How To Register Non Profit Organization

How to Commencement a California Nonprofit

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

planting-icon2 Congratulations. Yous've got an thought for making the world a better place, and you desire to start a nonprofit as the means to do so. The good news is that starting a California nonprofit isn't that difficult to do if you have a sound programme, the correct team, and sufficient startup funds.

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

Check out the recorded webinar from February 2022 with CalNonprofits CEO Jan Masaoka, where she walks through the major steps and gives advice about boards, finding your get-go funding, and much more than! FREE for Members / $15 for not-yet-members.

Questions to consider:

- Do you demand to piece of work with an chaser to start a nonprofit?
- Should yous start a nonprofit? What are the alternatives?

x bones steps for starting a California nonprofit public do good corporation:

one. Determine the proper noun of the corporation
2. Draft and file the articles of incorporation
3. Engage the board of directors
iv. Draft the bylaws and disharmonize 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'south Registry of Charitable Trusts
viii. File the Argument of Information with the California Secretary of State
9. Utilise for federal tax exemption with the Internal Revenue Service (IRS)
10. Apply for California tax exemption with the California Franchise Tax Board (FTB)
Bonus: Additional Resources

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

i. Determine the name of the corporation.

A nonprofit is typically formed as a corporation and its name can be 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 accustomed by the California Secretary of Land if the proper noun is not the same as or too like to an existing name on the agency's records and if it's non misleading to the public.

You tin cheque the current database of existing names on the concern search page on the Secretarial assistant of Country website. You can also reserve a name for lx days by mailing in a Name Reservation Request, which prevents another person from registering that corporation name with the California Secretarial assistant of State while it is reserved. You must too make certain the name does not infringe on some other person's trademark rights. This is not always easy to determine, simply a good commencement includes running a trademark search on the U.Southward. Patent and Trademark Office database and a simple Google search. For some founders, it may as well be important to confer with an intellectual property attorney to help ensure they are not infringing on some other's rights and to protect their name from existence used past other parties.

Also, if you plan to operate the nonprofit in other states in add-on to California, some founders may want to bank check that the corporation's proper noun is similarly available in those other states where the nonprofit plans to have operations and therefore may demand to annals as a foreign corporation with the required land agencies in order to conduct business in that location.
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2. Draft and file the articles of incorporation.

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

(a) The organisation'southward name;

(b) Its purpose or purposes of the nonprofit;

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

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

(e) The corporation's street address and mailing accost, if different; and

(f) Appropriate dedication and dissolution clauses.

For California, the articles volition too identify the blazon 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-step guide) is the appropriate option for a nonprofit formed for charitable or public purposes. The articles of incorporation are typically signed by an "incorporator," which can exist just one person but may also be signed past the initial board of directors if they are named in the Manufactures.

There is a template you tin fill up in and impress on the Secretarial assistant of State'southward website. This is a skillful starting indicate but does not provide guidelines or communication on every of import consideration. For case, at that place is no guidance on specific purpose statements (you lot'll want to exist conscientious almost restricting the corporation's activities in the futurity by a very limiting specific purpose statement) and no option to select any 501(c)(3) purposes other than charitable, educational, and religious. Information technology besides does not address other languages that may be required in the articles if the nonprofit also intends to seek exemption from belongings taxes in California.

A give-and-take on specific purpose statements: A broad specific purpose statement provides room for the organization's mission to evolve without requiring an amendment to the articles of incorporation. It and may also brand information technology easier to comply with charitable trust laws that require charitable funds to be used consequent with the specific purpose of the arrangement at the fourth dimension such funds were originally acquired. If, instead, you adopt a narrow purpose statement such as "to restore and maintain Pomponio Country Beach," you would not be able to use funds caused while the articles of incorporation contained this purpose statement to restore any other beaches, but the statement would provide a stronger mission anchor to assistance ensure that your organization stays on a specific course after the founders have left. In this example, the organization could amend its articles with the Secretary of Land to broaden its purposes to include other beaches, though only the funds acquired after that change is in effect could be used for those broader activities. A ameliorate selection might be for the nonprofit to prefer a purpose statement "to restore and maintain California beaches and adjoining habitats."

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

More about the agent for service of process : Information technology is also important to understand that the amanuensis is responsible for receiving lawsuits and perhaps other important legal documents on behalf of the organisation and making sure those documents achieve the President or other authorized officer or director in a timely way. If the agent fails to exercise so (e.g., fails to take his or her mail checked regularly while abroad for an extended menstruum), the system could confront negative consequences such equally losing a default judgment for not showing up to defend a lawsuit. An organization can place an individual who resides in California who is willing to serve equally an agent or may elect to pay for a registered corporate agent, which may be preferred if there is no person willing to accept this responsibility or if privacy concerns are an event (an individual agent's proper noun and street accost volition be a matter of public record).
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3. Appoint the board of directors.

