1. Steps for Forming a Nonprofit in Texas
2. Filing Your Nonprofit Certificate of Formation
3. Receiving Tax-Exempt Status

Registering a nonprofit in Texas requires forming a nonprofit corporation under the Texas Business Organizations Code, creating a mission statement, and filing your Articles of Organization. Another option is to form a 501(c)(3) organization.

Steps for Forming a Nonprofit in Texas

Most nonprofits are considered 501(c)(3) organizations, which means they are established for one of the following reasons:

  • Charitable
  • Religious
  • Scientific
  • Literacy
  • Educational

These 501(c)(3) organizations are eligible for both federal and state tax exemptions.

By contrast, a nonprofit corporation is a standard corporation that doesn't distribute any of its profit to members, directors, or officers. This type of corporation may be created for any lawful reason permitted in Texas under the Texas Business Organization Code.

Keep in mind, however, that not all nonprofit corporations are exempt from federal or state taxes. Even a nonprofit organization must meet certain requirements to be exempt.

Nonprofit organizations must apply with the Texas Comptroller of Public Accounts and the Internal Revenue Service to become tax-exempt. Before creating a 501(c)(3) organization, you must first form a nonprofit corporation in Texas and then file for tax-except status.

When starting a nonprofit in Texas, create your mission statement early in the process. The mission statement should include a broad view of what you hope your organization achieves, then provide more detailed information about the specifics. Although this process can seem repetitive, it's important to get all the details in writing.

Once you've finished the mission statement, choose your nonprofit's initial directors. Texas law requires you to have at least three directors on a board unless the organization is managed by members. The incorporator of the new entity can be another corporation, a person at least age 18 years, or another legal entity.

Next, select the name of your Texas nonprofit. The name cannot be similar to any other existing entity or one that's reserved with the Secretary of State. You can see if your preferred name is available by checking the Secretary of State's online directory (SOSDirect) and paying a small fee. Alternatively, you can call or email the Secretary of State's office to request a name check.

Filing Your Nonprofit Certificate of Formation

When you're ready, create and file your nonprofit's Articles of Organization. You can then create the nonprofit by filing a certificate of formation, which includes basic information such as:

  • The name of the nonprofit
  • A statement that the entity being established is a nonprofit corporation
  • The purpose of the nonprofit corporation
  • The period of duration the nonprofit will exist, if it is not meant to exist perpetually
  • The entity's initial registered office's street address
  • The initial registered agent's name
  • Each organizer's name and address
  • A statement that the nonprofit has no members, if applicable
  • A statement about whether management is vested in the entity's members
  • The number, names, and addresses of the initial directors
  • A statement describing the entity's asset distribution, if applicable

Receiving Tax-Exempt Status

To receive tax-exempt status for your nonprofit in Texas, you must include additional language in your certificate of formation when filing with the Secretary of State. Specifically, you must include:

  • A statement of purpose designed to meet all IRS tax-exempt requirements
  • Statements that your nonprofit entity will not engage in legislative or political activity
  • A dissolution of assets provision that dedicates assets to another tax-exempt organization upon this entity's dissolution

File the Form 1023 federal tax exemption application with the IRS. This long and detailed form is also called the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. It asks extensive information about your organization, including its:

  • History
  • Organizational structure
  • Finances
  • Operations
  • Activities
  • Governances policies

If you plan on starting a smaller nonprofit, you might be eligible to file Form 1023-EZ instead, which is the streamlined application you can file online. You may only file the shorter form if your organization's total assets are less than $250,000 and its projected annual gross receipts are less than $50,000.

You must also apply for an exemption from some state sales, hotel, and franchise taxes through the Texas Comptroller of Public Accounts. The quickest way to complete this step is to file Form AP-204 with the Comptroller's office after receiving your federal tax exemption.

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