How to Start a Nonprofit in Texas


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.

All Posts by Steve Goldstein →
Business Formation Expert  |   Fact Checked by Editorial Staff
Last updated: 
LLCBuddy™ offers informative content for educational purposes only, not as a substitute for professional legal or tax advice. We may earn commissions if you use the services we recommend on this site.
At LLCBuddy, we don't just offer information; we provide a curated experience backed by extensive research and expertise. Led by Steve Goldstein, a seasoned expert in the LLC formation sector, our platform is built on years of hands-on experience and a deep understanding of the nuances involved in establishing and running an LLC. We've navigated the intricacies of the industry, sifted through the complexities, and packaged our knowledge into a comprehensive, user-friendly guide. Our commitment is to empower you with reliable, up-to-date, and actionable insights, ensuring you make informed decisions. With LLCBuddy, you're not just getting a tutorial; you're gaining a trustworthy partner for your entrepreneurial journey.
Start a Nonprofit in Texas

Are you looking to start a nonprofit in Texas? You’ve come to the right place. Known for its vibrant community and rich culture, Texas (often referred to as The Lone Star 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 Texas’s motto, “Friendship,” thousands of nonprofits are founded within the state each year. This article will provide a comprehensive guide to starting your own nonprofit corporation in Texas. 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 Texas, we encourage you to read this article in its entirety.

What is a Nonprofit in Texas?

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 Texas, 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 Texas

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 Texas 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 Texas might be eligible for tax exemptions (check with Texas Comptroller of Public Accounts), but this type of organization does not get to enjoy limited liability and personal asset protection.

How to Start a Nonprofit Corporation in Texas

Setting up a nonprofit corporation requires a few things to consider. Name of the nonprofit, initial directors, drafting bylaws, get a Registered Agent, 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 Texas 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 Texas 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 120 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 Three unrelated directors to start the organization. If you don’t choose a minimum of Three directors, it will automatically become a member-managed corporation.

Step 3: Appoint Your Texas Registered Agent

The third step is to get a Texas Registered Agent for your nonprofit corporation. The Registered Agent 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 Texas.

Step 4: Write Texas 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 Texas state law. It is similar to an LLC operating agreement in Texas for the LLC owners.

Step 5: File the Texas Certificate of Formation – For Profit Corporation

This is the most important step. File your Certificate of Formation – For Profit Corporation with the Texas Secretary of State. You can do it through four methods that are online, fax, by mail and in-person. All the formation forms, such as the Texas LLC Certificate of Formation form, the Texas Certificate of Formation – For Profit Corporation form for corporations, forms for LLPs, and all others can be found on the Texas 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 $300 for filing online, by mail, in person filing, or by Fax to the Secretary of State, P.O. Box 13697, Austin, TX 78711-3697 or upload it online (if available).

Step 6: Obtain Tax ID for Your Texas 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 Texas

The next step is to get the business licenses you need to run your nonprofit organization in Texas. 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 Texas, you must apply for the tax exemption to Texas Comptroller of Public Accounts. 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 AP-204 Form to apply for the state tax exemption. Read Texas classification of taxes to learn more about the Texas tax structure.

Step 10: Get Insurance for Your Texas 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 Texas Department of Insurance for more information.

After Forming Your Texas 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 Texas. 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 Texas

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

  • Well Aware
  • Migrant Clinicians Network Inc.
  • EKAL VIDYALAY FOUNDATION OF USA.
  • Together In Hope.
  • The Heart Smiles.
  • African Childrens Haven.
  • Caring for Cambodia Inc.
  • Kellermann Foundation.

