Learn How to Form a Texas Nonprofit Corporation

Embark on the journey of creating a non-profit corporation in Texas by delving into our informative guide, designed to navigate you through the intricate steps and empower your mission for positive impact.

While we don’t support nonprofit corporation formations at this time, we can create your Texas corporation. Corp formation starts at $0 + state fees and only takes 5-10 minutes

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A little help can go a long way, and since the Texas state motto is Friendship, ZenBusiness is here to act in that capacity and help you figure out how to form a Texas nonprofit corporation.

The Texas Business Organizations Code governs and provides state-specific laws for forming a nonprofit in the State of Texas. A Texas nonprofit corporation is any corporation in that state where the entity does not distribute its income to the directors, officers, or members. Nonprofit applicants can be residents or from out of state. Here’s what you need to do to form your Texas nonprofit corporation.

Step 1: Select your initial board of directors

A Texas nonprofit must have at least three directors, a president, a secretary, and at least one board member. The president and secretary may not be the same individual. The management structure can have a board of directors, members, or both. Nonprofit members are like for-profit corporation’s shareholders, but they don’t receive stock or income distributions.

Step 2: Choose a name for your Texas nonprofit corporation

Although your corporation’s name reflects its purpose, it must be unique to register it with the Secretary of State. The state rejects duplicates or deceptively similar submissions to existing names. You can check if the name you want is available on the Secretary of State’s website for $1 per search.

If the name that you want is available, you can reserve it for 120 days with the state for a fee.

After doing this, you should pick out a domain name that aligns with your nonprofit name. Once you have one, register it using our domain registration service. This allows you to establish an internet presence.

Step 3: Choose a Texas registered agent

Registered agents are third parties that agree to be your primary contact, for all legal and process correspondence from the state. Registered agents can be individuals, a corporation, or a founder of a nonprofit. However, all registered agents must maintain a street address and be available Monday through Friday during normal business hours.

All registered agents must provide consent acknowledging their role under the Texas Code. The consent can be physical or electronic and doesn’t have to be filed with the state.

ZenBusiness’s registered agent service is a good way to take care of this requirement. Our partners can fill this role on your behalf, giving you more time to work on other aspects of the nonprofit. They’ll upload them to your online dashboard then forward them to the right people.

Step 4: File Certificate of Formation with Texas

Complete Form 202 for domestic (in-state) or Form 302 for foreign (out-of-state) registration, with the information you’ve compiled about your Texas nonprofit corporation. The certificate submitter must be at least 18 years old or an officer of the legal entity authorized to submit the request. Notarized signatures are not mandatory, but the submitter is responsible for the accuracy of all information, including the agent’s consent.

You can submit your completed registration certificate online, via mail, or by fax. Check the Secretary of State’s website for updated fees and filing information.

Step 5: Create corporate bylaws

Corporate bylaws outline your nonprofit’s management structure including the purpose, list of directors and officers, and dates for your board and annual meetings. Texas does not require you to submit a copy of your bylaws when you register your nonprofit, but must have them for compliance and auditing purposes.

Step 6: Hold an organizational meeting for the board of directors

After the Certificate of Formation has been approved, schedule an organizational meeting for the board of directors. The meeting organizer must provide the directors and members with at least three days’ notice, of the date, time, and location of the meeting. A majority vote of the directors and invited members is needed to adopt the nonprofit’s initial set of bylaws.

Step 7: Set up corporate records-keeping

Nonprofits must maintain current financial records for the directors to prepare annual financial reports, outlining the previous year’s income, expenses, and balance statement.

Records can be physical or electronic and must be kept for the current year plus three years of retention.

Step 8: Get tax ID numbers

An Employer Identification Number, or EIN, allows the IRS to recognize your nonprofit as a business. You can get one through the IRS for free or use Zenbusiness’s EIN service so you can focus on other things.

Step 9: Apply for all necessary Texas licenses and permits

Each nonprofit’s local, state, or federal requirements for licenses and permits are different. Not having the right ones can delay your plans. Our business license report service can do the legwork and provide you with a list of requirements.

Step 10: Apply for tax-exempt status (on both federal and state levels)

You’ll need to apply for 501(c)(3) status to gain federal tax-exempt status. You’ll need to fill out form 1023. There’s a long version and a short one, fill out the one that best fits your nonprofit’s needs. Your nonprofit’s purpose, stated in your bylaws, must align with the criteria in the IRS code to qualify.

For state tax-exemption criteria, refer to Publication 96-1045 from the Texas Comptroller.

Step 11: Register as a charity with the state

A nonprofit’s purpose must align with certain classifications to qualify for federal or state exempt status. These classifications include charitable and benevolent activities, religious and missionary affiliations, civic and cultural awareness, or educational and athletic programs.

Step 12: Acquire insurance for your nonprofit

A variety of insurance options are available for nonprofits. If you have employees, you’ll need unemployment insurance and worker’s compensation. Review theTexas Department of Insurance website to find registered companies and agents to make sure you have all your bases covered.

Step 13: Open a bank account

Opening a corporate bank account separates your personal and business finances, and adds credibility to your company. Research several banks to compare benefits and fees. Once you find the bank for you, open a corporate account using your Certificate of Formation, EIN, and any other documents the bank asks for.

Ready to kickstart your Texas nonprofit corporation?

At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service or are looking to register a domain, our goal is to help you stay on the road to success. Check out our services, and contact us today to see how we can help you grow your company.

Texas Nonprofit Corporation FAQs

  • Yes. A founder, working as an employee, can be paid a reasonable salary.

  • Nonprofits must file IRS tax form 990-T to report income from sources unrelated to its purpose. Consult with a tax professional for specific tax requirements. Income related to your purpose can be reinvested into the nonprofit.

  • Any lawful business that doesn’t distribute income to its board, officers, or members, may qualify as a Texas nonprofit corporation.

  • Nonprofits can sell products. Profits from product sales may incur a tax. In Texas, you have to apply for tax-exempt status at the state level as well as the federal level.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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