How To Register A 501 C 3

How to Start a California Nonprofit

A Step-past-Step Guide & Boosted Resource --->

planting-icon2 Congratulations. You've got an thought for making the world a better place, and you want to start a nonprofit every bit the ways to do so. The good news is that starting a California nonprofit isn't that difficult to do if yous accept a sound plan, the correct team, and sufficient startup funds.

The bad news is that running a successful nonprofit is not piece of cake. You'll need to remember 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 yous should showtime a nonprofit or consider alternatives. More on these points later in this article.

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

Questions to consider:

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

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

one. Determine the name of the corporation
ii. Draft and file the articles of incorporation
3. Engage the board of directors
4. Draft the bylaws and conflict of interest policy
five. Have the initial board actions
6. Obtain an employer identification number (EIN)
7. File the initial registration class with the California Attorney General's Registry of Charitable Trusts
8. File the Argument of Data with the California Secretary of State
9. Apply for federal tax exemption with the Internal Revenue Service (IRS)
10. Utilize 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. Decide the proper name of the corporation.

A nonprofit is typically formed as a corporation and its name tin be a valuable asset. A corporation's legal name must be registered with the state where the corporation is formed. In California, a corporation name may be accepted by the California Secretary of State if the name is not the aforementioned every bit or also similar to an existing proper noun on the agency'due south records and if it'south not misleading to the public.

Yous can bank check the current database of existing names on the business concern search page on the Secretary of Land website. Y'all tin also reserve a proper name for 60 days by mailing in a Name Reservation Request, which prevents another person from registering that corporation name with the California Secretary of State while it is reserved. You must also make certain the proper name does not infringe on another person's trademark rights. This is not always piece of cake to decide, but a skillful start includes running a trademark search on the U.Southward. Patent and Trademark Part database and a unproblematic Google search. For some founders, it may also exist important to confer with an intellectual property attorney to help ensure they are not infringing on another's rights and to protect their name from beingness used by other parties.

As well, if you plan to operate the nonprofit in other states in add-on to California, some founders may want to check that the corporation's name is similarly available in those other states where the nonprofit plans to have operations and therefore may need to register as a foreign corporation with the required land agencies in order to carry concern in that location.
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two. Typhoon and file the articles of incorporation.

A corporation is legally created with the filing of the manufactures of incorporation. Articles of incorporation typically identify:

(a) The organization'southward proper noun;

(b) Its purpose or purposes of the nonprofit;

(c) The agent for service of process -- that is, a person who tin 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 Secretary of Land for such purpose;

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

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

(f) Appropriate dedication and dissolution clauses.

For California, the manufactures will besides identify the type of nonprofit corporation being formed. There are 3 types of nonprofit corporations in California: public benefit, mutual benefit, and religious. A nonprofit public benefit corporation (the focus of this step-by-step 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 tin be just one person but may also be signed by the initial board of directors if they are named in the Articles.

There is a template you can fill in and print on the Secretary of Country'southward website. This is a good starting point merely does not provide guidelines or communication on every of import consideration. For example, at that place is no guidance on specific purpose statements (yous'll desire to be careful 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 not accost other languages that may be required in the articles if the nonprofit besides intends to seek exemption from belongings taxes in California.

A give-and-take on specific purpose statements: A broad specific purpose statement provides room for the organisation's 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 require charitable funds to be used consistent with the specific purpose of the arrangement at the time such funds were originally caused. If, instead, you adopt a narrow purpose statement such as "to restore and maintain Pomponio State Embankment," you would not be able to use funds acquired while the manufactures of incorporation contained this purpose statement to restore whatsoever other beaches, just the statement would provide a stronger mission anchor to assistance ensure that your arrangement stays on a specific course later on the founders have left. In this case, the organization could meliorate its articles with the Secretary of State to augment its purposes to include other beaches, though merely the funds acquired later on that alter is in effect could be used for those broader activities. A better choice might exist for the nonprofit to adopt a purpose statement "to restore and maintain California beaches and adjoining habitats."