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

Under California law, a nonprofit board may exist composed of as few equally one director, merely the IRS may take outcome with granting recognition of 501(c)(3) status to a nonprofit with only one director. It is ordinarily recommended that nonprofits have between three and 25 directors.

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

A corporation'due south bylaws provide the fundamental provisions for the governance of the corporation'south activities and affairs. Bylaws should provide guidance to the board and reassurance of audio governance practices to government authorities, funders, and other interested stakeholders.

Bylaws typically contain specific provisions detailing:

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

(b) How directors are elected or otherwise selected (e.1000., by a majority vote of directors at the almanac lath meeting);

(c) How the lath may accept an activity (e.g., by a majority vote of directors at a board meeting or by unanimous written consent);

(d) How board meetings are called, noticed, and held (eastward.grand., iv times per year with 14 days advance notice by email);

(e) How board meetings are conducted (e.g., the chair of the board presides or pursuant to Robert'due south Rules, which we more often than not discourage for virtually nonprofits);

(f) The officers of the corporation (California law requires iii officers: a president or chair of the board, secretarial assistant, and treasurer or chief fiscal officer);

(thou) The duties and responsibilities of each officeholder;

(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 say-so of board and not-lath committees (e.g., committees tasked to deed with the dominance of the lath versus informational committees that can merely brand recommendations);

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

(thousand) The reports due to directors and members, if whatsoever (eastward.thousand., financial reports).

Bylaws may also include the corporation's specific purpose or mission statement (which might replicate or make more specific the purpose statement in the articles of incorporation) and the corporation's cadre values if they would exist viewed as helpful in guiding the board on its leadership and decision-making – though the corporation should as well be mindful to avoid inconsistencies between the articles and bylaws if mentioning the purposes or mission argument in both places (for which the articles volition control).

If the nonprofit has voting members, the bylaws will too need to incorporate additional provisions regarding fellow member rights and processes. Nonprofits considering a voting membership construction may want to offset discuss such structure with a lawyer, particularly if they do not expect their members to actively participate in meetings and regularly exercise their rights to vote for members of the board of directors.

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

Separately articulated policies commonly supplement the bylaws in addressing cardinal governance and direction issues. For example, although not required by federal taxation law, information technology is considered past many to be a best exercise for any nonprofit to accept an adopted conflict of involvement policy. Additionally, if a nonprofit does not have a conflict of interest policy, it must describe its policy regarding conflicts of interest in the IRS Course 1023. Accordingly, it would be advantageous for nigh nonprofits to adopt a policy. The IRS provides a sample policy in Appendix A of the Instructions to Form 1023, which tin can be a helpful starting point though note that this sample policy does non necessarily account for state police requirements such equally the procedural requirements under California law for approving certain cocky-dealing transactions involving directors.
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v. Take the initial board actions at a board meeting or past unanimous written consent of the directors.

The lath should accept the following actions:

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

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

(d) Approve establishing a bank account;

(e) Approve 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 manager (if applicative).

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

At this step, the directors may besides complete some initial forms for the organization's records (which may also be required of the corporation's officers) such as their completed annual disclosure of any potential or actual conflicts of interests, which is usually required by any well-drafted conflict of involvement policy, and as well providing a signed written consent to receiving electronic transmissions from the corporation as required by California law in lodge to conduct official business concern electronically (e.g., receiving meeting notices by e-mail).
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6. Obtain an employer identification number (EIN).

An officer or authorized third-party designee may apply for and obtain an EIN online.
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seven. File the initial registration form (Form CT-1) with the California Chaser 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 exist filed inside xxx days afterwards receipt of avails. The CT-1 Course and Instructions are available online. The corporation'due south articles of incorporation and bylaws should exist included in the initial filing. For corporations that are in the process of applying for 501(c)(3) tax-exempt condition, you tin can submit copies of the Form 1023 application and federal determination letter (Step 9) after receiving the determination letter to complete your filing with the Registry.
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eight. File the Statement of Information (Form SI-100) with the Secretary of State.

The Statement must initially be filed within 90 days of the appointment of incorporation. This biennial filing requirement, which identifies the organisation's address, principal officers, and agent for service of process, can exist filed online or by mail. (You can observe information and instructions on completing the Statement of Information here.)
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9. Use for federal tax exemption with the Internal Revenue Service (IRS) and receive a decision letter from the IRS.

Completing the Form 1023 application for exempt condition under Internal Revenue Code (IRC) Section 501(c)(3) may exist the near challenging part of the startup process. It is a legally-driven and comprehensive enquiry covering 10 Parts and 8 Schedules.

