Does The Non Profit Have To Be Registered

How to Start a California Nonprofit

A Step-by-Footstep Guide & Additional Resources --->

planting-icon2 Congratulations. Y'all've got an idea for making the world a meliorate place, and you desire to start a nonprofit as the means to do so. The good news is that starting a California nonprofit isn't that hard to do if yous have a sound plan, the right team, and sufficient startup funds.

The bad news is that running a successful nonprofit is non like shooting fish in a barrel. You'll need to call up through how you volition bring value to the public, obtain funds, attract staff and/or volunteers, build a lath of directors, and comply with the various laws that regulate nonprofits. Your answers to these questions will make up one's mind whether you should outset a nonprofit or consider alternatives. More on these points later in this commodity.

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

Questions to consider:

- Exercise you demand to work with an attorney to start a nonprofit?
- Should y'all start a nonprofit? What are the alternatives?

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

1. Determine the proper noun of the corporation
2. Draft and file the articles of incorporation
iii. Appoint the board of directors
4. Typhoon the bylaws and conflict of involvement policy
5. Have the initial lath deportment
six. Obtain an employer identification number (EIN)
vii. File the initial registration grade with the California Chaser Full general's Registry of Charitable Trusts
8. File the Statement of Information with the California Secretary of Land
nine. Use for federal taxation exemption with the Internal Acquirement Service (IRS)
10. Apply for California tax exemption with the California Franchise Tax Board (FTB)
Bonus: Additional Resources

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

1. Make up one's mind the name of the corporation.

A nonprofit is typically formed as a corporation and its name can be a valuable asset. A corporation'due south legal name must be registered with the state where the corporation is formed. In California, a corporation proper noun may exist accustomed by the California Secretarial assistant of State if the proper noun is not the same as or too similar to an existing name on the agency's records and if information technology's not misleading to the public.

Yous tin can check the current database of existing names on the business search page on the Secretary of State website. You can also reserve a name for 60 days past mailing in a Proper noun Reservation Request, which prevents another person from registering that corporation name with the California Secretary of State while information technology is reserved. You must also make sure the proper name does not borrow on another person's trademark rights. This is not always like shooting fish in a barrel to determine, just a good start includes running a trademark search on the U.Southward. Patent and Trademark Role database and a simple Google search. For some founders, it may also be important to confer with an intellectual holding attorney to help ensure they are not infringing on another's rights and to protect their proper name from existence used past other parties.

Also, if you plan to operate the nonprofit in other states in improver to California, some founders may desire to check that the corporation's name is similarly bachelor in those other states where the nonprofit plans to have operations and therefore may need to annals as a foreign corporation with the required country agencies in society to conduct business there.
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2. Draft and file the articles of incorporation.

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

(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 can be an private whose name and address are identified or a corporate amanuensis registered with the California Secretary of Country for such purpose;

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

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

(f) Appropriate dedication and dissolution clauses.

For California, the articles will also place the type of nonprofit corporation being formed. There 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-pace 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 only may as well be signed by the initial board of directors if they are named in the Articles.

There is a template you tin can fill in and impress on the Secretary of State's website. This is a good starting bespeak but does not provide guidelines or advice on every important consideration. For example, in that location is no guidance on specific purpose statements (you'll want to exist careful virtually restricting the corporation's activities in the future past a very limiting specific purpose statement) and no option to select any 501(c)(3) purposes other than charitable, educational, and religious. It as well does non address other languages that may be required in the articles if the nonprofit also intends to seek exemption from belongings taxes in California.

A discussion on specific purpose statements: A broad specific purpose statement provides room for the organisation's mission to evolve without requiring an amendment to the manufactures of incorporation. It and may also make it easier to comply with charitable trust laws that require charitable funds to be used consequent with the specific purpose of the organization at the time such funds were originally acquired. If, instead, you adopt a narrow purpose statement such as "to restore and maintain Pomponio State Beach," you would not be able to use funds acquired while the articles of incorporation contained this purpose argument to restore any other beaches, but the argument would provide a stronger mission anchor to help ensure that your system stays on a specific form later on the founders take left. In this instance, the organization could amend its articles with the Secretarial assistant of State to broaden its purposes to include other beaches, though just the funds acquired after that change is in effect could be used for those broader activities. A ameliorate choice might be for the nonprofit to adopt a purpose argument "to restore and maintain California beaches and bordering habitats."