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

More about the agent for service of process : Information technology is besides of import to understand that the agent is responsible for receiving lawsuits and mayhap other important legal documents on behalf of the arrangement and making sure those documents reach the President or other authorized officer or manager in a timely style. If the amanuensis fails to do so (e.g., fails to have his or her post checked regularly while away for an extended period), the organization could face negative consequences such as losing a default judgment for not showing upwards 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 in that location is no person willing to have this responsibility or if privacy concerns are an issue (an individual amanuensis'south proper name and street address will be a matter of public record).
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3. Appoint the lath of directors.

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

Under California law, a nonprofit lath may be composed of as few every bit 1 manager, merely the IRS may take event with granting recognition of 501(c)(3) status to a nonprofit with only one director. It is commonly recommended that nonprofits have between 3 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 management and oversight over the system's 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 also looking at the Board Source website and for more than information and resources about boards, many of which are costless.
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4. Draft the bylaws and disharmonize of interest policy.

A corporation's bylaws provide the fundamental provisions for the governance of the corporation'due south activities and affairs. Bylaws should provide guidance to the lath and reassurance of sound governance practices to authorities authorities, funders, and other interested stakeholders.

Bylaws typically contain specific provisions detailing:

(a) The powers of the lath and duties of the directors;

(b) How directors are elected or otherwise selected (e.k., past a bulk vote of directors at the almanac board meeting);

(c) How the lath may take an action (e.one thousand., by a majority vote of directors at a lath meeting or by unanimous written consent);

(d) How board meetings are called, noticed, and held (e.one thousand., four times per twelvemonth with 14 days advance notice past e-mail);

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

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

(g) The duties and responsibilities of each officer;

(h) Whether the corporation has voting members or is a not-membership corporation, either of which should be clearly stated in the bylaws;

(i) The authority of board and non-board committees (e.chiliad., committees tasked to human activity with the authority of the board 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.g., fiscal reports).

Bylaws may likewise include the corporation'southward specific purpose or mission statement (which might replicate or make more than specific the purpose statement in the articles of incorporation) and the corporation's cadre 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 volition control).

If the nonprofit has voting members, the bylaws will as well need to contain additional provisions regarding member rights and processes. Nonprofits because a voting membership structure may desire to first discuss such construction with a lawyer, specially if they do not expect their members to actively participate in meetings and regularly exercise their rights to vote for members of the lath 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 key governance and management bug. For instance, although not required by federal revenue enhancement law, it is considered by many to exist a best practice for any nonprofit to have an adopted conflict of interest policy. Additionally, if a nonprofit does not take a conflict of interest policy, information technology must describe its policy regarding conflicts of interest in the IRS Form 1023. Accordingly, it would be advantageous for about nonprofits to adopt a policy. The IRS provides a sample policy in Appendix A of the Instructions to Form 1023, which tin can exist a helpful starting point though annotation that this sample policy does non necessarily business relationship for land law requirements such as the procedural requirements nether California constabulary for approving certain self-dealing transactions involving directors.
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five. Take the initial board deportment at a board meeting or past unanimous written consent of the directors.

The board should take the following actions:

(a) Adopt the bylaws and disharmonize 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) Corroborate establishing a bank account;

(eastward) Corroborate applying for federal and land taxation-exempt status;

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

(g) 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 lath can review and ostend 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'southward officers) such equally their completed almanac disclosure of any potential or actual conflicts of interests, which is usually required by any well-drafted conflict of interest policy, and as well providing a signed written consent to receiving electronic transmissions from the corporation every bit required past California law in club to behave official business organization electronically (e.g., receiving meeting notices by eastward-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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7. File the initial registration form (Class CT-ane) with the California Chaser General'southward 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 xxx days later receipt of assets. The CT-1 Class 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 process of applying for 501(c)(3) tax-exempt status, you lot can submit copies of the Form 1023 application and federal determination letter of the alphabet (Footstep ix) afterward receiving the determination letter of the alphabet 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 within 90 days of the date of incorporation. This biennial filing requirement, which identifies the organisation's accost, master officers, and agent for service of process, can exist filed online or by postal service. (You can notice data and instructions on completing the Statement of Information hither.)
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ix. Utilize for federal tax exemption with the Internal Revenue Service (IRS) and receive a decision letter from the IRS.

Completing the Class 1023 awarding for exempt status under Internal Acquirement Code (IRC) Department 501(c)(3) may be the nigh challenging part of the startup process. It is a legally-driven and comprehensive enquiry covering 10 Parts and 8 Schedules.

