How Do I Register A Nonprofit Organization

How to Start a California Nonprofit

A Step-by-Step Guide & Additional Resource --->

Congratulations. You've got an idea for making the world a better place, and you want to get-go a nonprofit as the ways to do and so. The good news is that starting a California nonprofit isn't that difficult to practise if you lot have a audio program, the correct team, and sufficient startup funds.

The bad news is that running a successful nonprofit is not easy. You'll need to think through how yous will bring value to the public, obtain funds, attract staff and/or volunteers, build a board of directors, and comply with the diverse laws that regulate nonprofits. Your answers to these questions will determine whether you lot should showtime a nonprofit or consider alternatives. More on these points later on in this article.

Check out the recorded webinar from February 2022 with CalNonprofits CEO January Masaoka, where she walks through the major steps and gives communication well-nigh boards, finding your first funding, and much more! Gratis for Members / $15 for non-withal-members.

Questions to consider:

- Do y'all need to piece of work with an attorney to showtime a nonprofit?
- Should you first a nonprofit? What are the alternatives?

ten basic steps for starting a California nonprofit public benefit corporation:

i. Determine the proper noun of the corporation
2. Draft and file the articles of incorporation
3. Appoint the lath of directors
iv. Draft the bylaws and conflict of interest policy
5. Take the initial board actions
6. Obtain an employer identification number (EIN)
7. File the initial registration form with the California Attorney General'due south Registry of Charitable Trusts
8. File the Statement of Information with the California Secretary of Land
ix. Apply for federal tax exemption with the Internal Revenue Service (IRS)
10. Employ for California tax exemption with the California Franchise Tax Board (FTB)
Bonus: Additional Resources

Chart of the steps with the agencies, forms, and links.

one. Determine the name of the corporation.

A nonprofit is typically formed as a corporation and its proper name tin can exist a valuable asset. A corporation's legal proper name must be registered with the state where the corporation is formed. In California, a corporation name may be accepted by the California Secretary of State if the name is non the same as or too like to an existing name on the agency's records and if information technology's not misleading to the public.

You tin bank check the electric current database of existing names on the business search page on the Secretarial assistant of State website. Y'all can also reserve a proper name for 60 days by mailing in a Name Reservation Request, which prevents another person from registering that corporation name with the California Secretary of Country while information technology is reserved. You must too make certain the proper noun does not infringe on another person'southward trademark rights. This is non always like shooting fish in a barrel to determine, merely a good start includes running a trademark search on the U.S. Patent and Trademark Office database and a simple Google search. For some founders, it may also be of import to confer with an intellectual property attorney to help ensure they are not infringing on another'south rights and to protect their proper name from being used by other parties.

Too, if you plan to operate the nonprofit in other states in addition to California, some founders may want to check that the corporation's name is similarly available in those other states where the nonprofit plans to have operations and therefore may need to register equally a foreign corporation with the required state agencies in order to conduct business concern there.
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2. Draft and file the manufactures of incorporation.

A corporation is legally created with the filing of the articles of incorporation. Articles of incorporation typically place:

(a) The system's name;

(b) Its purpose or purposes of the nonprofit;

(c) The amanuensis for service of process -- that is, a person who tin can receive lawsuits and other official correspondence and other matters, which can be an individual whose name and address are identified or a corporate agent registered with the California Secretary of State for such purpose;

(d) Limitations on the corporation's operations, consistent with its tax-exempt status;

(e) The corporation'due south street address and mailing address, if unlike; and

(f) Appropriate dedication and dissolution clauses.

For California, the articles will as well identify the type of nonprofit corporation being formed. There are 3 types of nonprofit corporations in California: public benefit, mutual benefit, and religious. A nonprofit public benefit corporation (the focus of this step-by-pace guide) is the advisable pick for a nonprofit formed for charitable or public purposes. The articles of incorporation are typically signed by an "incorporator," which can be but ane person just may also be signed by the initial board of directors if they are named in the Articles.

There is a template you lot can fill in and print on the Secretary of State'southward website. This is a good starting signal only does non provide guidelines or advice on every of import consideration. For example, there is no guidance on specific purpose statements (y'all'll want to exist careful about restricting the corporation's activities in the future by a very limiting specific purpose statement) and no option to select any 501(c)(3) purposes other than charitable, educational, and religious. It also does not accost other languages that may be required in the articles if the nonprofit also intends to seek exemption from belongings taxes in California.