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

More about the agent for service of procedure : It is also of import to empathise that the agent is responsible for receiving lawsuits and perhaps other of import legal documents on behalf of the organization and making certain those documents reach the President or other authorized officer or director in a timely manner. If the amanuensis fails to do so (e.thou., fails to have his or her postal service checked regularly while abroad for an extended period), the organization could face negative consequences such as losing a default judgment for not showing up to defend a lawsuit. An organization can identify an individual 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 there is no person willing to take this responsibleness or if privacy concerns are an upshot (an individual agent's name and street accost volition be a matter of public record).
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iii. Appoint the board of directors.

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

Under California law, a nonprofit board may be composed of as few every bit one director, but the IRS may accept consequence with granting recognition of 501(c)(3) status to a nonprofit with only i director. It is commonly recommended that nonprofits have betwixt three and 25 directors.

These directors – board members – should understand their legal duties and responsibilities to act with reasonable intendance and in the best interests of the organization while providing direction and oversight over the system's activities, finances, officers, and legal compliance. Bridgespan offers valuable resources on nonprofit corporate governance, including BoardSource'southward Ten Basic Responsibilities of Nonprofit Boards ($29). We recommend too looking at the Board Source website and for more information and resource well-nigh boards, many of which are costless.
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iv. Draft the bylaws and conflict of interest policy.

A corporation's bylaws provide the primal 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 regime 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 (east.thou., past a bulk vote of directors at the annual lath meeting);

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

(d) How board meetings are called, noticed, and held (e.g., four times per year with 14 days advance notice by electronic mail);

(e) How board meetings are conducted (e.m., the chair of the board presides or pursuant to Robert'due south Rules, which we generally discourage for most nonprofits);

(f) The officers of the corporation (California law requires 3 officers: a president or chair of the board, secretary, and treasurer or chief financial officer);

(grand) The duties and responsibilities of each officer;

(h) Whether the corporation has voting members or is a non-membership corporation, either of which should exist clearly stated in the bylaws;

(i) The authorization of board and non-lath committees (e.g., committees tasked to act with the potency of the lath versus advisory committees that can only 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 whatsoever (due east.grand., fiscal reports).

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

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 want to first discuss such structure with a lawyer, particularly if they exercise not expect their members to actively participate in meetings and regularly practise their rights to vote for members of the lath 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 key governance and management issues. For case, although not required past federal tax law, it is considered by many to be a best exercise for any nonprofit to have an adopted conflict of interest policy. Additionally, if a nonprofit does not have a disharmonize of involvement policy, it must describe its policy regarding conflicts of involvement in the IRS Form 1023. Appropriately, it would be advantageous for most nonprofits to adopt a policy. The IRS provides a sample policy in Appendix A of the Instructions to Class 1023, which can be a helpful starting point though note that this sample policy does non necessarily account for country police force requirements such as the procedural requirements under California constabulary for approving certain self-dealing transactions involving directors.
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v. Take the initial lath deportment at a board coming together or by unanimous written consent of the directors.

The board should take the post-obit 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 bank account;

(e) Approve applying for federal and state taxation-exempt status;

(f) Approve reimbursement of startup expenses (if applicative); and

(thou) Approve 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 case the board tin review and ostend those prior actions if desired.

At this step, the directors may as well complete some initial forms for the organization'southward records (which may also be required of the corporation'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 every bit required past California police force in club to conduct official business electronically (east.1000., receiving meeting notices by e-post).
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six. 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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7. File the initial registration form (Form CT-one) with the California Attorney Full general'southward Registry of Charitable Trusts.

The initial registration must exist renewed annually, is required for the majority of nonprofit public benefit corporations, and must be filed within xxx days after receipt of assets. The CT-one Course and Instructions are available online. The corporation'southward 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, you tin submit copies of the Form 1023 awarding and federal conclusion letter of the alphabet (Step 9) after receiving the determination letter of the alphabet to complete your filing with the Registry.
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eight. File the Argument of Information (Form SI-100) with the Secretary of State.

The Statement must initially be filed inside xc days of the date of incorporation. This biennial filing requirement, which identifies the organization's address, main officers, and agent for service of process, can be filed online or by mail. (You tin can discover information and instructions on completing the Statement of Information hither.)
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ix. Apply for federal taxation exemption with the Internal Revenue Service (IRS) and receive a determination letter from the IRS.

