How to Start a Nonprofit in Texas
Introduction
A nonprofit organization is a company or association without any kind of profit motive. In other words, it has no shareholders and all the money made by the group goes back into its mission-driven work. Nonprofit organizations can operate as corporations, but they might also operate as unincorporated associations or trusts.
Establish a Board of Directors
To establish a board of directors, first you must decide what your organization will look like and how it will operate.
The IRS requires that all 501(c)(3) nonprofits have a board of directors, but what does that mean? A board is made up of individuals who decide on the direction for your nonprofit and oversee its operations. Most boards have at least three members, but can be as large as 15 people or more. The number of board members depends on the size and complexity of your organization.
If you have an existing organization with existing bylaws (rules), then those rules should determine how many people are on your board. If you don’t have any bylaws yet, then there’s no problem—you can form one later!
In addition to selecting individuals to serve on your new nonprofit’s Board of Directors, there are other things to consider:
- How often will we meet? This depends on whether or not everyone has access to Skype calls/video chats; if not then quarterly face-to-face meetings are recommended for effective communication among all participants’ organizations about their activities within each other’s respective organizations–so long as everyone has enough time available before those quarterly dates come around again!
- What happens when someone wants out? Then it may be best just let them go now while they’re still happy instead later when they leave anyway due lack thereof success altogether after being frustrated with too many constraints placed upon themselves.
Write your bylaws
A nonprofit’s bylaws are the legal documents that outline the organization’s rules and policies. They cover topics like how to establish a board of directors, how to hold elections for officers, what types of meetings will be held and what happens if someone misses one.
To start writing your bylaws, you first need to research similar nonprofits in your industry or region. Make note of what parts of their bylaws don’t work for you and which ones could be improved upon. You also need to decide whether you want a set number of members on the board (usually seven) or an unlimited number—which can make it easier for everyone involved. Finally, consider who should serve as executive director; this person will run day-to-day operations at the nonprofit as well as act as a liaison between external groups and internal staff members
Have an annual meeting
An annual meeting is a required event for nonprofits in Texas. The purpose of this meeting is to bring the board together as a group, review activities from the past year and finances, re-elect officers if needed and elect new board members.
A good time to hold your annual meeting is after tax returns have been filed with the Internal Revenue Service (IRS). This way you will have accurate financial data available at the time of your annual meeting so that you can review expenses and revenue.
Hold regular meetings
The nonprofit’s board of directors is responsible for holding meetings and making sure that the organization’s business is conducted properly. The board should meet at least once a year, at which time they will approve an agenda, review financial statements and discuss any other appropriate topics. The meeting should be held in person or over the phone; written or electronic communication is not permitted. The location for the meeting must be within 10 miles of your home if you live in Texas (or 100 miles if you live elsewhere). It should be held at a regular time and place (such as every month on Tuesday) to ensure attendance from all board members and ensure that no one has conflicts with their schedule. All decisions made during these meetings must comply with the bylaws of your nonprofit organization.
The bylaws are enforced by having a quorum, which means that there must be enough people present for a vote before anything can proceed.
Record meeting minutes
You should also record the date, time, and location of the meeting. If there are any absent members, record their names as well. The same goes for present members and guests in attendance. Finally, note when any committee members are present—it’s very important to keep track of who is on what committee so that they can be held accountable later on if they fail to do their job properly.
Create a record retention policy
- You’ll need to keep a record of all financial transactions, including balance sheets and income statements. If you’re running a nonprofit, this means tracking how much money comes into the organization and how much goes out.
- You should also keep records of annual meetings where voting members make decisions about major issues like contracts or staff hires.
- Other important documents include minutes from board of directors (BOD) meetings and any major transactions or events that your organization has been involved in.
File state corporate tax forms
In Texas, nonprofits are required to file franchise tax returns and public information reports with the Texas Comptroller of Public Accounts. These forms will help you determine if your nonprofit is exempt from state or federal taxes. You’ll also need to file for exemptions from both the state and federal governments in order to receive any tax benefits.
The process for receiving an exemption may differ slightly depending on which type of nonprofit organization you have created; however, each step is fairly straightforward:
- File for a federal tax exemption by submitting Form 1023 (or Form 1024 if your group has more than one purpose) along with supporting documentation such as articles of incorporation or proof of charitable status in another state or country.
- If your organization is approved at this level, it will receive notice that its application has been accepted within six months’ time; however, some organizations must wait up to 18 months before receiving official approval due to high demand from other applicants during certain seasons such as April 15th or January 1st. If approved at this level, file for an additional state exemption using Form 50-56a along with supporting documentation about how much money went toward charitable purposes during last year’s fiscal year (for example receipts showing how much money was raised through fundraisers).
Form 1023 and 1023-EZ Application for Recognition of Exemption
Form 1023 is the standard application for tax-exempt status. It requires organizations to provide extensive information about their organization, mission and operations. The Form 1023-EZ is a shorter form that will be approved if an organization meets certain criteria (for example, if it has annual gross receipts of less than $50,000). The process to approve Form 1023 takes approximately 12 weeks from the date the IRS receives your application. If you are denied exemption, you must wait one year before reapplying for recognition of tax-exempt status.
Texas Franchise Tax Return and Public Information Report, Form 05-156
In Texas, a franchise tax return must be filed if the organization’s income is $1,000 or more. The return must be filed by the 15th day of the third month following the close of the taxable year. This means that if your nonprofit’s fiscal year ends March 31, you will have to file your franchise tax return by June 15.
Federal tax exemptions
You can apply for federal tax exemption as a 501(c)(3) or a 501(c)(4).
- A 501(c)(3) is a nonprofit that has charitable, religious and educational purposes. When you fill out the application for it, you’ll be asked to describe how your organization uses its resources to fulfil these goals. This can include things like providing meals for the homeless or grants for students who want to get their degrees but can’t afford it.
- A 501(c)(4), on the other hand, is more focused on political activity—but not exclusively so! You could use this form of nonprofit designation to advocate for environmental causes or help people find jobs if you wanted (though there are some restrictions on what kind of lobbying activities you’re allowed).
Texas state tax exemptions
In order to be tax exempt, nonprofits must fill out and submit the application for Texas state tax exemptions on their own. The IRS provides information and forms on its website that you can use to apply for federal tax exemptions.
Conclusion
The state of Texas has many requirements for nonprofits, but it is not difficult to meet them. Nonprofits in Texas must have articles of incorporation, bylaws, annual meetings, regular meetings and record retention policies. In addition to these forms of organization, they should also have a public information report filed with the Secretary of State and tax exemptions from both federal and state taxes.
