meeting for adopting bylaws and elect the initial directors of the organization. Keep notes on the meeting and keep the record book at the principal place of business. File the federal and state forms for tax-exemption status with the federal government.
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Directors
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The regulations require at least one director, and you must list the directors in the nonprofit's articles of incorporation or the bylaws. California regulations prohibit more than 49 percent of the board of directors as "interested persons," defined as individuals who provide other services, or "nondirector" services and receive consideration for the services. California nonprofit benefits corporation directors do not have to live in the state.
Time Frames
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Within 30 days after the organization starts receiving or accumulating assets, file with the Attorney General's Registry of Charitable Trusts, even if you do not have all the required documents. File a Statement of Information with the Secretary of State every two years. The clocks starts ticking toward the deadline for filing tax-exempt status once you file the articles of corporation. The IRS requires nonprofit corporations to file Form1023 within 90 days of the end of the year if it has receipts of more than $5,000.
Expert Insight
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The Public Counsel Law Center recommends delaying filing the incorporation documents because the tax exemption document may take longer than anticipated. Exceptions apply if the nonprofit has already opened for operation, and may incur liabilities; or the entity completes the tax exemption application and can file the form right away. Consult with an attorney to decide how to proceed.
Warning
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The Internal Revenue Service may classify you as a private foundation or a public charity. Make sure you understand the difference and how get the proper designation for your nonprofit. A private foundation may have to pay excise taxes.
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References
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