How Much Does It Cost To Register A Nonprofit Organization

How to Start a California Nonprofit

A Step-past-Stride Guide & Additional Resource --->

planting-icon2 Congratulations. You've got an idea for making the earth a better place, and you want to start a nonprofit equally the means to do so. The practiced news is that starting a California nonprofit isn't that difficult to do if you take a sound plan, the correct team, and sufficient startup funds.

The bad news is that running a successful nonprofit is not easy. Y'all'll demand to retrieve through how you lot 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 volition determine whether you should start a nonprofit or consider alternatives. More on these points subsequently in this commodity.

Cheque out the recorded webinar from February 2022 with CalNonprofits CEO January Masaoka, where she walks through the major steps and gives advice virtually boards, finding your first funding, and much more than! FREE for Members / $15 for not-all the same-members.

Questions to consider:

- Do you need to work with an chaser to start a nonprofit?
- Should yous beginning a nonprofit? What are the alternatives?

10 basic steps for starting a California nonprofit public benefit corporation:

i. Make up one's mind the proper name of the corporation
2. Draft and file the articles of incorporation
three. Appoint the board of directors
iv. Draft the bylaws and conflict of involvement policy
5. Take the initial board deportment
6. Obtain an employer identification number (EIN)
seven. File the initial registration form with the California Attorney General's Registry of Charitable Trusts
viii. File the Statement of Information with the California Secretarial assistant of Land
9. Apply for federal taxation exemption with the Internal Revenue Service (IRS)
10. Utilise for California revenue enhancement exemption with the California Franchise Tax Board (FTB)
Bonus: Additional Resource

Chart of the steps with the agencies, forms, and links.

1. Determine the name of the corporation.

A nonprofit is typically formed equally a corporation and its name can exist a valuable asset. A corporation's legal name must exist registered with the land where the corporation is formed. In California, a corporation name may be accepted past the California Secretarial assistant of State if the name is not the aforementioned as or besides similar to an existing name on the agency's records and if it's not misleading to the public.

You can check the current database of existing names on the business search folio on the Secretary of State website. Yous can too reserve a proper name for 60 days past mailing in a Name Reservation Request, which prevents some other person from registering that corporation name with the California Secretary of State while it is reserved. You must also make sure the name does not infringe on some other person'due south trademark rights. This is non always easy to decide, but a good start includes running a trademark search on the U.Southward. Patent and Trademark Office database and a simple Google search. For some founders, it may likewise exist of import to confer with an intellectual property attorney to assist ensure they are non infringing on another'due south rights and to protect their proper noun from being used by other parties.

Likewise, if you program to operate the nonprofit in other states in add-on to California, some founders may desire to cheque that the corporation's name is similarly bachelor in those other states where the nonprofit plans to take operations and therefore may need to register as a foreign corporation with the required state agencies in order to conduct business organization there.
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ii. Draft and file the manufactures of incorporation.

A corporation is legally created with the filing of the articles of incorporation. Articles of incorporation typically place:

(a) The organization's proper noun;

(b) Its purpose or purposes of the nonprofit;

(c) The agent for service of process -- that is, a person who can receive lawsuits and other official correspondence and other matters, which 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's operations, consistent with its tax-exempt status;

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

(f) Appropriate dedication and dissolution clauses.

For California, the articles volition besides place the blazon of nonprofit corporation being formed. In that location are three types of nonprofit corporations in California: public benefit, mutual do good, and religious. A nonprofit public benefit corporation (the focus of this step-by-footstep guide) is the appropriate choice for a nonprofit formed for charitable or public purposes. The articles of incorporation are typically signed by an "incorporator," which can be simply 1 person but may besides be signed by the initial board of directors if they are named in the Articles.

In that location is a template you tin fill up in and print on the Secretarial assistant of State's website. This is a practiced starting point only does not provide guidelines or communication on every of import consideration. For example, there is no guidance on specific purpose statements (you'll want to be careful well-nigh restricting the corporation's activities in the future by a very limiting specific purpose statement) and no option to select any 501(c)(3) purposes other than charitable, educational, and religious. It also does non address other languages that may be required in the articles if the nonprofit also intends to seek exemption from property taxes in California.

A word on specific purpose statements: A broad specific purpose statement provides room for the organization'south mission to evolve without requiring an amendment to the articles of incorporation. It and may also make it easier to comply with charitable trust laws that crave charitable funds to be used consequent with the specific purpose of the organization at the time such funds were originally acquired. If, instead, y'all prefer a narrow purpose statement such as "to restore and maintain Pomponio State Beach," you would not be able to use funds caused while the articles of incorporation contained this purpose statement to restore any other beaches, but the argument would provide a stronger mission anchor to aid ensure that your organization stays on a specific grade later on the founders have left. In this instance, the organization could amend its articles with the Secretary of State to broaden its purposes to include other beaches, though but the funds caused after that alter is in effect could be used for those broader activities. A better pick might be for the nonprofit to adopt a purpose statement "to restore and maintain California beaches and adjoining habitats."