Completing the Form 1023 awarding for exempt status under Internal Revenue Code (IRC) Section 501(c)(3) may be the most challenging part of the startup process. It is a legally-driven and comprehensive inquiry covering 10 Parts and 8 Schedules.

Equally of January 31, 2020, the IRS revised Form 1023 to be an online backup form that must be filed electronically at Pay.gov. While substantively the new electronic Course 1023 is generally similar to its paper version predecessor, there are some new changes with the electronic course and e-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 yous understand the eastward-filing procedure. You volition exist required to create an business relationship at Pay.gov in which you will be able to preview and download the course, save your progress, and return to the form at a later time. Please notation that although you will be able to save your progress, the application will not let you to accelerate to the adjacent page until you have 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 activeness, include data that answers the following questions.

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

Form 1023 too requires information regarding (a) organizational structure; (b) bounty and other financial arrangements with officers and directors, and certain highly paid employees and contained 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 boosted schedule as a successor system); (e) specific activities; and (f) actual and/or projected statement of revenues and expenses (which should exist consistent with whatsoever identified activities).

Part 8 is designed to make up one's mind the arrangement's classification as either a individual foundation or a public charity. Public charity condition is generally the more favorable tax status but requires an organization to meet certain requirements. For most organizations, this ways passing a public support exam over an ongoing v-yr measuring period. For organizations that will receive a large bulk of their support from few sources over their showtime five years, monitoring and managing of the public support ratio may be critically important. Public Charity Status Simplified (a piffling) is a helpful online resources from Insight Centre for Customs Economic Development.

If you recollect that your nonprofit will non bring in gross receipts of more than $fifty,000 per year during the next three years, and has not had gross receipts of more than $50,000 in any of the by three years, you may exist eligible to file Form 1023-EZ. The full criteria are explained here. Similar Form 1023, the 1023-EZ must exist filed electronically. You tin find instructions on this site.

The filing fee for Course 1023 is currently $600. The filing fee for Form 1023-EZ is $275. Fees are paid online here.
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10. Apply for California revenue enhancement exemption with the California Franchise Tax Lath (FTB) and receive an affirmation of exemption letter from the FTB.

Organizations with a 501(c)(3) federal conclusion letter can request California recognition of taxation exemption nether California Revenue & Tax Code department 23701d from the FTB by filing Form 3500A along with a copy of the IRS decision letter. You can find instructions here. The FTB will generally recognize the system'southward exemption from state income taxes equally of the federal constructive date. An organization that does not accept a 501(c)(3) federal determination letter is otherwise required to file the more complicated Form 3500 for land income tax exemption. In that location is no fee for either Form 3500A or Form 3500.
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Bonus: Additional Resources

IRS "StayExempt.org" specially for 501(c)3s
Nolo Press: How to Form a Nonprofit Corporation in California
California Chaser General'south "Guide for Charities"
Nonprofit Kit for Dummies
Why Join the California Association of Nonprofits

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Do you need to piece of work with an attorney to commencement a nonprofit?

Although the majority of nonprofits are fix without the help of lawyers, it'due south like shooting fish in a barrel to make mistakes that become 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 every bit attorneys, board members with nonprofit incorporation feel, and experienced consultants. Don't discount the value of a knowledgeable attorney. You tin observe 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 start a California nonprofit, you lot should thoughtfully consider whether this is the correct choice for your ideas and for the public benefit. At that place may be other ways to comport out your dreams, including working under the umbrella of an existing nonprofit. One oftentimes-disregarded alternative is fiscal sponsorship, a relationship that may allow a group to house a charitable projection within an existing nonprofit with the ability to spin information technology off at a after date. For more information on financial sponsorship, run across Fiscal Sponsorship Nuts from the Bar Association of San Francisco. Very pocket-size operations may consider forming themselves as an unincorporated association. You may also detect that starting a for-profit company volition serve your purposes ameliorate than a nonprofit structure.

Once y'all have started your nonprofit, be sure to expect at CalNonprofits' Nonprofit Compliance Checklist, a regularly updated listing of all the federal and country 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 Clan of Nonprofits as part of their delivery to pro bono work and community service.

Emily Chan is of counsel with Adler & Colvin and a former recipient of the Outstanding Nonprofit Lawyer – Young Attorney award recognized by the Nonprofit Organizations Committee of the American Bar Association. Gene Takagi is a principal chaser of NEO Law Group, a role-time lecturer at Columbia University, and a contributing editor of the Nonprofit Constabulary Weblog.

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