How to Start a Nonprofit in California


Steve Goldstein
Steve Goldstein
Business Formation Expert
Steve Goldstein runs LLCBuddy, helping entrepreneurs set up their LLCs easily. He offers clear guides, articles, and FAQs to simplify the process. His team keeps everything accurate and current, focusing on state rules, registered agents, and compliance. Steve’s passion for helping businesses grow makes LLCBuddy a go-to resource for starting and managing an LLC.

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Start a Nonprofit in California

Are you looking to start a nonprofit in California? You’ve come to the right place. Known for its vibrant community and rich culture, California (often referred to as The Golden State) is an ideal location for establishing a nonprofit organization. Unlike for-profit businesses, nonprofits focus on addressing pressing social issues and require a strong foundation, thorough research, and a clear mission targeting a specific community problem.

Embarking on the journey of creating a nonprofit entails various crucial steps, such as obtaining 501(c)(3) status. A 501(c)(3) organization is designed for charitable, religious, educational purposes, and more, qualifying it for federal and state tax exemptions.

In the spirit of California’s motto, “I have found it (Eureka),” thousands of nonprofits are founded within the state each year. This article will provide a comprehensive guide to starting your own nonprofit corporation in California. Keep in mind that the steps discussed here are general guidelines, and modifications may be necessary depending on your specific circumstances. To gain a deep understanding of how to start a nonprofit in California, we encourage you to read this article in its entirety.

What is a Nonprofit in California?

Nonprofit organizations are legal entities that operate to serve public benefits and address community issues. Unlike for-profit organizations, nonprofits do not aim to generate any profit. The Internal Revenue Service (IRS) generally exempts nonprofit organizations from tax. However, based on the business entity structure, you will receive tax exemptions as a nonprofit.

In California, ensure you have a community issue to address before you start forming your nonprofit. It can generally be education, religion, charity, social service, or other social issues. Nonprofits do not pay taxes on the money they receive through fundraising programs, donations, or any charitable funding.

Types of Nonprofits in California

The first thing one has to decide is what type of nonprofit structure one wants. There are several types of nonprofits one can start. Here is a list of nonprofit types one can choose from-

  1. Nonprofit LLC
  2. Nonprofit Corporation
  3. Unincorporated Nonprofit

Forming an LLC in California for your nonprofit can be a smooth option. However, having a corporation is less complex than having a nonprofit LLC. Hence, it is wise to start a nonprofit corporation instead of an unincorporated nonprofit or nonprofit LLC.

– LLCBuddy Editorial Team.

Technically, starting a corporation for your nonprofit protects your personal assets but also is eligible for Federal and State tax exemptions. When you form an LLC for your nonprofit, it only protects your personal assets but does not give you any tax exemptions. On the other hand, a nonprofit Corporation has both corporation and limited liability company benefits. You can also have an unincorporated structure where you don’t have to register it. Unincorporated nonprofits in California might be eligible for tax exemptions (check with California Franchise Tax Board), but this type of organization does not get to enjoy limited liability and personal asset protection.

How to Start a Nonprofit Corporation in California

Setting up a nonprofit corporation requires a few things to consider. Name of the nonprofit, initial directors, drafting bylaws, get a Agent for Service of Process, obtain tax IDs, insurance, and a bank account – these are important steps you must follow. The steps mentioned here are general business formation steps. State-wise, some steps can be different. Getting an expert consultation before you start your nonprofit corporation formation is recommended. Here are the steps explained below-

Step 1: Get a Suitable Name for Your California Nonprofit Corp

The first step is to name your nonprofit corporation. You must be sure that the name is available and that no other organization is using this name. You can check the California LLC name search to find the best suitable name for your organization. You must follow those rules to avoid any legal issues later. You can reserve the name for 60 days for any domestic entity (such as a nonprofit LLC) if you’re not forming the nonprofit immediately.

Step 2: Appoint the Initial Board of Directors

The next step is to get your nonprofit’s initial board of directors. It is very important when you are setting up a nonprofit corporation. You need at least One unrelated directors to start the organization. If you don’t choose a minimum of One directors, it will automatically become a member-managed corporation.

Step 3: Appoint Your California Agent for Service of Process

The third step is to get a California Agent for Service of Process for your nonprofit corporation. The Agent for Service of Process is a person who receives all the legal documents on your behalf. It is necessary to get a registered agent. He/she must be above 18 years old and have a physical address in California.