A word on specific purpose statements: A broad specific purpose statement provides room for the system's mission to evolve without requiring an subpoena to the manufactures of incorporation. It and may also arrive easier to comply with charitable trust laws that require charitable funds to exist used consequent with the specific purpose of the organisation at the time such funds were originally acquired. If, instead, you lot adopt a narrow purpose argument such every bit "to restore and maintain Pomponio State Embankment," you would not exist able to use funds acquired while the manufactures of incorporation contained this purpose statement to restore any other beaches, but the statement would provide a stronger mission anchor to help ensure that your organization stays on a specific course later on the founders accept left. In this example, the organization could amend its articles with the Secretary of State to broaden its purposes to include other beaches, though simply the funds acquired afterwards that change is in consequence could be used for those broader activities. A ameliorate selection might exist for the nonprofit to adopt a purpose statement "to restore and maintain California beaches and adjoining habitats."

For boosted information on this issue, read Starting a Nonprofit: Manufactures of Incorporation and Specific Purpose Statements.

More virtually the agent for service of process : It is besides important to understand that the agent is responsible for receiving lawsuits and possibly other important legal documents on behalf of the organization and making sure those documents reach the President or other authorized officeholder or manager in a timely manner. If the agent fails to practise so (due east.one thousand., fails to have his or her mail checked regularly while away for an extended catamenia), the organization could face negative consequences such equally losing a default judgment for not showing up to defend a lawsuit. An organization can identify an individual who resides in California who is willing to serve as an agent or may elect to pay for a registered corporate agent, which may exist preferred if there is no person willing to accept this responsibility or if privacy concerns are an outcome (an individual amanuensis's name and street address will be a matter of public tape).
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three. Appoint the board of directors.

If the initial directors are not named in the articles of incorporation, the incorporator tin and should appoint the board through a written action.

Under California law, a nonprofit board may exist composed of as few as ane managing director, but the IRS may accept effect with granting recognition of 501(c)(3) status to a nonprofit with only i director. It is commonly recommended that nonprofits have betwixt 3 and 25 directors.

These directors – board members – should sympathise their legal duties and responsibilities to act with reasonable intendance and in the all-time interests of the organisation while providing direction and oversight over the system'southward activities, finances, officers, and legal compliance. Bridgespan offers valuable resource on nonprofit corporate governance, including BoardSource's Ten Basic Responsibilities of Nonprofit Boards ($29). We recommend also looking at the Board Source website and for more than information and resources about boards, many of which are free.
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4. Draft the bylaws and conflict of interest policy.

A corporation's bylaws provide the fundamental provisions for the governance of the corporation'southward activities and affairs. Bylaws should provide guidance to the lath and reassurance of sound governance practices to government regime, funders, and other interested stakeholders.

Bylaws typically comprise specific provisions detailing:

(a) The powers of the board and duties of the directors;

(b) How directors are elected or otherwise selected (e.grand., past a majority vote of directors at the annual lath coming together);

(c) How the board may take an action (e.one thousand., by a majority vote of directors at a board meeting or by unanimous written consent);

(d) How board meetings are called, noticed, and held (e.grand., four times per twelvemonth with fourteen days accelerate notice past email);

(e) How board meetings are conducted (e.g., the chair of the board presides or pursuant to Robert's Rules, which nosotros generally discourage for about nonprofits);

(f) The officers of the corporation (California law requires 3 officers: a president or chair of the lath, secretary, and treasurer or chief fiscal officer);

(g) The duties and responsibilities of each officer;

(h) Whether the corporation has voting members or is a non-membership corporation, either of which should be clearly stated in the bylaws;

(i) The dominance of board and not-board committees (eastward.g., committees tasked to act with the authority of the board versus advisory committees that can merely make recommendations);

(j) The level of indemnification provided past the corporation to protect its directors, officers, employees, and other agents; and

(k) The reports due to directors and members, if whatsoever (e.thou., financial reports).

Bylaws may also include the corporation's specific purpose or mission statement (which might replicate or brand more than specific the purpose argument in the articles of incorporation) and the corporation's core values if they would exist viewed as helpful in guiding the lath on its leadership and decision-making – though the corporation should likewise be mindful to avert inconsistencies betwixt the articles and bylaws if mentioning the purposes or mission argument in both places (for which the articles will control).

If the nonprofit has voting members, the bylaws will also need to contain additional provisions regarding member rights and processes. Nonprofits considering a voting membership structure may want to first hash out such structure with a lawyer, particularly if they exercise not expect their members to actively participate in meetings and regularly exercise their rights to vote for members of the lath of directors.

Public Counsel provides an Annotated Form of Bylaws for a California Nonprofit Public Benefit Corporation.