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

More than about the agent for service of process : Information technology is also of import to understand that the agent is responsible for receiving lawsuits and perhaps other important legal documents on behalf of the organization and making sure those documents achieve the President or other authorized officer or director in a timely manner. If the agent fails to do so (e.1000., fails to take his or her post checked regularly while away for an extended period), the organization could face up negative consequences such as losing a default judgment for not showing upward to defend a lawsuit. An organisation can identify an private who resides in California who is willing to serve as an agent or may elect to pay for a registered corporate agent, which may be preferred if in that location is no person willing to accept this responsibility or if privacy concerns are an consequence (an individual agent's name and street address will exist a thing of public record).
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3. Engage the board of directors.

If the initial directors are not named in the articles of incorporation, the incorporator tin can and should appoint the lath through a written action.

Nether California police force, a nonprofit lath may be composed of every bit few as one director, only the IRS may accept issue with granting recognition of 501(c)(three) status to a nonprofit with simply 1 director. It is commonly recommended that nonprofits have between 3 and 25 directors.

These directors – lath members – should understand their legal duties and responsibilities to human action with reasonable care and in the best interests of the organisation while providing direction and oversight over the organization'south activities, finances, officers, and legal compliance. Bridgespan offers valuable resources on nonprofit corporate governance, including BoardSource's Ten Basic Responsibilities of Nonprofit Boards ($29). We recommend besides looking at the Board Source website and for more information and resources about boards, many of which are gratuitous.
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iv. Typhoon the bylaws and conflict of involvement policy.

A corporation's bylaws provide the fundamental provisions for the governance of the corporation'south activities and affairs. Bylaws should provide guidance to the lath and reassurance of sound governance practices to government regime, 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.g., by a majority vote of directors at the annual board coming together);

(c) How the lath may accept an activity (east.g., by a bulk vote of directors at a board coming together or past unanimous written consent);

(d) How board meetings are called, noticed, and held (east.yard., four times per year with fourteen days advance discover by email);

(eastward) How board meetings are conducted (e.g., the chair of the lath presides or pursuant to Robert's Rules, which we generally discourage for near nonprofits);

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

(g) The duties and responsibilities of each officer;

(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-board committees (e.g., committees tasked to act with the authorisation of the lath versus advisory committees that tin can just make recommendations);

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

(k) The reports due to directors and members, if any (due east.g., financial reports).

Bylaws may too include the corporation's specific purpose or mission statement (which might replicate or make more specific the purpose statement in the articles of incorporation) and the corporation's cadre values if they would exist viewed every bit helpful in guiding the board on its leadership and decision-making – though the corporation should also exist mindful to avert inconsistencies between the articles and bylaws if mentioning the purposes or mission statement in both places (for which the articles will control).

If the nonprofit has voting members, the bylaws will also demand to contain additional provisions regarding member rights and processes. Nonprofits considering a voting membership structure may desire to first discuss such structure with a lawyer, specially if they do not look 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 Form of Bylaws for a California Nonprofit Public Benefit Corporation.

Separately articulated policies commonly supplement the bylaws in addressing fundamental governance and management problems. For example, although not required by federal tax law, it is considered by many to be a all-time practise for any nonprofit to have an adopted conflict of interest policy. Additionally, if a nonprofit does not have a conflict of interest policy, information technology must depict its policy regarding conflicts of interest in the IRS Form 1023. Accordingly, it would be advantageous for nigh nonprofits to adopt a policy. The IRS provides a sample policy in Appendix A of the Instructions to Form 1023, which can be a helpful starting point though annotation that this sample policy does non necessarily account for land police requirements such as the procedural requirements under California law for approving certain self-dealing transactions involving directors.
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5. Accept the initial board actions at a board meeting or by unanimous written consent of the directors.

The board should take the following actions:

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

(b) Set the verbal 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;

(east) Approve applying for federal and state revenue enhancement-exempt status;

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

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

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

At this step, the directors may also complete some initial forms for the organization's records (which may also be required of the corporation's officers) such as their completed annual disclosure of any potential or actual conflicts of interests, which is usually required by any well-drafted conflict of interest policy, and also providing a signed written consent to receiving electronic transmissions from the corporation as required by California police in lodge to bear official concern electronically (east.g., receiving meeting notices by email).
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six. Obtain an employer identification number (EIN).

An officer or authorized 3rd-party designee may apply for and obtain an EIN online.
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7. File the initial registration form (Class CT-1) with the California Attorney General's Registry of Charitable Trusts.

The initial registration must exist renewed annually, is required for the bulk of nonprofit public do good corporations, and must exist filed within 30 days after receipt of assets. The CT-1 Form and Instructions are available online. The corporation'due south articles of incorporation and bylaws should be included in the initial filing. For corporations that are in the process of applying for 501(c)(3) tax-exempt status, y'all can submit copies of the Form 1023 application and federal conclusion letter (Footstep 9) after receiving the determination letter to complete your filing with the Registry.
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8. File the Statement of Data (Form SI-100) with the Secretary of State.

The Statement must initially exist filed inside 90 days of the date of incorporation. This biennial filing requirement, which identifies the organization'southward address, principal officers, and agent for service of process, can exist filed online or by postal service. (You can observe information and instructions on completing the Statement of Information hither.)
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9. Utilise for federal revenue enhancement exemption with the Internal Acquirement Service (IRS) and receive a determination alphabetic character from the IRS.

