How To Start A Nonprofit in Texas

Are you ready for my amazing guide on how to start a nonprofit in Texas? I didn’t think so but before getting into the fun details, I highly recommend going straight to Northwest Registered Agent who will be able to help you get all this setup without having to go through all the steps in this guide on your own.

We will go through the steps on how to name your nonprofit, figure out how to get tax exempt status and follow the Texas business organizations code but before we do any of that – let’s talk about how to name your nonprofit.

Name Your Texas Nonprofit Organization

You may be thinking that you’ve got the name figured out and you’re ready to get started but you do need to check with the Texas Secretary of State’s office to determine if it’s even available in your state. You can do that by going here and doing a Nonprofit Corporations lookup that will tell you if the business name is available.

Once you’ve figured out your name is available, it will also be important for you to lock in your digital name too. You can do that by going to Godaddy.com where you can lock in your domain name and they have an amazing website builder service to get you started quickly with a digital footprint of your nonprofit name.

Choose a Registered Agent

A registered agent or registered agent service is extremely important (and required by law) to have a Texas Registered Agent who can help you with any legal documents that will be coming your way. This is not a choice but a requirement whether it’s a nonprofit, C-Corp, S-Corp, LLC or veterans organizations that you’ve setup one of the many charitable organizations.

NORTHWEST REGISTERED AGENT HERE

If you’re going to look for a local law firm in Texas that can help you with this service you can do that too or act as your own registered agent. I highly discourage being your own registered agent because if you’re not careful you could be opening up your home address to the public which is a huge no-no for anyone.

Create your Nonprofit Board & Officers

Another major piece of the puzzle is to make sure you’re setting up your business entity to have the best nonprofit board members with the community in mind. Whether you’re starting a private school or the latest climate activist group you’re going to need some help from an attorney or law firm to follow the right steps. Typically you’ll get business advice delivered straight but it’s important to focus on getting the right people in place on your team so they can make the right choices for your nonprofit organization.

You’ll be relying on people to help you with getting the tax exemption, franchise tax (if needed) and track income and expense activity which is going to be important as you grow and build your team over time.

You’ll typically see the following types of members on a board of a nonprofit

  • Presidents
  • Vice Presidents
  • Treasurer
  • Secretaries
  • Events Chairperson
  • Membership Chairperson
  • Fundraising Chairperson
  • Volunteer Coordinator

Develop Bylaws & Conflict of Interest Policies

After you’ve decided what type of board and board members you’re going to have on your team, it’s important that you focus on setting up bylaws that your team can follow. As a nonprofit corporation that is going to act as a Texas nonprofit it’s important to set these rules up from the beginning. A Texas nonprofit corporation typically sees bylaws with the following terms:

  • Number of members on the board
  • Voting process
  • How to elect new members
  • Duties and Responsibilities for each role
  • Liabilities for officers & directors
  • Duration of the nonprofit (if it’s not perpetual)

If you’re going to be a tax exempt organization please make sure you’re setting up the right bylaws to follow so you can succeed with your nonprofit corporation.

It’s important to also have a conflict of interest policy which is basically a set of rules that you can make sure your team follows. Imagine if you have a private school where the board members are all parents of the students that are attending. Do you think there would be any conflict there if they had to decide where funds would go on specific activities (or lack there of)? It’s also possible to think through this as religious organizations or any other type you might be starting in Texas.

Typically the policies you’d setup are:

  • Procedures for exposing potential conflicts
  • How to avoid conflicts of interest
  • What happens if someone has a conflict of interest
  • Policies on gifts and gratuities
  • Approval policies by the Board

Do your research, talk to an attorney and make sure you’re following best practices when it comes to building this. Make your business entity responsible for acting in the right way for your community.

Create A Fundraising Plan

Yes – you need one of these. If you’re a nonprofit you’re going to need funds to run it and you’ll need to really think through your mission and how you’re going to approach the larger community to make sure you’re hitting the sweet spot of what’s needed.

Typically a fundraising plan consists of:

  • An analysis of your nonprofit to understand what you do, how you help and what type of programs or services you offer
  • Your target audience – who are the people most likely to want to support you
  • What’s your ask? – how much money are you looking to raise and over what period of time. This is also typically broken down into annual, 3 year, 5 year goals so you can measure progress.
  • Types of fundraising activities – this is going to be things like direct mail, social media, events and more.
  • Your strategy on how you’re going to execute these types of activities.
  • Your budget for each activity and what the estimated return is going to be.

This is critical for any nonprofit so you can make sure you’re hitting the goals you’ve set, measure progress and also have a good understanding of what’s working and what’s not.

It’s important to also have some sort of fundraising goal in mind when you’re thinking about how you want to execute your mission.

File Texas Articles of Incorporation

If you want that state income tax exemption and continue to operate as a nonprofit corporation in Texas, you will need to file and get the Texas Certificate that shows you’re an official nonprofit corporation. This is also something that’s required for your Federal Tax Exemption which is just as important so you can make sure the Internal Revenue Service is aware of this too.