Step 4: Write California Nonprofit Bylaws

The next important step is to write the company bylaws. The directors and board members must decide how the meetings, elections, voting, and other corporate activities will be held. These bylaws must comply with the California state law. It is similar to an LLC operating agreement in California for the LLC owners.

Step 5: File the California Articles of Incorporation

This is the most important step. File your Articles of Incorporation with the California Secretary of State. You can do it through three ways, online, by mail and in-person. All the formation forms, such as the California LLC Articles of Organization form, the California Articles of Incorporation form for corporations, forms for LLPs, and all others can be found on the California SOS official website. Submit the details of your nonprofit corporation, like the name of the nonprofit, address, name and address of the registered agent, operation dates, directors’ details, and more information related to your company. You can send the form (for offline filing) and the filing fee of $100 for filing online and by mail. $115 for in person filing to the Secretary of State, Business Entities Filings, P.O. Box 944228, Sacramento, CA 94244 or upload it online (if available).

Step 6: Obtain Tax ID for Your California Nonprofit Corporation

The subsequent step involves obtaining a Tax ID for your nonprofit corporation. You will need to acquire an Employer Identification Number (EIN) from the official IRS website. To obtain the EIN, submit your application to the IRS office either by mail or through their online platform. There is no associated cost for this process.

Step 7: Get Business Licenses in California

The next step is to get the business licenses you need to run your nonprofit organization in California. Check with the local government office if any special licenses you need to run your nonprofit. You can file your nonprofit as a charity if you want.

Step 8: Federal Tax Exemption

You must submit Form 1023 to the IRS to file for federal tax exemption. This form, titled “Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code,” is required for all nonprofit corporations. Smaller nonprofits have the option to file Form 1023-EZ instead. You will be prompted to provide details about your organization upon obtaining the relevant form. Complete the form with the necessary information and submit it. The filing fees are $600 for Form 1023 and $275 for Form 1023-EZ.

Step 9: State Tax Exemption

Once you get the Federal Tax Exempt, it is time for State Tax Exempt. In California, you must apply for the tax exemption to California Franchise Tax Board. Get the form, fill it up with the correct details, and send it to the office. You may need to pay a fee along with the form and supportive documents to apply for the State Tax Exemption. You need Withholding Exemption Certificate to apply for the state tax exemption. Read California classification of taxes to learn more about the California tax structure.

Step 10: Get Insurance for Your California Nonprofit

Once you start your nonprofit, you must get insurance to protect your organization. You must get workers’ compensation and unemployment insurance if you have employees. Based on your nonprofit structure, you might need general liability insurance, property, vehicle, auto insurance, etc. You can contact the insurance providers to learn more about which are required for your organization. Also, you can contact California Department of Insurance for more information.

After Forming Your California Nonprofit Corporation

Once your nonprofit is formed, there are additional steps to complete:

  • Get a Business Bank Account: You must get a business account for all types of business-related transactions in California. You may need different documents based on the bank and place of business. Check with the bank for it.
  • File Nonprofit as Charity: This is optional. Your nonprofit is either for charity purposes or any purpose that meets your community’s needs. If your organization is for charity purposes, then you can file your nonprofit as a charity to enjoy tax exemptions.
  • Other Business Compliances: You may need additional compliances based on your nonprofit type. Check with your attorney or local authority for more information.

Names of Nonprofit Corporations in California

Following are some of the Nonprofit Organizations in California. The contact information of these organizations can be found on California SOS official websites.

  • Lady Freethinker. Los Angeles CA.
  • The Office of Letters and Light. Berkeley CA.
  • Erowid Center. Grass Valley CA.
  • Endangered Species International. San Francisco CA.
  • Fistula Foundation. San Jose CA.
  • Sankara Eye Foundation USA
  • Multidisciplinary Association For Psychedelic Studies (MAPS)
  • RedRover

