How to Set Up a Nonprofit Organization in California
Starting with forming a board of directors, you can then file your Articles of Incorporation and apply for nonprofit status.3 min read
Learn how to set up a nonprofit organization in California. Starting with forming a board of directors, you can then file your Articles of Incorporation and apply for nonprofit status.
Nonprofits must register with state and federal authorities. At the state level, you should apply to the Secretary of State.
California Nonprofit Organizations
Non-profit organizations are more commonly known as nonprofit public benefit corporations in California. Registering as a nonprofit organization gives protection to your personal assets, exemption from state and federal taxes, and deductions for certain gifts.
Types of California Nonprofit Organizations
There are basically three types of nonprofit organizations in California and all of them are corporations:
- Mutual benefit organizations: These are basically for the mutual benefit of the group forming them. These nonprofits are not exempt from tax. The Chamber of Commerce and the Hotel Association are examples of mutual benefit nonprofits.
- Public benefit organizations: These nonprofits are meant for the benefit of everyone. They are almost always tax exempt.
- Religious organizations: These are formed mostly for church and are tax exempt.
Steps to Forming a Nonprofit Organization in California
Reserve Your Name
Your nonprofit must have a unique name, clearly distinguishable from other corporations. Conduct a name search on the state's database of business names in order to check its availability. You can do this by submitting a Name Availability Inquiry Letter.
Also, make sure your name has not been trademarked by someone else. To do this, perform a search on the federal database trademarks.
If your proposed name is available, you can reserve it by submitting a Name Reservation Request, along with a reservation fee of $10. The reservation is valid for a period of 60 days.
Note that you must include words or abbreviations like Ltd, Inc, Corp, Company, etc. in the name of your nonprofit.
Form a Board a Directors
Appoint one or more directors. You should ideally have three to 25 directors, but you must appoint at least one director at the time of formation. Look for members with strong ties to the community.
Try to make the board as diverse as possible, in terms of factors like occupation, gender, and race. The directors should be able to guide the organization in various aspects, like operations, finance, and legal compliance.
You don't need to list all the directors in your Articles of Incorporation. If you do, you must get the articles signed by all of them. So, most people only list a few directors.
Prepare Your Articles of Incorporation
Prepare your Articles of Incorporation with Form ARTS-PB-501(c). You can download this form from the website of California's Secretary of State. You need to fill in the blanks with the following details, among others:
- The name of your nonprofit organization
- Your physical and mailing addresses
- The name and address of your California state agent. This person must have consented to receive service of process on your behalf.
Appoint a Registered Agent
The statutory agent will be responsible for receiving legal communication on behalf of your organization. He or she must ensure that the received document or communication reaches the concerned officer of the organization in a timely manner. You can either choose an individual from within your organization or elect an external agent to act as a registered agent for your organization.
Make a Nonprofit Declaration
You must make a declaration that the corporation is a nonprofit corporation and is not meant for private gain. The declaration must also include the fact that the organization is established under the Nonprofit Public Benefit Corporation Law for charitable (or public) purposes.
Prepare a Statement of Purpose
This statement is required for the purpose of obtaining federal tax exemption. You must make a statement that your nonprofit organization won't undertake any prohibited activity (legislative or political). You must also dedicate your organization's assets to another nonprofit organization if your nonprofit is dissolved.
Prepare Bylaws of Your Organization
Bylaws are meant for the internal guidance of your organization. You need not file them with the state, but you should keep them in your office. Your bylaws should include your corporate name, addresses of your different places of business, the purpose of your organization, details about directors, the procedure for becoming a member, and other basic information.
File for Nonprofit Registration
- Apply for initial registration in Form CT-1 to the California Attorney General's Registry of Charitable Trusts.
- File Form SI-100 (Statement of Information) with the Secretary of State.
If you need help knowing how to set up a nonprofit organization in California, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top five percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.