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S OUTHWEST B ORDER N ONPROFIT R ESOURCE C ENTER. Starting a Nonprofit . THE UNIVERSITY OF TEXAS-PAN AMERICAN. What We Do. Capacity Building Opportunities Online Directory Assist with Start-up Nonprofits Online Library Foundation Center Online

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s outhwest b order n onprofit r esource c enter

SOUTHWEST BORDER NONPROFIT RESOURCE CENTER

Starting a Nonprofit

THE UNIVERSITY OF TEXAS-PAN AMERICAN

what we do
What We Do
  • Capacity Building Opportunities
  • Online Directory
  • Assist with Start-up Nonprofits
  • Online Library
  • Foundation Center Online
  • Educate Students as Resource for Nonprofits

community.utpa.edu/sbnrc

nonprofits stats
Nonprofits Stats
  • Texas
    • 2011- 92,622 Nonprofit Organizations
    • 2003- 86,933 Nonprofit Organizations
  • Rio Grande Valley
    • Cameron- 733
    • Hidalgo- 1,000
    • Starr- 34
    • Willacy- 44

National Center for Charitable Statistics

forming a nonprofit tax exempt corporation in texas
Forming a Nonprofit Tax-Exempt Corporation in Texas
  • What is a nonprofit corporation?
  • Forming an organization to serve an unmet need
  • Benefits and limitations of a nonprofit corporation
what is a nonprofit corporation
What is a Nonprofit Corporation?
  • A corporation in which income is NOT distributed to a members
  • Tax-Exemption under section 501(c)(3)
  • Purposes: religious, charitable, scientific, testing for public safety, literary, educational, or prevention of cruelty to children or animals
forming an organization to serve an unmet need
Forming an Organization to Serve an Unmet Need
  • MISSION:
    • What is the primary purpose of the nonprofit?
    • Does the community have an unmet need?
  • VISION:
    • What target audience will be served?
  • RESEARCH:
    • What are competing organizations already providing?
    • Is there a strong commitment from organizers and participants to build the nonprofit?
    • Is there an adequate source of funds to support the organization?
benefits and limitations of nonprofits
Benefits and Limitations of Nonprofits
  • Benefits:
    • Members and directors are shielded from personal liability
    • Organization can be eligible to receive government or community development loans and grants
  • Limitations:
    • Nonprofit cannot be organized for the purpose of financial profit for its members or directors
    • Nonprofits are absolutely precluded from engaging in partisan political campaign activities and their lobbying is heavily regulated
what is a community development organization
What is a Community Development Organization?
  • Characterized by community based leadership and its work primarily in the development of affordable housing, job training, and small business assistance
  • There are four independent bases for federal tax-exemption for a nonprofit community development organization:
    • Relieving the poor and distressed
    • Combating community deterioration
    • Eliminating discrimination
    • Lessening the burdens of government
steps needed to form a nonprofit corporation
Steps Needed To Form a Nonprofit Corporation
  • Step 1: Check availability of name with the Texas Secretary of State in Austin at

www.sos.state.tx.us/corp/forms_boc.shtml

steps needed to form a nonprofit corporation1
Steps Needed To Form a Nonprofit Corporation
  • Step 2: Prepare Certificate of Formation in the document filed with the Secretary of State to form the nonprofit corporation.
    • Certificate of formation must include:
      • Purpose Clause – Mission/Vision
      • Initial Directors – Directors constituting the initial board (minimum of 3)
      • Incorporator – The person who signs the certificate of formation
      • Registered Agent and Address – The agent is the incorporator or the officer of the corporation. The registered office generally cannot be a post office box
      • Members - The nonprofit corporation needs to be governed by voting members, board of directors, or a combination of the two
steps needed to form a nonprofit corporation2
Steps Needed To Form a Nonprofit Corporation
  • Step 3: File the certificate with the Secretary of State
      • The incorporator needs to submit the completed Certificate of Formation in duplicate together with a $25 filing fee.
      • This is mailed to: P.O. Box 13697,

Austin, TX 78711-3697.

steps needed to form a nonprofit corporation3
Steps Needed To Form a Nonprofit Corporation
  • Step 4: Prepare Bylaws
    • Meetings
    • Leadership
    • Provisions for Membership
    • Quorum
    • Controls
    • Committees
    • Fiscal Year
    • Bylaw Amendments
steps needed to form a nonprofit corporation4
Steps Needed To Form a Nonprofit Corporation
  • Step 5: Meeting of initial directors to adopt bylaws and transact business
    • Adopt Bylaws
    • Elect Officers
    • 501(c)(3) Application
steps needed to form a nonprofit corporation5
Steps Needed To Form a Nonprofit Corporation
  • Step 6: Apply for a federal Employer Identification Number (EIN)
    • In order to be tax-exempt, an organization must obtain a Federal Employer Identification Number and is needed whether or not the organization has members
      • Complete an IRS form SS-4, available on the IRS website at www.irg.gov
      • EIN is obtainable easily online at

https://sa2.www4.irs.gov/modiein/individual/index.jsp

steps needed to form a nonprofit corporation6
Steps Needed To Form a Nonprofit Corporation
  • Step 7: Prepare federal tax-exemption application
    • Must file a Form 1023 with the IRS at www.irs.gov. The site contains step by step directions of what a Form 1023 entitles
steps needed to form a nonprofit corporation7
Steps Needed To Form a Nonprofit Corporation
  • Step 8: Apply for sales, franchise and hotel tax-exemption from Texas comptroller
    • To apply for state exemption based on the federal exempt status, complete Form AP-204 located at

www.window.state.tx.us/taxinfo/exempt/index.html

steps needed to form a nonprofit corporation8
Steps Needed To Form a Nonprofit Corporation
  • Step 9: Apply for property tax-exemptions from the local tax appraisal district
    • To receive the exemption, an organization should submit Form 50-299 at

www.window.state.tx.us/taxinfo/taxforms/02-form06.html

should an organization use a lawyer to help gain tax exempt status
Should an Organization Use a Lawyer to Help Gain Tax-Exempt Status?
  • A lawyer is not required, but may help you by avoiding unnecessary mistakes which might jeopardize your ability to incorporate or gain tax-exempt status
  • Lawyer will also advise on certain corporate responsibilities
  • Lawyer may also be able to recommend an accountant to comply with ongoing federal and state tax, bookkeeping, and reporting obligations
what are the legal obligations of a tax exempt nonprofit
What are the Legal Obligations of a Tax-Exempt Nonprofit?
  • A nonprofit corporation must:
    • Hold an annual meeting
    • Refrain from making a loan to a director.
    • Maintain current and accurate financial records
    • Prepare annual reports in accordance with accounting standards
    • Keep records, books and annual reports at its principle office for three years for public inspection
    • Keep current registered agent on record
    • Submit IRS Form 990 every tax year
    • Submit Secretary of State Form 802-General Information
how is a nonprofit organization monitored
How is a Nonprofit Organization Monitored?
  • The Board of Directors
  • Private Watchdog Groups (National Charities Information Bureau and the American Institute of Philanthropy)
  • The State (The Attorney General’s Office)
  • IRS
  • Individual Donors and Members