FAQs

What are the steps to start a nonprofit in California?
To start a nonprofit in California, you will need to register with the California Secretary of State, create bylaws, obtain a federal tax identification number from the IRS, obtain a state tax exemption from the FTB, and obtain a business license from the county or city where your organization will be located.
What are the requirements for forming a nonprofit in California?
To form a nonprofit in California, you will need to register with the California Secretary of State, create bylaws that comply with the California Nonprofit Corporation Law, obtain a federal tax identification number from the IRS, obtain a state tax exemption from the FTB, and obtain a business license from the county or city where your organization will be located.
What is the cost to start a nonprofit in California?
The costs to start a nonprofit in California will vary depending on the specific requirements of your organization. Generally, you will need to pay the filing fee to the California Secretary of State, the fees associated with obtaining a federal tax identification number from the IRS and a state tax exemption from the FTB, as well as any applicable business license fees.
Is there a required minimum number of people needed to start a nonprofit in California?
No, there is no minimum number of people required to start a nonprofit in California. However, you will need to appoint at least three directors when filing the Articles of Incorporation with the California Secretary of State.
What type of documents are required to start a nonprofit in California?
To start a nonprofit in California, you will need to prepare and submit the Articles of Incorporation with the California Secretary of State, create bylaws that comply with the California Nonprofit Corporation Law, and obtain a federal tax identification number from the IRS and a state tax exemption from the FTB.
How long does it take to start a nonprofit in California?
The amount of time it takes to start a nonprofit in California will vary depending on the specific requirements of your organization. Generally, it will take several weeks to complete the registration process with the California Secretary of State and obtain the necessary documents from the IRS and FTB.
What is the California Nonprofit Corporation Law?
The California Nonprofit Corporation Law (also known as the Corporations Code) is the set of regulations that govern the formation and operation of nonprofit organizations in California.
What is the California Secretary of State?
The California Secretary of State is the state’s chief elections officer and is responsible for registering and regulating business entities in California.
What is the IRS?
The IRS (Internal Revenue Service) is the federal government agency that administers and enforces the tax laws of the United States.
What is the FTB?
The FTB (Franchise Tax Board) is a state agency responsible for collecting taxes and administering the California state tax laws.
Do I need to register with the California Secretary of State to start a nonprofit in California?
Yes, you will need to register with the California Secretary of State in order to form a nonprofit in California.
Do I need to obtain a federal tax identification number from the IRS to start a nonprofit in California?
Yes, you will need to obtain a federal tax identification number from the IRS in order to start a nonprofit in California.
Do I need to obtain a state tax exemption from the FTB to start a nonprofit in California?
Yes, you will need to obtain a state tax exemption from the FTB in order to start a nonprofit in California.
Do I need to obtain a business license to start a nonprofit in California?
Yes, you will need to obtain a business license from the county or city where your organization will be located in order to start a nonprofit in California.
Are there any restrictions on the activities of a nonprofit organization in California?
Yes, nonprofits in California are subject to certain restrictions and must comply with the California Nonprofit Corporation Law.
What types of activities are prohibited for nonprofit organizations in California?
Nonprofits in California are prohibited from engaging in activities that are not related to the organization’s mission, engaging in political activities, or participating in activities that result in private inurement (the illegal distribution of profits to directors, officers, or other individuals).
What is the process for filing the Articles of Incorporation with the California Secretary of State?
The process for filing the Articles of Incorporation with the California Secretary of State includes completing the Articles of Incorporation form, submitting the form and filing fee, and then waiting for the Secretary of State to approve the filing.
How do I create bylaws for a nonprofit in California?
To create bylaws for a nonprofit in California, you will need to draft the bylaws in accordance with the California Nonprofit Corporation Law.
What are the reporting requirements for nonprofits in California?
Nonprofits in California are required to file annual reports with the California Secretary of State and the IRS, as well as any other applicable federal or state reports.
What other licenses or permits may be required to start a nonprofit in California?
Depending on the type of activities your nonprofit will engage in, you may need to obtain other licenses or permits in order to start a nonprofit in California.
What are the consequences of not complying with the requirements for starting a nonprofit in California?
If you fail to comply with the requirements for starting a nonprofit in California, you may be subject to fines, penalties, and other sanctions imposed by the California Secretary of State and other regulatory agencies.
What are the annual filing requirements for nonprofits in California?
Nonprofits in California are required to file an annual report with the California Secretary of State and the IRS, as well as any other applicable federal or state reports.
Is insurance required for nonprofits in California?
Depending on the type of activities your nonprofit will engage in, you may need to obtain insurance in order to start a nonprofit in California.
What is the California Franchise Tax Board?
The California Franchise Tax Board (FTB) is a state agency responsible for collecting taxes and administering the California state tax laws.
Are there any tax exemptions available for nonprofits in California?
Yes, nonprofits in California may be eligible for certain state and federal tax exemptions.
What is the difference between a nonprofit and a for-profit organization in California?
The main difference between a nonprofit and a for-profit organization in California is that a nonprofit is organized for a charitable purpose and is not organized to earn a profit.
What are the differences between a private foundation and a public charity in California?
A private foundation in California is an organization that is funded by a single source and is subject to certain restrictions and regulations, while a public charity is an organization that is supported by multiple sources and is subject to fewer restrictions and regulations.
How do I obtain a federal tax identification number for my nonprofit in California?
To obtain a federal tax identification number for your nonprofit in California, you will need to submit an application (Form SS-4) to the IRS.
How do I obtain a state tax exemption for my nonprofit in California?
To obtain a state tax exemption for your nonprofit in California, you will need to submit an application (Form 3500A) to the FTB.
What is the process for starting a nonprofit in California?
To start a nonprofit in California, you will need to file articles of incorporation with the California Secretary of State, obtain a federal employer identification number, obtain a California state tax identification number, adopt nonprofit corporate bylaws, appoint directors, hold an initial board of directors meeting, and create an annual reporting schedule.
What is the cost to register a nonprofit in California?
The cost to register a nonprofit in California is a minimum of $70, which covers the filing fee for Articles of Incorporation.
Is a California nonprofit required to register with the state?
Yes, a California nonprofit must register with the Secretary of State to receive nonprofit status.
Does a California nonprofit need a board of directors?
Yes, California law requires that a nonprofit have a board of directors consisting of at least three individuals.
Does a California nonprofit need to obtain a federal employer identification number (EIN)?
Yes, a California nonprofit must obtain a federal employer identification number from the Internal Revenue Service in order to be eligible to apply for 501(c)(3) status.
Are there any other requirements for a California nonprofit?
Yes, California law also requires that a nonprofit adopt corporate bylaws, appoint directors, hold an initial board of directors meeting, and create an annual reporting schedule.