FAQs

What is the process for starting a nonprofit in Texas?
To start a nonprofit in Texas, you need to file articles of incorporation with the Texas Secretary of State, create a governing board and bylaws, obtain an Employer Identification Number (EIN) from the IRS, and register with the Texas Attorney General’s Office.
Is there a fee to file articles of incorporation in Texas?
Yes, there is a filing fee of $25 for articles of incorporation in Texas.
What type of documents do I need to file with the Texas Secretary of State to form a nonprofit?
You need to file articles of incorporation and a cover letter with the Texas Secretary of State to form a nonprofit.
Can I form a nonprofit without obtaining an EIN?
No, you need to obtain an EIN from the IRS before you can form a nonprofit.
How do I register with the Texas Attorney General’s Office?
You must complete the Charitable Trust Registration form on the Texas Attorney General’s website and submit it with the associated filing fee.
Do I need to register my nonprofit with the IRS?
Yes, you need to apply for 501(c)(3) tax-exempt status with the IRS in order to receive tax-deductible donations.
How do I obtain a 501(c)(3) tax-exempt status in Texas?
You can obtain 501(c)(3) tax-exempt status in Texas by submitting Form 1023 with the IRS and paying the associated filing fee.
What other licenses and permits do I need to operate a nonprofit in Texas?
Depending on the type of nonprofit, you may need to obtain other licenses and permits, such as a business license, sales tax permit, and more.
How do I apply for a business license in Texas?
To apply for a business license in Texas, you need to contact the local county clerk or county judge’s office.
How do I obtain a sales tax permit in Texas?
You can obtain a sales tax permit in Texas by submitting Form AP-201 to the Texas Comptroller of Public Accounts.
What are the reporting requirements for nonprofits in Texas?
Nonprofits in Texas are required to file an Annual Information Report with the Texas Attorney General’s Office every year.
What is the deadline for filing an Annual Information Report in Texas?
The deadline for filing an Annual Information Report in Texas is June 15th of each year.
Are nonprofits in Texas subject to annual audits?
Nonprofits with gross receipts of more than $500,000 are required to have an annual audit by a certified public accountant.
What is the Texas Franchise Tax?
The Texas Franchise Tax is an annual tax levied on all corporations, limited liability companies, and limited partnerships doing business in Texas.
Do nonprofits have to pay the Texas Franchise Tax?
Yes, nonprofits must pay the Texas Franchise Tax unless they have qualified for exemption.
How do I qualify for exemption from the Texas Franchise Tax?
To qualify for exemption from the Texas Franchise Tax, you must submit Form 05-163 to the Texas Comptroller of Public Accounts.
Are there any other taxes that nonprofits in Texas must pay?
Yes, nonprofits in Texas may be subject to other taxes, such as sales taxes and local taxes.
Are there any special rules for fundraising in Texas?
Yes, nonprofits in Texas must obtain a permit from the Texas Secretary of State before engaging in fundraising activities.
How do I apply for a fundraising permit in Texas?
You can apply for a fundraising permit in Texas by submitting Form AP-200 and the associated filing fee to the Texas Secretary of State.
What is the Texas Charitable Trust Act?
The Texas Charitable Trust Act is a law that outlines the responsibilities and obligations of charitable organizations in Texas.
What are the penalties for violating the Texas Charitable Trust Act?
Violations of the Texas Charitable Trust Act can lead to civil or criminal penalties, including fines and possible jail time.
Are there any restrictions on how I can use donations in Texas?
Yes, charitable organizations in Texas are required to use donations for their stated purposes only and must account for all donations.
Are there any reporting requirements for donations in Texas?
Yes, charitable organizations in Texas must report all donations over $25 to the Texas Attorney General’s Office.
Do I need to register with the Texas Comptroller of Public Accounts?
Yes, nonprofits in Texas must register with the Texas Comptroller of Public Accounts and obtain a sales tax permit.
Are there any restrictions on political activities for nonprofits in Texas?
Yes, nonprofits in Texas are prohibited from engaging in political activities and must remain nonpartisan.
Can I sell merchandise to raise funds in Texas?
Yes, nonprofits in Texas can sell merchandise to raise funds as long as they comply with all applicable laws and regulations.
Are there any restrictions on how I can use my nonprofit’s funds in Texas?
Yes, nonprofits in Texas are required to use their funds for their stated purposes only and must maintain accurate financial records.
What are the rules for dissolving a nonprofit in Texas?
To dissolve a nonprofit in Texas, you need to file articles of dissolution with the Texas Secretary of State, notify all creditors of the dissolution, and complete any other requirements set forth in your articles of incorporation.
What are the steps to starting a nonprofit organization in Texas?
The steps to starting a nonprofit organization in Texas include researching the mission of the nonprofit, forming a board of directors, filing the Articles of Incorporation, filing for a tax-exempt status with the IRS, registering with the Texas Secretary of State, and registering with the Texas Comptroller of Public Accounts.
What are the legal requirements for a nonprofit organization in Texas?
Legal requirements for nonprofit organizations in Texas include filing Articles of Incorporation with the Texas Secretary of State, filing for a tax-exempt status with the IRS, registering with the Texas Comptroller of Public Accounts, and ensuring compliance with Texas state laws and regulations.
Are there any specific rules or regulations that nonprofits in Texas must follow?
Yes, nonprofits in Texas must comply with all applicable state and federal laws and regulations. This includes filing the Articles of Incorporation, filing for a tax-exempt status with the IRS, registering with the Texas Secretary of State, and registering with the Texas Comptroller of Public Accounts.
What are the benefits of forming a nonprofit organization in Texas?
The benefits of forming a nonprofit organization in Texas include access to tax-exempt status, exemption from certain state taxes, and the ability to access public and private grants and donations.
Are there any additional resources available for those starting a nonprofit in Texas?
Yes, there are various online resources available for those starting a nonprofit in Texas, including the Texas Secretary of State website, the Texas Comptroller of Public Accounts website, and the IRS website.

Also Read

Why Texas Nonprofit Corporation is So Important

One of the key reasons why nonprofit corporations are so important in Texas is their ability to fill gaps left by government services. While the government plays a vital role in providing certain services, there are many areas where nonprofit organizations are better equipped to address specific needs efficiently and effectively. By leveraging the energy and expertise of their staff and volunteers, nonprofits can deliver innovative and responsive programs that directly impact the lives of Texas residents.

Moreover, nonprofit organizations often have a unique perspective on social issues and can advocate for important causes without the often-political constraints faced by government agencies. This allows them to address underlying problems and work towards systemic change, rather than simply providing Band-Aid solutions. With a clear focus on their mission and values, nonprofit corporations in Texas have the flexibility to adapt quickly to changing circumstances and serve as a catalyst for positive social change.

Nonprofit corporations also play a crucial role in fostering a sense of community and connection among Texas residents. By providing a platform for individuals to come together and work towards a common goal, nonprofits can strengthen social bonds and empower people to make a difference in their own communities. This sense of belonging and purpose can have a profound impact on individuals and help build a stronger, more resilient society in Texas.

Furthermore, the work of nonprofit organizations often goes unnoticed and underappreciated, despite the significant contributions they make to society. From providing shelter to the homeless, to offering support to vulnerable populations, nonprofit corporations in Texas are on the front lines of addressing some of the most pressing issues facing our state. Their dedication and commitment to serving others exemplify the best of humanity and inspire others to do the same.

In conclusion, nonprofit corporations play a vital role in Texas, addressing a wide range of social issues and making a positive impact on the lives of residents. By filling gaps left by government services, advocating for important causes, fostering a sense of community, and providing essential services to those in need, nonprofits are true champions of social change. Their work may be challenging and often thankless, but the impact they make is immeasurable and essential for the well-being of Texas as a whole.

Conclusion

Starting a nonprofit corporation in Texas 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 Texas, 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 Texas, you must follow the steps mentioned above in the article.

Leave a Comment