In order to file this in Texas, go get the form from here and submit it to the state. The filing fee as of 2019 is $25.

There’s a few key items you’ll want to make sure you have when you’re filling this out:

  • The corporate name of your nonprofit and if it’s available in Texas. You can check here to see if it’s available or not. If it’s not, you’ll need to come up with an alternate name that is available.
  • The county in which the nonprofit will have it’s principle office in Texas.
  • The names and addresses of your incorporators. These are the people who are organizing the nonprofit and filing the paperwork on behalf of the organization.
  • The duration of your nonprofit. For most nonprofits, this will be “perpetual” which means it has no expiration date.
  • Your purpose or mission statement. This is what you’ll use to explain what the nonprofit is all about and can be used in marketing materials and more.
  • Your registered agent information in Texas.

Nonprofit organizations will get a Federal Tax Exemption if you continue to keep that tax exempt status but it will require work and make sure you’re following the right rules. You don’t want to end up being an unincorporated nonprofit association because you didn’t follow the right steps and this is one of them.

Obtain an Employer Identification Number (EIN)

Your Federal Tax Identification Number is just as important as your individual social security number. It’s the number that will help you with a sales tax exemption, state taxes, federal tax exemptions and the Texas State Tax Exemptions too. You can apply for your EIN here and make sure you’re following the steps to do this the right way too. It’s not complicated but it’s one of the many steps you’ll need to follow to have your nonprofit corporation setup correctly as a Texas nonprofit. Federal taxes are going to be part of this but if you get your EIN you can become one of the Texas nonprofits that’s ready to be setup as an individual or business entity the right way.

Apply for 501(c)

Setting up your nonprofit as a 501 c 3 organization will be important as you think about setting up an organizational meeting for your community. Your board member may want to do this but you’ll need to go to the Texas Secretary of State’s site here and get the right form to fill out.

Apply for State Tax Exemption(s)

You’ll want to make sure you have all of your ducks in a row when it comes to applying for state tax exemption. The first thing you’ll need is that 501 (c) 3 status from the federal government which we talked about earlier. You’ll also need to get your EIN set up too.

The next thing you will do is fill out the Texas Franchise Tax Exemption Application which you can get here.

There’s a few key items you’ll need when you’re filling this out:

  • Your federal 501 (c) 3 determination letter.
  • Your Federal Employer Identification Number
  • A copy of your Articles of Incorporation or Certificate of Formation.
  • Your bylaws or organizing documents.
  • A statement that includes your purpose, activities, and programs.

After you have all of these items, you’ll want to send it in to the address on the form which is:

Franchise Tax Exemption Unit

PO Box 13697

Austin, TX 787

You can go get the form from the Texas Comptroller site here and follow the latest instructions there since it’s important to do it this way if you’re looking for tax exempt status.

Setup a Nonprofit Bank Account 

Yes a bank account is important no matter what type of tax exempt status you’re looking for so go to Lili Banking and get an account setup.

LILI BANKING

You’re going to need to have fundraising efforts and if you’re going to be running any type of organization that requires find (which is all of them), you will need a bank account so make sure you have the right type setup for your organization.

Register for Charitable Solicitation (Fundraising) with the State of Texas

If you’re going to solicit donations, which as a nonprofit you probably will be, you need to make sure it’s done correctly and that starts with registering your charity.

The first step is to determine if your organization needs to register. If your gross receipts are less than $25,000 per year, you are not required to register; but, we encourage you to do so. Registering is simple and easy, and it lets the public know that your organization has met minimum standards set by law.

You can find out more about this from the Texas Attorney General’s site here and make sure you’re following all of their requirements when it’s time to start raising funds.

Obtain Other Business Licenses & Permits

Depending on the type of nonprofit you have and what you’re doing, you may need to get other types of licenses. If you’re running a food bank, for example, you’ll need to make sure you have the right food handling license.

You can go here to find out which permits and licenses apply to your business and make sure you’re following all of the requirements.

Conclusion

As you can see, there’s a lot to think about when you’re starting a nonprofit in Texas but if you follow these steps, you’ll be on your way to becoming a registered nonprofit corporation in the state.

FAQs

What are the 4 types of non profit organizations?

There are four types of non-profit organizations in the United States: 501(c)(3) public charities, 509(a)(1) and 509(a)(2) private foundations, and 527 political organizations.

How do I get a 501c3 in Texas?

To get a 501c3 in Texas, you’ll need to fill out the Texas Franchise Tax Exemption Application which you can get here. You’ll also need your federal 501 (c) 3 determination letter, your Federal Employer Identification Number, and a copy of your Articles of Incorporation or Certificate of Formation.

How do I start a nonprofit organization with no money in Texas?

If you’re starting a nonprofit with no money in Texas, you may want to consider getting a business license and soliciting donations. You can also look into grants and other funding options.