What are are the exemption requirements for a 501c3 Organization
While we’ve covered the steps to start a nonprofit, today we’re going to look more at the specific requirements from the IRS in establishing a nonprofit organization. The steps to establish your corporation as a nonprofit include:
- Choose Directors for your Nonprofit – In Texas, you must have at least 3 members on your board of directors. These directors may be a natural person of at least 18 years or older, a corporation, or a separate legal entity. You can check to see if your business name is available at SOSDirect. You may also reserve a business name in Texas for up to 120 days by filing Form 501 with the Texas Secretary of State. The filing fee is $40.
- Name Your Texas Nonprofit – You must have a distinguishable business name for your entity and verify it with the Texas Secretary of State.
- Choose Your Registered Agent – In Texas all nonprofit corporations must have an agent for service of process that can receive legal papers on the corporation’s behalf if sued. This agent must have a physical street address IN Texas. This is typically the director or officer at the beginning.
- File Texas Nonprofit Certificate of Formation – Your nonprofit corporation becomes established legally in Texas once you file your certificate of formation with the Texas Secretary of State. We’ll walk you through everything you need to know when filling out the certificate of formation.
- Prepare Nonprofit Bylaws – Before filing your certificate of formation you will need to have Texas law compliant bylaws that contain the guide for your corporation when holding meetings, electing officers and directors, and taking care of other formalities.
- Hold a Meeting of your Board of Directors – The first board meeting should include:
- approving bylaws
- appointing officers
- setting an accounting period and tax year, and
- approving initial transactions of the corporation, such as the opening of a corporate bank account
- Get an EIN – You must obtain a Federal Employer Identification Number (EIN) from the IRS website.
- Obtain Business Licenses – It’s time to obtain your Federal and State Tax Exemptions!
- File Form 1023 for federal tax exemption – File this with our team at Nonprofit Elite or Form 1023-EZ if the annual gross receipts is less that $50,000 and the assets are less than $250,000.
- Apply for Texas State Tax Exemptions – File Form AP-204 with the Texas Comptroller after you have obtained your federal tax exemption. Make sure to include a copy of your IRS exemption letter with your application.
Establish Your Nonprofit Corporation
In order to establish your nonprofit, you will first need to set up your nonprofit corporation at the state level. This process requires filing of Articles of Incorporation and is necessary for the liability protection of the officers, directors, and other key individuals within the corporation.
You will also most likely need to obtain a federal tax ID number (FEIN) from the IRS and establish your nonprofits’ bylaws. The bylaws are a legal document that dictates how the organization must be governed.
In reality, many times these are forgotten within a few years by those directing the organization. However, failure to follow the stipulations outlined in the bylaws can have a major negative impact to the organization. By ensuring that these are simple and direct, they are more likely to be followed, but don’t treat them as a policy or procedure manual. It’s more of an overarching guide than a rule book. You can learn more about Bylaws here.
Make it easy for yourself and hire Nonprofit Elite to ensure that you are guaranteed success with the IRS. Call us today at (800) 368-4388 to apply for nonprofit status today.