Separately articulated policies ordinarily supplement the bylaws in addressing key governance and management bug. For instance, although not required by federal tax constabulary, it is considered past many to be a best practice for any nonprofit to have an adopted conflict of interest policy. Additionally, if a nonprofit does not have a conflict of interest policy, it must depict its policy regarding conflicts of interest in the IRS Course 1023. Appropriately, information technology would be advantageous for most nonprofits to prefer a policy. The IRS provides a sample policy in Appendix A of the Instructions to Form 1023, which tin be a helpful starting point though notation that this sample policy does non necessarily account for land law requirements such every bit the procedural requirements under California constabulary for approving sure self-dealing transactions involving directors.
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5. Have the initial board actions at a board meeting or past unanimous written consent of the directors.

The board should take the post-obit actions:

(a) Prefer the bylaws and conflict of interest policy;

(b) Set the exact authorized number of directors if the bylaws provide for a range for the size of the lath;

(c) Adopt a financial twelvemonth (such as a year ending December 31 or June 30);

(d) Approve establishing a bank account;

(e) Corroborate applying for federal and state tax-exempt status;

(f) Approve reimbursement of startup expenses (if applicable); and

(g) Approve the compensation of the president (CEO) or the treasurer (CFO) and anyone performing the functions of such officers, like an executive director (if applicable).

The incorporator may have already taken some of these actions at the fourth dimension that he or she appointed the initial lath, in which instance the lath can review and confirm those prior actions if desired.

At this footstep, the directors may also complete some initial forms for the organization's records (which may also be required of the corporation'south officers) such every bit their completed annual disclosure of whatsoever potential or bodily conflicts of interests, which is usually required by any well-drafted conflict of interest policy, and as well providing a signed written consent to receiving electronic transmissions from the corporation equally required by California police force in gild to carry official business electronically (due east.g., receiving meeting notices by e-mail).
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six. Obtain an employer identification number (EIN).

An officeholder or authorized tertiary-party designee may employ for and obtain an EIN online.
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seven. File the initial registration course (Form CT-1) with the California Attorney General's Registry of Charitable Trusts.

The initial registration must be renewed annually, is required for the majority of nonprofit public benefit corporations, and must be filed within 30 days subsequently receipt of assets. The CT-1 Form and Instructions are available online. The corporation's articles of incorporation and bylaws should exist included in the initial filing. For corporations that are in the procedure of applying for 501(c)(3) tax-exempt condition, you tin can submit copies of the Course 1023 application and federal conclusion letter (Step ix) afterward receiving the determination letter to complete your filing with the Registry.
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8. File the Statement of Information (Class SI-100) with the Secretarial assistant of Land.

The Statement must initially be filed within xc days of the engagement of incorporation. This biennial filing requirement, which identifies the organization's address, principal officers, and amanuensis for service of procedure, can exist filed online or past mail. (You can find information and instructions on completing the Statement of Information here.)
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9. Apply for federal taxation exemption with the Internal Revenue Service (IRS) and receive a decision letter from the IRS.

Completing the Course 1023 awarding for exempt status under Internal Revenue Lawmaking (IRC) Section 501(c)(3) may exist the most challenging part of the startup procedure. Information technology is a legally-driven and comprehensive inquiry covering 10 Parts and eight Schedules.

As of January 31, 2020, the IRS revised Course 1023 to be an online fill-in class that must be filed electronically at Pay.gov. While substantively the new electronic Class 1023 is mostly like to its paper version predecessor, there are some new changes with the electronic form and e-filing procedure and some wrinkles that may be addressed in the future. Luckily, the IRS has added new tools and instructional videos to their website to help y'all understand the e-filing procedure. Yous will be required to create an account at Pay.gov in which y'all will exist able to preview and download the form, save your progress, and return to the form at a afterwards time. Delight note that although you lot will be able to save your progress, the awarding will not let you to advance to the adjacent page until you have completed all of the questions on the current page, including entering required descriptions or explanations or completing required schedules.

A critical department for careful completion is Office Iv, Narrative Description of Your Activities, which asks: for each by, present, or planned activity, include information that answers the following questions.

• What is the activity?
• Who conducts the activity?
• Where is the action conducted?
• What percent of your total time is allocated to the activity? (Combined time percentages should add upward to 100%.)
• How is the activity funded and what percent of your overall expenses is allocable to this activeness?
• How does the activeness further your exempt purposes?

