How to Start a Nonprofit Organization in Texas 2024

Establishing a nonprofit is kind of similar to forming a corporation in Texas. You can easily start a nonprofit in Texas as a limited liability company, a corporation, or any other type of business structure. Unlike for-profit businesses, nonprofits focus on addressing pressing social issues than profit-oriented businesses.

This article will guide you through the Dos and Don’ts of starting a nonprofit in Texas. LLCBuddy editors explain all the steps you must follow to form a corporation for your nonprofit organization. It must be noted that this page shared generalized steps to form a nonprofit in Texas. It is recommended to consult an attorney or hire a professional service.

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 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

How to Start a Nonprofit in Texas

Nonprofits are certainly different from for-profit organizations. The main focus of the organization is on social values rather than profit. The process of having a nonprofit in Texas is similar to forming any corporation in Texas. However, there are a few additional steps to follow.

Step 1: Develop Your Mission and Vision

Before you get into legal details, you need to define the purpose and goal of your organization clearly; this will go a long way in guiding your decisions as well as making it easy for you to explain your mission statement.

• Pick out what specific cause or issue you want to address;
• Define who you will target or help reach particular goals;
• List down both what people should do within a short period and what they should achieve in the long term perspective;
• Write a captivating mission statement.

Step 2: Name Your Nonprofit in Texas

Naming a business in Texas has a handful of regulations. If you start a corporation or an LLC in Texas, you must follow those regulations to name your nonprofit. The most important rule is to check if the name is available in Texas to use.

If you’re forming an LLC in Texas for your nonprofit organization, check out LLC naming guidelines in Texas. For the corporation regulations, read on how to start a corporation in Texas. As soon as the name is decided, you can reserve it with the Texas Secretary of State. You can also file DBA in Texas before you establish your nonprofit organization. DBA can be filed in two methods, by mail and in person.. The DBA filing fee in Texas is varies by county.

• Online DBA Filing: There is no online filing available
• Offline DBA Filing: For filing offline in Texas, you must send the accomplished DBA filing form to the County Clerk’s Office where your business is located. The mailing address and drop-off location will vary depending on the specific county.
• DBA Renew Time in Texas: ten years

Step 3: Appoint Initial Board Members

If you’re forming a corporation for your Texas nonprofit, it is required to appoint the initial board members. In Texas, 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 4: Get Texas Registered Agent

This is a very important step for any business in Texas. The Registered Agent in Texas is a person who conducts all types of documentation between the State and your nonprofit organization. The Registered Agent must be from Texas, above 18 years of age, and must have legal rights to conduct business in the state. Several professional and business formation services offer registered agent services in all the states in the USA. It is better to hire a professional rather than being your own Registered Agent in Texas.

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

This is the most important step in forming a nonprofit corporation in Texas. File your Certificate of Formation – For Profit Corporation with the Texas Secretary of State. You can file your nonprofit corporation through four methods that are online, fax, by mail and in-person. 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.

• Online Incorporation: Create an account/Log in to the SOS site, get the e-form, fill it, and submit online. Or get the online PDF, fill it up and upload it back on the site.
• Offline Incorporation: Send the form by mail to or drop it off in person at Secretary of State, P.O. Box 13697, Austin, TX 78711-3697. Or Fax it to (512) 463 – 5709
• Incorporation Fee in Texas: $300 for filing online, by mail, in person filing, or by Fax

Hiring a professional service might be a wise idea here. Having a corporation is much more complex than forming an LLC. We recommend ZenBusiness as they are one of the top business service providers currently. They offer LLC formation at $0 in Texas.

Step 5.1: Write Company Bylaws

As soon as you file the formation documents, it is time for 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 6: Get an EIN in Texas

The next step is to obtain the EIN in Texas. The employer identification number (EIN) is required to conduct business in Texas. You will need to acquire the Texas 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: Tax Exemptions for Your Nonprofit

When you start a nonprofit in Texas, you enjoy tax exemptions. As the nonprofits are not profit-oriented, they get a huge tax exemption from Federal and State authorities.

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.

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 the 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 an Exemption Certificate to apply for the state tax exemption. Read Texas classification of taxes to learn more about the Texas tax structure.

After You Form a Nonprofit Corporation in Texas

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

• Get necessary licenses: As soon as your corporation or an LLC for your Nonprofit in Texas will be established, get necessary licenses and permits. Check with the local authority/government to get the local permits.
• Get Insurance for the Texas Nonprofit: 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.
• 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.
• Evaluating And Improving Performance: To evaluate the performance of your non-profit organization, it is necessary to; establish performance metrics also tied to the mission; and implement continuous improvement strategies.
• Staying Current With Nonprofit Trends And Best Practices: To stay up-to-date on trends and best practices in the non-profit world you should join nonprofit associations plus networks.

Common Challenges And How To Address Them

• Funding Sustainability

For funding sustainability issues you need to focus on diversifying funding sources and developing strong relationships with donors. Also, implementing efficient financial management, exploring earned income opportunities for sustainability, and such should be on focus.

• Volunteer Management

The challenges faced in volunteer management can be resolved by creating clear roles plus expectations for volunteers, and providing adequate training also support. Recognize and appreciate volunteer contributions while implementing volunteer retention strategies such as offering regular appreciation events or awards. Provide trainers’ placement services too.

• Mission Drift

This problem can be solved by several mechanisms such as regular review and reaffirmation of your organizational mission–this will ensure that all activities are aligned with the core purpose. Educate board members and staff about the importance of the mission and make them understand how this works out in practice. Implement a strategic planning process and explain to the board why it is important for their organizations to have a well-defined mission.

• Regulatory Compliance

To remain compliant with the law, you need to: keep track of changing laws and regulations all the time; conduct regular compliance audits; seek professional advice when in doubt; and implement comprehensive record-keeping systems.

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 Secretary of State portal.

• 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

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In Conclusion

Starting a Nonprofit corporation in the Texas takes careful thought, dedication, and detailing. Follow the steps detailed in this guide while addressing common challenges so that your organization can be built on solid ground and make a long-lasting impact on your cause. Remember also that running a nonprofit organization in Texas is a perpetual learning, adapting, and growing process.

As you continue your journey, you may need professional help. Having a professional or experienced person, or attorneys while you run your nonprofit in Texas can make the journey much simpler in the long run. Since forming a nonprofit involves tax exemptions, the government takes additional care to verify your background.

Donations, charity, and several community services are the most desirable ways to evade tax. Hence, many people get involved in nonprofit organizations. It is recommended to consult a legal professional, accountants, and service providers like ZenBusiness for the paperwork and formation process. With persistence, passion, and proper management structure everything is possible hence changing positively your community as far as Non-Profit corporations are concerned.