Also Read

Why California Nonprofit Corporation is So Important

California has a reputation for being a hub of innovation and progress, but with that comes a variety of social and environmental challenges. Nonprofit corporations in California are at the forefront of addressing these challenges and working towards positive change in the community. They often fill gaps where government funding falls short, providing vital services and support to those in need.

One of the key reasons why nonprofit corporations are so important in California is their ability to mobilize resources and expertise towards a common goal. With a large and diverse population, there are countless issues that need to be addressed, from homelessness and poverty to environmental sustainability and access to education. Nonprofit organizations can bring together individuals, businesses, and government agencies to collaborate and work towards solutions that benefit the greater good.

Nonprofit corporations also play a critical role in advocating for social change. In California, where progressive policies are often met with resistance, nonprofit organizations provide a platform for individuals to voice their concerns and push for policy changes that reflect the needs of the community. By mobilizing volunteers and supporters, nonprofit organizations can amplify their impact and make a meaningful difference in the lives of Californians.

Furthermore, nonprofit corporations in California are instrumental in promoting transparency and accountability. As stewards of public trust and resources, nonprofit organizations are held to high standards of governance and financial management. By operating as nonprofit corporations, these organizations are required to file annual reports and adhere to strict regulations that ensure they are meeting their mission and serving the public good.

Nonprofit corporations also play a crucial role in fostering innovation and creativity. In a state known for its entrepreneurial spirit, nonprofit organizations provide a platform for individuals to explore new ideas and approaches to addressing social challenges. By supporting grassroots initiatives and experimentation, nonprofit corporations can help drive positive change and catalyze innovation in the community.

Overall, nonprofit corporations in California are essential drivers of social progress and community development. By addressing pressing issues, advocating for change, promoting transparency, and fostering innovation, these organizations play a vital role in shaping the future of the state. As we continue to grapple with unprecedented challenges, nonprofit corporations in California will be at the forefront of building a more equitable, sustainable, and just society for all.

Conclusion

Starting a nonprofit corporation in California is an incredible way to give back to your community and positively impact the causes that matter most to you. By forming a nonprofit, you can provide essential services, promote awareness, and make a lasting difference in the lives of those who need it most. In California, a lot of nonprofit organizations are there to cater to people in need. Starting a nonprofit corporation is better than an LLC, as it provides limited liability and tax benefits. It helps you save taxes. If you want to start a nonprofit in California, you must follow the steps mentioned above in the article.

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