Completing the Form 1023 application for exempt status nether Internal Revenue Code (IRC) Section 501(c)(3) may exist the nearly challenging part of the startup process. It is a legally-driven and comprehensive inquiry covering ten Parts and viii Schedules.

As of Jan 31, 2020, the IRS revised Form 1023 to exist an online fill-in course that must exist filed electronically at Pay.gov. While substantively the new electronic Form 1023 is mostly similar to its newspaper version predecessor, in that location are some new changes with the electronic course and eastward-filing process and some wrinkles that may be addressed in the future. Luckily, the IRS has added new tools and instructional videos to their website to help y'all understand the e-filing process. Yous will be required to create an account at Pay.gov in which you lot will be able to preview and download the form, save your progress, and return to the form at a later fourth dimension. Please notation that although you will be able to relieve your progress, the awarding will not allow you to accelerate to the next page until you take completed all of the questions on the current page, including entering required descriptions or explanations or completing required schedules.

A critical section for careful completion is Part IV, Narrative Description of Your Activities, which asks: for each past, present, or planned activity, include information that answers the following questions.

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

Form 1023 also requires data regarding (a) organizational construction; (b) compensation and other fiscal 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 organization; (d) organizational history (e.g., an organization that was spun off or previously fiscally sponsored by some other organization may need to complete an additional schedule as a successor organization); (eastward) specific activities; and (f) actual and/or projected statement of revenues and expenses (which should be consistent with any identified activities).

Part VIII is designed to determine the organization'due south classification as either a private foundation or a public charity. Public charity condition is mostly the more favorable tax status but requires an organization to meet certain requirements. For about organizations, this means passing a public support test over an ongoing five-yr measuring flow. For organizations that volition receive a large bulk of their back up from few sources over their first v years, monitoring and managing of the public support ratio may exist critically of import. Public Clemency Status Simplified (a little) is a helpful online resource from Insight Heart for Customs Economic Development.

If you call back that your nonprofit will not bring in gross receipts of more than than $50,000 per year during the side by side three years, and has not had gross receipts of more than $fifty,000 in any of the past three years, y'all may be eligible to file Class 1023-EZ. The full criteria are explained hither. Like Grade 1023, the 1023-EZ must be filed electronically. You lot can find instructions on this site.

The filing fee for Class 1023 is currently $600. The filing fee for Grade 1023-EZ is $275. Fees are paid online hither.
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10. Apply for California revenue enhancement exemption with the California Franchise Revenue enhancement Board (FTB) and receive an affirmation of exemption letter from the FTB.

Organizations with a 501(c)(3) federal decision letter tin can asking California recognition of tax exemption under California Acquirement & Taxation Code section 23701d from the FTB past filing Form 3500A along with a copy of the IRS conclusion letter. You can find instructions here. The FTB will by and large recognize the organisation's exemption from state income taxes every bit of the federal effective date. An system that does not take a 501(c)(3) federal decision alphabetic character is otherwise required to file the more complicated Course 3500 for state income taxation exemption. There is no fee for either Grade 3500A or Grade 3500.
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Bonus: Additional Resources

IRS "StayExempt.org" especially for 501(c)3s
Nolo Printing: How to Form a Nonprofit Corporation in California
California Attorney General's "Guide for Charities"
Nonprofit Kit for Dummies
Why Join the California Clan of Nonprofits

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Do y'all demand to work with an attorney to start a nonprofit?

Although the majority of nonprofits are set upwardly without the assist of lawyers, it's like shooting fish in a barrel to make mistakes that go costly to correct later (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, lath members with nonprofit incorporation feel, and experienced consultants. Don't discount the value of a knowledgeable attorney. You tin can find 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 commencement a California nonprofit, yous should thoughtfully consider whether this is the right selection for your ideas and for the public benefit. There may be other ways to carry out your dreams, including working nether the umbrella of an existing nonprofit. One often-overlooked alternative is fiscal sponsorship, a human relationship that may allow a group to house a charitable projection within an existing nonprofit with the power to spin information technology off at a subsequently date. For more than data on financial sponsorship, come across Fiscal Sponsorship Basics from the Bar Clan of San Francisco. Very small-scale operations may consider forming themselves as an unincorporated clan. You may also find that starting a for-profit visitor volition serve your purposes better than a nonprofit structure.

One time yous have started your nonprofit, exist sure to await 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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Most THE AUTHORS: Emily Chan and Factor Takagi

Attorneys Emily Chan and Gene Takagi wrote this guide for the California Association of Nonprofits as office of their commitment to pro bono work and community service.

Emily Chan is of counsel with Adler & Colvin and a quondam recipient of the Outstanding Nonprofit Lawyer – Young Attorney honour recognized by the Nonprofit Organizations Committee of the American Bar Association. Cistron Takagi is a main attorney of NEO Law Group, a office-fourth dimension lecturer at Columbia Academy, and a contributing editor of the Nonprofit Law Blog.

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