How To Register A 501c3 Organization

How to Kickoff a California Nonprofit

A Step-by-Step Guide & Boosted Resources --->

planting-icon2 Congratulations. You've got an thought for making the world a ameliorate identify, and yous desire to beginning a nonprofit as the means to practise so. The good news is that starting a California nonprofit isn't that hard to do if you have a sound plan, the right squad, and sufficient startup funds.

The bad news is that running a successful nonprofit is not easy. You lot'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 diverse laws that regulate nonprofits. Your answers to these questions will determine whether you should outset a nonprofit or consider alternatives. More on these points later on in this commodity.

Check out the recorded webinar from Feb 2022 with CalNonprofits CEO Jan Masaoka, where she walks through the major steps and gives advice about boards, finding your offset funding, and much more! Costless for Members / $xv for not-yet-members.

Questions to consider:

- Do y'all need to work with an attorney to start a nonprofit?
- Should yous start a nonprofit? What are the alternatives?

10 basic steps for starting a California nonprofit public do good corporation:

1. Determine the name of the corporation
2. Typhoon and file the articles of incorporation
three. Engage the board of directors
iv. Typhoon the bylaws and conflict 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's Registry of Charitable Trusts
8. File the Statement of Information with the California Secretarial assistant of State
9. Apply for federal tax exemption with the Internal Acquirement Service (IRS)
10. Utilize for California revenue enhancement exemption with the California Franchise Tax Board (FTB)
Bonus: Additional Resources

Nautical chart of the steps with the agencies, forms, and links.

one. Determine the name of the corporation.

A nonprofit is typically formed as a corporation and its proper name tin can be a valuable asset. A corporation'southward legal proper noun must be registered with the land where the corporation is formed. In California, a corporation proper name may be accepted past the California Secretary of Country if the name is non the same as or too similar to an existing name on the agency's records and if it'south not misleading to the public.

You can bank check the current database of existing names on the concern search page on the Secretary of State website. You tin likewise reserve a name for 60 days by mailing in a Name Reservation Asking, which prevents another person from registering that corporation proper name with the California Secretary of State while it is reserved. Y'all must likewise make sure the proper name does non infringe on another person's trademark rights. This is not always easy to determine, merely a skilful start includes running a trademark search on the U.Due south. Patent and Trademark Office database and a unproblematic Google search. For some founders, it may also exist important to confer with an intellectual holding attorney to help ensure they are not infringing on another's rights and to protect their name from existence used by other parties.

Also, if y'all plan to operate the nonprofit in other states in addition to California, some founders may want to check that the corporation'southward proper name is similarly available in those other states where the nonprofit plans to have operations and therefore may demand to register as a foreign corporation with the required state agencies in order to carry business there.
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2. Typhoon 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 organization's name;

(b) Its purpose or purposes of the nonprofit;

(c) The agent for service of procedure -- that is, a person who can receive lawsuits and other official correspondence and other matters, which tin can be an individual whose name and address are identified or a corporate agent registered with the California Secretarial assistant of State for such purpose;

(d) Limitations on the corporation'southward operations, consistent with its revenue enhancement-exempt status;

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

(f) Appropriate dedication and dissolution clauses.

For California, the articles volition besides place the type of nonprofit corporation being formed. In that location are three types of nonprofit corporations in California: public do good, mutual benefit, and religious. A nonprofit public benefit corporation (the focus of this step-by-stride guide) is the appropriate option for a nonprofit formed for charitable or public purposes. The articles of incorporation are typically signed past an "incorporator," which can be just one person but may as well exist signed by the initial board of directors if they are named in the Articles.

There is a template you can make full in and print on the Secretary of State's website. This is a good starting point but does not provide guidelines or communication on every of import consideration. For example, there is no guidance on specific purpose statements (y'all'll want to be careful nigh restricting the corporation'south activities in the future by a very limiting specific purpose statement) and no option to select any 501(c)(three) purposes other than charitable, educational, and religious. Information technology also 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 word on specific purpose statements: A broad specific purpose statement provides room for the system'south mission to evolve without requiring an amendment to the articles of incorporation. Information technology and may also brand it easier to comply with charitable trust laws that crave charitable funds to exist used consistent with the specific purpose of the organization at the fourth dimension such funds were originally acquired. If, instead, you adopt a narrow purpose statement such equally "to restore and maintain Pomponio State Beach," you would not be able to utilise funds acquired while the articles of incorporation contained this purpose statement to restore whatsoever other beaches, just the statement would provide a stronger mission anchor to help ensure that your organization stays on a specific course after the founders accept left. In this example, the arrangement could improve its articles with the Secretary of State to augment its purposes to include other beaches, though just the funds acquired after that change is in effect could exist used for those broader activities. A better selection might be for the nonprofit to adopt a purpose statement "to restore and maintain California beaches and bordering habitats."

For boosted information on this issue, read Starting a Nonprofit: Articles of Incorporation and Specific Purpose Statements.