Class 1023 also requires information regarding (a) organizational structure; (b) compensation and other fiscal arrangements with officers and directors, and sure highly paid employees and independent contractors; (c) members and other individuals and organizations that receive benefits from the organization; (d) organizational history (east.g., an organization that was spun off or previously fiscally sponsored by some other organization may need to consummate an additional schedule as a successor arrangement); (e) specific activities; and (f) actual and/or projected argument of revenues and expenses (which should be consequent with any identified activities).

Part VIII is designed to determine the organization's nomenclature as either a private foundation or a public charity. Public charity status is mostly the more favorable tax condition merely requires an organization to come across certain requirements. For virtually organizations, this ways passing a public back up exam over an ongoing v-twelvemonth measuring period. For organizations that will receive a large bulk of their support from few sources over their showtime five years, monitoring and managing of the public support ratio may exist critically important. Public Charity Status Simplified (a little) is a helpful online resources from Insight Center for Community Economic Development.

If you think that your nonprofit will non bring in gross receipts of more than $50,000 per year during the next 3 years, and has non had gross receipts of more than $l,000 in any of the past three years, you lot may be eligible to file Form 1023-EZ. The full criteria are explained here. Like Form 1023, the 1023-EZ must be filed electronically. Yous tin can find instructions on this site.

The filing fee for Form 1023 is currently $600. The filing fee for Form 1023-EZ is $275. Fees are paid online here.
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x. Apply for California tax exemption with the California Franchise Tax Board (FTB) and receive an affidavit of exemption letter from the FTB.

Organizations with a 501(c)(3) federal determination alphabetic character tin request California recognition of taxation exemption under California Revenue & Taxation Code section 23701d from the FTB past filing Form 3500A forth with a re-create of the IRS determination letter. Yous tin can find instructions here. The FTB will by and large recognize the organization's exemption from land income taxes as of the federal effective appointment. An organization that does not take a 501(c)(3) federal determination letter is otherwise required to file the more complicated Form 3500 for state income tax exemption. In that location is no fee for either Form 3500A or Course 3500.
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Bonus: Additional Resources

• IRS "StayExempt.org" specially for 501(c)3s
• Nolo Press: How to Form a Nonprofit Corporation in California
• California Attorney General'southward "Guide for Charities"
• Nonprofit Kit for Dummies
• Why Bring together the California Clan of Nonprofits

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Do you lot need to work with an attorney to start a nonprofit?

Although the majority of nonprofits are set up without the help of lawyers, it'due south easy to brand mistakes that go plush to correct later (such as unwisely creating voting membership structures, calculation unlawful provisions to template bylaws, violating the commerciality doctrine, etc.). We recommend having experienced professionals involved -- such every bit attorneys, board members with nonprofit incorporation experience, and experienced consultants. Don't discount the value of a knowledgeable attorney. Yous can notice a list of firms and consultants who are CalNonprofits members in the Professional Directory online. (Search for "Starting a Nonprofit and Staying Compliant.")
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What are some alternatives to starting a nonprofit?

Now that you know how to start a California nonprofit, you should thoughtfully consider whether this is the right selection for your ideas and for the public do good. There may be other means to deport out your dreams, including working under the umbrella of an existing nonprofit. One often-overlooked alternative is fiscal sponsorship, a relationship that may allow a grouping to business firm a charitable project within an existing nonprofit with the ability to spin it off at a later date. For more information on financial sponsorship, see Financial Sponsorship Basics from the Bar Association of San Francisco. Very small operations may consider forming themselves as an unincorporated association. You may also discover that starting a for-turn a profit company will serve your purposes improve than a nonprofit structure.

In one case you have started your nonprofit, be sure to look at CalNonprofits' Nonprofit Compliance Checklist, a regularly updated listing of all the federal and country forms required from nonprofits, including links to all the forms.
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ABOUT THE AUTHORS: Emily Chan and Gene Takagi

Attorneys Emily Chan and Factor Takagi wrote this guide for the California Association of Nonprofits every bit office of their commitment to pro bono work and community service.

Emily Chan is of counsel with Adler & Colvin and a former recipient of the Outstanding Nonprofit Lawyer – Immature Attorney award recognized by the Nonprofit Organizations Committee of the American Bar Association. Factor Takagi is a main chaser of NEO Law Grouping, a function-time lecturer at Columbia University, and a contributing editor of the Nonprofit Law Blog.

You tin achieve Emily at www.adlercolvin.com or 415-421-7555
Y'all can reach Gene at www.neolawgroup.com or 415-977-0558
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Source: https://calnonprofits.org/resources/starting-a-california-nonprofit

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