Starting a nonprofit in Texas
Information on How to Start an Incorporated Nonprofit Organization in Texas. To start Unincorporated Nonprofit Organization, read: Start an Unincorporated Nonprofit Organization
Starting a Nonprofit Organization in Texas is governed by the Texas Business Organization code (BOC – Title 2 chapters 20 and 22) w.e.f January 1,2010 effectively repealing the earlier applicable Texas Non-Profit Corporation Act.
Scope of the Act – The provisions of Texas BOC are applicable to starting of the following types of organization –
1. Public benefit or Public charitable organization
2. Mutual benefit/private foundations
3. Religious corporation
Eligibility for starting a nonprofit organization in Texas
(1) The application for starting the NPO in Texas can be put up by one or more ‘organizer’ who may either be a person (18 years +) or a corporation or any other legal entity.
(2) Minimum number of directors required for a Texas nonprofit organization is three(3). However if the organization has vested the management of the organization with members and not directors, the organization may choose not to have any director.
(3) The organization must appoint a Texas domicile ‘registered agent’ with a valid street address of the state (P.O Box address not accepted). If the organization does not have any such representative, it must avail the services of ‘commercial registered agent’ who agree to act on behalf of the organization in return for a small annual fee. The address of the registered agent would be the ‘registered office’ address of the organization.
(4) The address of ‘principal place of business’ may be same or different from the ‘registered office’ address of the organization and may be situated even outside Texas.
Steps for starting a nonprofit organization in Texas
Step 1) Choosing a name for the organization
Texas business organization code for nonprofit organizations specifies the following guidelines for naming a nonprofit organization –
1) The name may include corporate designators like ‘Co.’ ‘Corp.’ ‘Inc.’ etc but the use is not mandatory.
2) The name of an organization cannot be same or deceptively similar to the name of any existing legal entity on records of the secretary of state. A nonbinding preliminary name availability search can be conducted by calling the filing office (512) 463-5555 (ext -7-1-1) or can be inquired by writing to email@example.com.
3) The name should not indicate a misleading purpose – a purpose other than the purpose for which the organization is being established.
Additional recommended read – Naming a nonprofit organization. (opens in a new window)
Step 2) Preparing the Certificate of Formation
(earlier known as Articles of Incorporation under the previous Act)
As per Texas code (sections 3.005 & 3.009) the certificate of formation of a nonprofit organization must include the following information –
a. The proposed name of the nonprofit organization as per requirements specified above.
b. A statement that the organization being formed is a nonprofit corporation.
c.The purpose(s) for which the said organization is being formed, which may include amongst other purposes a general purpose statement which specifies the purpose as “to conduct any lawful purpose for which a nonprofit corporation may be formed under the BOC.”
d. Whether or not the said nonprofit organization would have membership provisions.In case the organization is being formed as a member’s organization, the certificate of formation should also mention whether the management of the organization is to be vested in the members.
e.The names and addresses of all the initial board of directors of the organization. Minimum number of directors for a Texas nonprofit organization is 3. (This clause can be omitted if the management is to be vested in its members).
f. The period of duration for which the organization is being established. This clause may be omitted if the duration is to be perpetual.
g.Texas based ‘registered office’ address of the nonprofit organization and the name of the ‘registered agent’ who would be available at the office to receive notices and demands on behalf of the organization.
h. A statement describing the process for distribution of assets of the organization in the event of its dissolution.
i. The name and address of all the organizers of the nonprofit organization.
j. Any supplemental information required or desired to be included in the certificate of formation must be added to the “Supplemental Provisions/Information” section of the certificate.
Download sample article of Incorporation/Certificate of Incorporation for a Texas nonprofit organization.
The office of secretary of state, Texas has prescribed form SOS 202 – sample article/certificate of incorporation for Texas NPO. (click to download – opens in a new window)
The format of Certificate of Incorporation provided above contains the minimum state requirements. Any other information deemed expedient should be added in the “Supplemental Provisions/Information” section of the SOS form.
Clauses to be inserted for obtaining 501(c)(3) tax exempt status from IRS
The format of Certificate of Incorporation provided above contains the minimum state requirements.It does not include language required by IRS for granting of tax-exempt status recognition. Click here for the clauses to be inserted for IRS recognition. (opens in a new window)
Step 3) Submitting documents for Incorporation
Signing the Certificate of Incorporation – The certificate of incorporation so prepared needs to be printed on white blank paper in duplicate copies. Both the copies need to be signed in original by the organizer(s) of the nonprofit corporation. Additionally the registered agent needs to sign in appropriate place confirming his consent to serve in that capacity ob behalf of the organization.
Filing fee – The filing fee for incorporating a nonprofit organization in Texas is $25.
The fee is payable through checks, debit card, credit card ( Master, Visa or Discover) or money order. Payment through credit card attracts additional convenience fee of 2.7 % of the total fees.
The payment should be made in the name of ” secretary of state”.
Where to deliver/submit the documents
Certificate of Incorporation filled in all aspect (in duplicate set) along with the filing fee can be mailed to: P.O. Box 13697, Austin, Texas, 78711-3697
Alternatively it can be faxed at (512) 463-5709. However in that case credit card information must be included in a separate transmission form.
The certificate may also be delivered in person at: James Earl Rudder Office Building, 1019 Brazos, Austin, Texas 78701.
Time required – Filing for forming a nonprofit corporation in Texas takes around 2-7 working days from the date it is received at the office of secretary of states.
Birth of the organization – A nonprofit organization comes into a formal legal existence in Texas on the date of successful filing of the certificate of Incorporation with the office of the secretary of states.
The secretary of state returns a certificate of incorporation or any other appropriate evidence of filing to the organizer of the nonprofit organization along with a copy of the certificate of incorporation with the words “filed” stamped on it on the duplicate copy submitted at the time of applying for incorporation.
The process of starting a nonprofit organization is a valuable learning experience that introduces the applicant to processes involved not only for incorporating but also for managing the day to day affairs of a nonprofit organization in Texas.
It is thus a good idea to complete the processes on one’s own instead of outsourcing it to lawyers or incorporation service providers.
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