Every bit of January 31, 2020, the IRS revised Form 1023 to be an online backup form that must be filed electronically at Pay.gov. While substantively the new electronic Class 1023 is by and large similar to its paper version predecessor, in that location are some new changes with the electronic form and e-filing process and some wrinkles that may be addressed in the time to come. Luckily, the IRS has added new tools and instructional videos to their website to assistance you empathize the east-filing process. You will be required to create an account at Pay.gov in which y'all volition be able to preview and download the course, relieve your progress, and return to the grade at a later time. Please annotation that although you lot volition be able to relieve your progress, the application will not permit you to accelerate to the next folio until you take completed all of the questions on the electric current page, including entering required descriptions or explanations or completing required schedules.

A disquisitional section for careful completion is Part Iv, Narrative Description of Your Activities, which asks: for each by, present, or planned activeness, include information that answers the following questions.

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

Form 1023 also requires information regarding (a) organizational construction; (b) compensation and other financial arrangements with officers and directors, and certain 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 another system may need to complete an additional schedule as a successor organization); (e) specific activities; and (f) actual and/or projected statement of revenues and expenses (which should be consequent with any identified activities).

Part 8 is designed to determine the organization'due south classification as either a private foundation or a public charity. Public charity status is generally the more than favorable tax status simply requires an arrangement to run across certain requirements. For most organizations, this means passing a public support test over an ongoing v-yr measuring period. For organizations that volition receive a large bulk of their support from few sources over their get-go five years, monitoring and managing of the public support ratio may be critically important. Public Charity Condition Simplified (a footling) is a helpful online resources from Insight Centre for Community Economical Development.

If you lot think that your nonprofit will not bring in gross receipts of more than $50,000 per yr during the next iii years, and has not had gross receipts of more than $50,000 in any of the past 3 years, you may be eligible to file Form 1023-EZ. The full criteria are explained here. Similar Form 1023, the 1023-EZ must be filed electronically. Y'all tin can observe instructions on this site.

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

Organizations with a 501(c)(3) federal conclusion letter of the alphabet can request California recognition of tax exemption under California Revenue & Taxation Code section 23701d from the FTB by filing Grade 3500A along with a copy of the IRS determination letter of the alphabet. You tin find instructions here. The FTB will generally recognize the system's exemption from country income taxes as of the federal constructive date. An organization that does non take a 501(c)(3) federal determination letter is otherwise required to file the more complicated Form 3500 for state income tax exemption. There is no fee for either Form 3500A or Course 3500.
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Bonus: Additional Resource

IRS "StayExempt.org" especially for 501(c)3s
Nolo Press: How to Grade a Nonprofit Corporation in California
California Attorney General's "Guide for Charities"
Nonprofit Kit for Dummies
Why Join the California Association of Nonprofits

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Do y'all need to work with an chaser to start a nonprofit?

Although the majority of nonprofits are prepare without the help of lawyers, it's like shooting fish in a barrel to brand mistakes that become costly to correct after (such equally unwisely creating voting membership structures, calculation unlawful provisions to template bylaws, violating the commerciality doctrine, etc.). We recommend having experienced professionals involved -- such equally attorneys, board members with nonprofit incorporation experience, and experienced consultants. Don't discount the value of a knowledgeable attorney. You tin find 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?

At present that you know how to get-go a California nonprofit, you should thoughtfully consider whether this is the correct option for your ideas and for the public benefit. There may be other ways to carry out your dreams, including working under the umbrella of an existing nonprofit. Ane often-overlooked alternative is financial sponsorship, a relationship that may let a group to business firm a charitable project inside an existing nonprofit with the ability to spin it off at a later on date. For more information on financial sponsorship, see Financial Sponsorship Nuts from the Bar Association of San Francisco. Very modest operations may consider forming themselves as an unincorporated association. You may also find that starting a for-profit company will serve your purposes better than a nonprofit structure.

Once you accept started your nonprofit, be sure to expect at CalNonprofits' Nonprofit Compliance Checklist, a regularly updated listing of all the federal and land forms required from nonprofits, including links to all the forms.
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Nigh THE AUTHORS: Emily Chan and Gene Takagi

Attorneys Emily Chan and Gene Takagi wrote this guide for the California Association of Nonprofits as part of their commitment to pro bono piece of work and customs service.

Emily Chan is of counsel with Adler & Colvin and a former recipient of the Outstanding Nonprofit Lawyer – Young Attorney accolade recognized past the Nonprofit Organizations Committee of the American Bar Clan. Factor Takagi is a principal attorney of NEO Constabulary Grouping, a part-time lecturer at Columbia University, and a contributing editor of the Nonprofit Police Blog.

You lot can accomplish Emily at www.adlercolvin.com or 415-421-7555
Yous can accomplish Gene at www.neolawgroup.com or 415-977-0558
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