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How to Start a Nonprofit Corporation in Texas

How to Start a Nonprofit Corporation in Texas thumbnail
Start a Lone Star nonprofit.

More than 1.6 million nonprofit organizations existed in the United States and accounted for 9 percent of wages and salaries paid in 2010, according to the National Center for Charitable Statistics. Starting a non-profit corporation provides a rewarding experience that benefits your community -- but several considerations are important before you begin the process. Non-profit corporations cannot distribute any part of their income to corporate members or directors under Texas law. As a result, establishing a non-profit in Texas requires some forethought, legwork and legal diligence.

Instructions

    • 1

      Select the appropriate tax-exempt status for the corporation. Not all non-profit corporations are tax exempt and you must follow the guidelines provided by both the Internal Revenue Service and the Texas Comptroller of Public Accounts. If you wish to apply for tax-exempt status, you must complete the required forms after you register the business. The IRS recognizes several types of tax-exempt status, including: Section 501(c)(3) charitable organizations; 501(c)(7) social clubs; 501(c)(4), 501(c)(9), and 501(c)(17) employee benefit funds; and 501(c)(19) and 501(c)(23) veterans organizations. The type of organization you start determines the type of tax-exempt status for which you apply. For example, if you open a charitable organization you must complete IRS Form 1023 (see Resources). The Texas Comptroller of Public Accounts provides individual forms for each type of organization (see Resources).

    • 2

      Select an appropriate name for the corporation and check its availability with the Secretary of State. File form 501 to request a name reservation for 120 days, which is optional. Otherwise, you can call the Secretary of State at 512-463-5555 to check availability. You can also use Texas's SOSDirect website to check availability online (see References).

    • 3

      Identify the members of the corporation. The state of Texas requires non-profit corporations to have three directors, at minimum, plus one secretary and one president.

    • 4

      Create a certificate of formation. The certificate of formation details important information about the corporation, its members and its purpose. At minimum, the document should include the purpose of the organization, contact information for its members and directors, the tax-exempt status, the registered agent and office address, and information on the person executing the document. You can download the certificate of formation from the Texas Secretary of State website (see References). Speak with an attorney for assistance.

    • 5

      Deliver the certificate of formation in duplicate, along with the $25 filing fee (as of 2011), to the Texas Secretary of State. You can fax the form to 512-463-5709.

    • 6

      Create the corporation's bylaws. Texas requires the bylaws to include information on standing meetings, the fiscal year, leadership, corporate committees, signature controls, plus the selection, voting rights and qualifications for corporate membership. Review the "Forming a Nonprofit Tax-Exempt Corporation in Texas" booklet for additional information (see Resources).

    • 7

      Call a meeting of the directors to adopt the bylaws after your receive the accepted certificate of formation. The directors should also select the corporate officers and vote whether to file for tax-exempt status with the Internal Revenue Service.

    • 8

      Complete an application for an Employer Identification Number through the Internal Revenue Service (see Resources).

    • 9

      Complete Internal Revenue Service form 1023 for tax-exempt status, if applicable, and submit the form to the IRS (see Resources). You must submit the corporation's bylaws, certificate of formation, financial information and the Employer Identification Number.

    • 10

      Complete and submit Form AP-204 to apply for Texas tax-exempt status, if the members of the corporation elected to apply at the state level (see Resources). If you're not applying for tax-exempt status, you must apply for a sales tax and use account through the Texas Comptroller of Public Accounts (see Resources).

Tips & Warnings

  • Nonprofit corporations that have a certificate of federal tax exemption are exempt from Texas State Franchise taxes. A copy of the federal exemption certificate must be filed with an exemption request to the Texas secretary of state.

  • Federal tax exemptions for nonprofit corporations are described on the IRS website at www.irs.gov/charities/index.html.

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