More about the amanuensis for service of process : Information technology is also important to sympathise that the amanuensis is responsible for receiving lawsuits and possibly other important legal documents on behalf of the organization and making sure those documents accomplish the President or other authorized officer or director in a timely mode. If the agent fails to do then (eastward.grand., fails to have his or her post checked regularly while away for an extended period), the arrangement could face up negative consequences such as losing a default judgment for not showing up to defend a lawsuit. An organisation can identify an individual who resides in California who is willing to serve as an amanuensis or may elect to pay for a registered corporate agent, which may be preferred if there is no person willing to take this responsibility or if privacy concerns are an consequence (an private amanuensis's name and street address will be a thing of public tape).
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three. 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 constabulary, a nonprofit board may be composed of as few as one director, but the IRS may take issue with granting recognition of 501(c)(three) status to a nonprofit with merely i managing director. It is usually recommended that nonprofits have betwixt three and 25 directors.

These directors – board members – should understand their legal duties and responsibilities to human action with reasonable intendance and in the all-time interests of the organization while providing management and oversight over the arrangement's activities, finances, officers, and legal compliance. Bridgespan offers valuable resources on nonprofit corporate governance, including BoardSource'south 10 Basic Responsibilities of Nonprofit Boards ($29). We recommend also looking at the Board Source website and for more than information and resources about boards, many of which are gratuitous.
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4. Draft the bylaws and disharmonize of interest policy.

A corporation's bylaws provide the cardinal provisions for the governance of the corporation's activities and diplomacy. Bylaws should provide guidance to the board and reassurance of sound 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.chiliad., by a bulk vote of directors at the almanac lath meeting);

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

(d) How board meetings are chosen, noticed, and held (due east.m., four 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'south Rules, which we more often than not discourage for almost nonprofits);

(f) The officers of the corporation (California law requires iii officers: a president or chair of the board, secretary, and treasurer or master financial officer);

(g) 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 conspicuously stated in the bylaws;

(i) The authorization of board and non-lath committees (e.thousand., committees tasked to act with the authority of the lath versus advisory committees that can only make recommendations);

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

(k) The reports due to directors and members, if any (e.thousand., financial reports).

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

If the nonprofit has voting members, the bylaws will too need to contain additional provisions regarding member rights and processes. Nonprofits considering a voting membership structure may want to commencement talk over such structure with a lawyer, especially 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 Class of Bylaws for a California Nonprofit Public Benefit Corporation.

Separately articulated policies commonly supplement the bylaws in addressing fundamental governance and management bug. For case, although non required by federal tax police force, it is considered by many to be a best do for whatsoever nonprofit to accept an adopted conflict of interest policy. Additionally, if a nonprofit does non accept a conflict of interest policy, it must draw its policy regarding conflicts of interest in the IRS Form 1023. Accordingly, it would be advantageous for most nonprofits to adopt a policy. The IRS provides a sample policy in Appendix A of the Instructions to Form 1023, which tin exist a helpful starting point though annotation that this sample policy does non necessarily account for state law requirements such as the procedural requirements under California constabulary for approving certain cocky-dealing transactions involving directors.
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5. Take the initial board actions at a lath meeting or by unanimous written consent of the directors.

The board should take the following actions:

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

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

(d) Approve establishing a depository financial institution business relationship;

(due east) Approve applying for federal and state tax-exempt status;

(f) Corroborate reimbursement of startup expenses (if applicable); and

(m) Corroborate the compensation of the president (CEO) or the treasurer (CFO) and anyone performing the functions of such officers, like an executive manager (if applicable).

The incorporator may take already taken some of these actions at the fourth dimension that he or she appointed the initial board, in which case the board can review and confirm those prior actions if desired.

At this step, the directors may as well consummate some initial forms for the organization'southward records (which may also be required of the corporation'due south officers) such as their completed annual disclosure of any potential or actual conflicts of interests, which is usually required by any well-drafted disharmonize of interest policy, and also providing a signed written consent to receiving electronic transmissions from the corporation equally required past California law in gild to conduct official concern electronically (e.g., receiving coming together 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 Attorney Full 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 be filed within 30 days afterwards receipt of avails. The CT-1 Form and Instructions are available online. The corporation's articles of incorporation and bylaws should be included in the initial filing. For corporations that are in the procedure of applying for 501(c)(three) tax-exempt status, you can submit copies of the Class 1023 awarding and federal determination letter of the alphabet (Step 9) after receiving the determination letter to complete your filing with the Registry.
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8. File the Argument of Information (Form SI-100) with the Secretary of State.

The Statement must initially exist filed within 90 days of the date of incorporation. This biennial filing requirement, which identifies the organization'due south address, principal officers, and agent for service of procedure, tin be filed online or by mail service. (You can find 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 determination letter from the IRS.