Equally of January 31, 2020, the IRS revised Form 1023 to exist an online fill-in form that must be filed electronically at Pay.gov. While substantively the new electronic Grade 1023 is mostly similar to its newspaper version predecessor, there are some new changes with the electronic form and east-filing process and some wrinkles that may be addressed in the futurity. Luckily, the IRS has added new tools and instructional videos to their website to assist yous understand the east-filing process. You will be required to create an business relationship at Pay.gov in which yous will exist able to preview and download the form, relieve your progress, and render to the form at a afterward time. Please note that although y'all volition exist able to salvage your progress, the awarding will non permit you lot to advance to the adjacent folio until you have completed all of the questions on the current folio, including entering required descriptions or explanations or completing required schedules.

A critical section for conscientious completion is Office Four, Narrative Description of Your Activities, which asks: for each by, nowadays, or planned action, include information that answers the post-obit questions.

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

Class 1023 likewise requires data regarding (a) organizational construction; (b) compensation 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 system; (d) organizational history (e.g., an organization that was spun off or previously fiscally sponsored past another organization may need to complete an additional schedule as a successor organisation); (east) specific activities; and (f) bodily and/or projected statement of revenues and expenses (which should be consequent with any identified activities).

Function VIII is designed to make up one's mind the organization'southward nomenclature as either a individual foundation or a public charity. Public charity condition is generally the more favorable tax status merely requires an arrangement to come across certain requirements. For most organizations, this means passing a public back up test over an ongoing five-year measuring flow. For organizations that will receive a big bulk of their support from few sources over their first v years, monitoring and managing of the public back up ratio may be critically important. Public Charity Status Simplified (a niggling) is a helpful online resources from Insight Centre for Customs Economic Evolution.

If y'all think that your nonprofit will not bring in gross receipts of more than $50,000 per year during the next iii years, and has non had gross receipts of more than $50,000 in whatsoever 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. Y'all can discover instructions on this site.

The filing fee for Form 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 tax exemption with the California Franchise Tax Lath (FTB) and receive an affidavit of exemption alphabetic character from the FTB.

Organizations with a 501(c)(3) federal determination letter tin can request California recognition of revenue enhancement exemption under California Revenue & Taxation Code section 23701d from the FTB past filing Form 3500A along with a copy of the IRS determination letter. You tin discover instructions hither. The FTB will generally recognize the organization's exemption from country income taxes as of the federal effective date. An organization that does not have a 501(c)(3) federal determination letter of the alphabet is otherwise required to file the more than complicated Class 3500 for state income tax exemption. In that location is no fee for either Form 3500A or Form 3500.
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Bonus: Additional Resource

IRS "StayExempt.org" specially 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 you need to work with an attorney to outset a nonprofit?

Although the majority of nonprofits are ready without the assist of lawyers, it's easy 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 as attorneys, board members with nonprofit incorporation feel, and experienced consultants. Don't discount the value of a knowledgeable attorney. You can detect a list of firms and consultants who are CalNonprofits members in the Professional person Directory online. (Search for "Starting a Nonprofit and Staying Compliant.")
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What are some alternatives to starting a nonprofit?

At present that you know how to start a California nonprofit, you should thoughtfully consider whether this is the right option for your ideas and for the public benefit. In that location may be other means to carry out your dreams, including working under the umbrella of an existing nonprofit. One often-overlooked alternative is fiscal sponsorship, a relationship that may allow a grouping to business firm a charitable project within an existing nonprofit with the ability to spin it off at a later date. For more information on fiscal sponsorship, run into Fiscal Sponsorship Basics from the Bar Association of San Francisco. Very small operations may consider forming themselves every bit an unincorporated association. Y'all may also detect that starting a for-turn a profit company will serve your purposes better than a nonprofit structure.

Once you take started your nonprofit, exist sure to look at CalNonprofits' Nonprofit Compliance Checklist, a regularly updated list of all the federal and land 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 Gene Takagi wrote this guide for the California Association of Nonprofits every bit function 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 past the Nonprofit Organizations Commission of the American Bar Association. Factor Takagi is a primary attorney of NEO Constabulary Group, a part-time lecturer at Columbia University, and a contributing editor of the Nonprofit Police force Weblog.

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