There are many steps to start a nonprofit in California. From choosing a corporate name, to filing articles of incorporation, following the right steps will help make sure your nonprofit is properly formed and obtains its federal and state tax exempt status. Read on to learn which steps you should follow to start a nonprofit in California and how to become a nonprofit in California.
First – What Does It Mean to Be A Nonprofit Organization?
Being a nonprofit 501(c)(3) organization means that the IRS has approved the organization as a tax-exempt, charitable organization. To be a charitable organization, the organization must be established for specific purposes including religious, educational, charitable, scientific, literary, testing for public safety, fostering of national or international amateur sports, or prevention of cruelty to animals and children.
Follow These Steps to Start a Nonprofit in California
Now that you have decided to set up your nonprofit you need to choose a name for your nonprofit and decide how your organization will be recognized and function.
Choose A Name For Your Nonprofit
A nonprofit is typically formed as a corporation. A nonprofit corporation cannot share the same name or a similar name with an existing corporate name on record with the California Secretary of State. Use the Business Search database on the California Secretary of State website to see if your proposed name is available. You can also check name availability by mailing a complete Name Availability Inquiry Letter to the California Secretary of State’s office in Sacramento. You can reserve a name for up to 60 days while you complete the nonprofit formation process. Visit the Secretary of State’s website for detailed instructions on how to check name availability. Choosing a nonprofit name is the first step to starting a nonprofit in California.
Setting Up A Nonprofit in California
Prepare and File Articles of Incorporation Form for Nonprofit Organizations
There are many steps to starting a nonprofit organization in California. The first step to setting up a nonprofit requires registering a nonprofit organization in California by the filing Articles of Incorporation with the California Secretary of State. The Articles of Incorporation is a form for nonprofit organizations that must identify the following:
The nonprofit’s name
- The purpose of the nonprofit
- The agent for service of process designation and address
- Corporate power limitations
The Secretary of State website has an California Articles of Incorporation form you can use. Contact A People’s Choice if you need help in completing the form. If you plan to receive tax exempt status from the IRS and California, your Articles of Incorporation should contain the following language:
- A statement of purpose that meets tax exempt status standards;
- A statement that your nonprofit will not engage in prohibited political and lobbying activity; and
- A dissolution of assets provision dedicating your nonprofit’s assets to another tax exempt organization upon dissolution.
Making sure the above information is included in your Articles of Incorporation is a key step in starting a nonprofit in California.
Bylaws for Nonprofit Organization
Prior to filing your nonprofit’s Articles of Incorporation, you need to prepare its bylaws. Bylaws contain the policies and procedures your nonprofit will follow for holding board meetings, electing officers and directors, and taking care of California corporate formalities. Once your draft bylaws are formed, your nonprofit’s board of directors should hold its first meeting to approve the bylaws. In addition, the board should choose officers, adopt a fiscal year calendar, and approve the applying for federal and tax exempt status at the meeting. Make sure meeting minutes are taken.
Nonprofit Tax ID Number – Apply for an EIN
Any nonprofit officer can apply for an Employer Identification Number (EIN) online. EINs are issued for tax administration.
File Statement of Information
You have 90 days from the date of incorporation to file your Statement of Information. It can be filed online or by mail. This document identifies your nonprofit’s physical address, principal officers, and agent for service of process.
Nonprofit Tax Exemption – State and Federal Exemption Application
The most challenging part of the process in establishing a tax exempt nonprofit corporation is getting the nonprofit tax exemption. This is done by completing the 1023 Form, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. The application requires you to give detailed information about your nonprofit including its history, finances, organizational structure, governance policies, and business activities. Review our article on How to File for 501(c)(3) Status in California for more information.
Once you get your federal tax exemption status, you should get your California state tax exemption. Contact us for more information on how to get your nonprofit tax status and for help in completing the state and federal exemption applications.
If you want more information about how to start a nonprofit organization in California, please contact our office. We can help you complete the steps to start a California nonprofit and make the experience easy and hassle-free.