Completing the Form 1023 awarding for exempt condition under Internal Revenue Code (IRC) Section 501(c)(3) may exist the near challenging function of the startup process. Information technology is a legally-driven and comprehensive inquiry covering ten Parts and 8 Schedules.

As of Jan 31, 2020, the IRS revised Grade 1023 to exist an online fill-in form that must be filed electronically at Pay.gov. While substantively the new electronic Class 1023 is mostly similar to its paper version predecessor, there are some new changes with the electronic course and eastward-filing process and some wrinkles that may be addressed in the hereafter. Luckily, the IRS has added new tools and instructional videos to their website to assist you understand the east-filing process. You lot will be required to create an business relationship at Pay.gov in which you volition be able to preview and download the grade, save your progress, and return to the form at a later time. Please note that although you will exist able to save your progress, the application will not allow you to advance to the next folio until you lot have completed all of the questions on the current page, including entering required descriptions or explanations or completing required schedules.

A critical department for conscientious completion is Part IV, Narrative Clarification of Your Activities, which asks: for each past, nowadays, or planned activity, include information that answers the post-obit questions.

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

Grade 1023 also requires data regarding (a) organizational structure; (b) bounty 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 arrangement; (d) organizational history (e.grand., an organization that was spun off or previously fiscally sponsored past another organization may demand to complete an additional schedule as a successor organisation); (east) specific activities; and (f) actual and/or projected argument of revenues and expenses (which should be consistent with whatsoever identified activities).

Part VIII is designed to determine the organisation's classification equally either a individual foundation or a public clemency. Public charity condition is by and large the more favorable tax status but requires an organization to meet sure requirements. For near organizations, this means passing a public back up exam over an ongoing five-year measuring period. For organizations that will receive a large majority of their support from few sources over their outset five years, monitoring and managing of the public back up ratio may be critically important. Public Charity Condition Simplified (a lilliputian) is a helpful online resource from Insight Eye for Community Economic Development.

If yous think that your nonprofit will not bring in gross receipts of more than $50,000 per twelvemonth during the next iii years, and has non had gross receipts of more than $l,000 in any of the past three years, you may be eligible to file Form 1023-EZ. The full criteria are explained here. Like Form 1023, the 1023-EZ must be filed electronically. You lot can detect instructions on this site.

The filing fee for Form 1023 is currently $600. The filing fee for Grade 1023-EZ is $275. Fees are paid online here.
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10. Apply for California taxation 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 decision alphabetic character can request California recognition of tax exemption under California Revenue & Taxation Code section 23701d from the FTB past filing Form 3500A along with a re-create of the IRS determination letter. You can observe instructions here. The FTB will mostly recognize the organisation's exemption from land income taxes as of the federal effective appointment. An organization that does not take a 501(c)(3) federal decision letter is otherwise required to file the more complicated Course 3500 for land income tax exemption. There is no fee for either Grade 3500A or Form 3500.
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Bonus: Additional Resources

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 you lot demand to work with an attorney to offset a nonprofit?

Although the majority of nonprofits are set up upwardly without the aid of lawyers, it's like shooting fish in a barrel to make mistakes that become costly to right after (such as unwisely creating voting membership structures, adding unlawful provisions to template bylaws, violating the commerciality doctrine, etc.). We recommend having experienced professionals involved -- such as attorneys, board members with nonprofit incorporation experience, and experienced consultants. Don't discount the value of a knowledgeable attorney. You can notice 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?

Now that you know how to showtime a California nonprofit, you should thoughtfully consider whether this is the correct choice for your ideas and for the public do good. There may be other ways to deport out your dreams, including working under the umbrella of an existing nonprofit. One frequently-overlooked alternative is financial sponsorship, a relationship that may allow a group to business firm a charitable projection within an existing nonprofit with the power to spin it off at a later date. For more information on fiscal sponsorship, see Financial Sponsorship Basics from the Bar Association of San Francisco. Very small operations may consider forming themselves as an unincorporated clan. You may as well find that starting a for-profit company will serve your purposes ameliorate than a nonprofit structure.

One time you have started your nonprofit, exist sure to expect at CalNonprofits' Nonprofit Compliance Checklist, a regularly updated listing of all the federal and state forms required from nonprofits, including links to all the forms.
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ABOUT THE AUTHORS: Emily Chan and Gene Takagi

Attorneys Emily Chan and Cistron Takagi wrote this guide for the California Association of Nonprofits equally part of their commitment to pro bono work and community service.

Emily Chan is of counsel with Adler & Colvin and a former recipient of the Outstanding Nonprofit Lawyer – Immature Chaser award recognized by the Nonprofit Organizations Commission of the American Bar Association. Gene Takagi is a main attorney of NEO Law Group, a part-time lecturer at Columbia University, and a contributing editor of the Nonprofit Law Blog.

You can reach Emily at world wide web.adlercolvin.com or 415-421-7555
You tin can achieve Gene at world wide web.neolawgroup.com or 415-977-0558
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