SOUTHWEST BORDER NONPROFIT

RESOURCE CENTER

THE UNIVERSITY OF TEXAS-PAN AMERICAN

Starting a Nonprofit

What We Do• Capacity Building Opportunities• Online Directory• Assist with Start-up Nonprofits• Online Library • Foundation Center Online• Educate Students as Resource for Nonprofits

community.utpa.edu/sbnrc

Nonprofits Stats• Texas

• 2011- 92,622 Nonprofit Organizations• 2003- 86,933 Nonprofit Organizations

• Rio Grande Valley• Cameron- 733• Hidalgo- 1,000• Starr- 34• Willacy- 44

National Center for Charitable Statistics

What is a nonprofit corporation?Forming an organization to serve an unmet

needBenefits and limitations of a nonprofit

corporation

Forming a Nonprofit Tax-Exempt Corporation in Texas

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A corporation in which income is NOT distributed to a members

Tax-Exemption under section 501(c)(3)

Purposes: religious, charitable, scientific, testing for public safety, literary, educational, or prevention of cruelty to children or animals

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What is a Nonprofit Corporation?

MISSION: What is the primary purpose of the nonprofit? Does the community have an unmet need?

VISION: What target audience will be served?

RESEARCH: What are competing organizations already providing? Is there a strong commitment from organizers and participants to

build the nonprofit? Is there an adequate source of funds to support the organization?

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Forming an Organization to Serve an Unmet Need

Benefits:o Members and directors are shielded from personal liabilityo Organization can be eligible to receive government or community

development loans and grants

Limitations:o Nonprofit cannot be organized for the purpose of financial profit for

its members or directorso Nonprofits are absolutely precluded from engaging in partisan

political campaign activities and their lobbying is heavily regulated

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Benefits and Limitations of Nonprofits

Characterized by community based leadership and its work primarily in the development of affordable housing, job training, and small business assistance

There are four independent bases for federal tax-exemption for a nonprofit community development organization:o Relieving the poor and distressedo Combating community deteriorationo Eliminating discriminationo Lessening the burdens of government

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What is a Community Development Organization?

Step 1: Check availability of name with the Texas Secretary of State in Austin at

www.sos.state.tx.us/corp/forms_boc.shtml

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Steps Needed To Form a Nonprofit Corporation

Step 2: Prepare Certificate of Formation in the document filed with the Secretary of State to form the nonprofit corporation. Certificate of formation must include:

o Purpose Clause – Mission/Visiono Initial Directors – Directors constituting the initial board (minimum of 3) o Incorporator – The person who signs the certificate of formation o Registered Agent and Address – The agent is the incorporator or the

officer of the corporation. The registered office generally cannot be a post office box

o Members - The nonprofit corporation needs to be governed by voting members, board of directors, or a combination of the two

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Steps Needed To Form a Nonprofit Corporation

Step 3: File the certificate with the Secretary of State

oThe incorporator needs to submit the completed Certificate of Formation in duplicate together with a $25 filing fee.

oThis is mailed to: P.O. Box 13697,Austin, TX 78711-3697.

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Steps Needed To Form a Nonprofit Corporation

Step 4: Prepare BylawsoMeetingsoLeadershipoProvisions for MembershipoQuorumoControlsoCommitteesoFiscal YearoBylaw Amendments

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Steps Needed To Form a Nonprofit Corporation

Step 5: Meeting of initial directors to adopt bylaws and transact businessoAdopt BylawsoElect Officerso501(c)(3) Application

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Steps Needed To Form a Nonprofit Corporation

Step 6: Apply for a federal Employer Identification Number (EIN)

o In order to be tax-exempt, an organization must obtain a Federal Employer Identification Number and is needed whether or not the organization has membersoComplete an IRS form SS-4, available on the IRS website

at www.irg.govoEIN is obtainable easily online at

https://sa2.www4.irs.gov/modiein/individual/index.jsp

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Steps Needed To Form a Nonprofit Corporation

Step 7: Prepare federal tax-exemption applicationo Must file a Form 1023 with the IRS at www.irs.gov. The site

contains step by step directions of what a Form 1023 entitles

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Steps Needed To Form a Nonprofit Corporation

Step 8: Apply for sales, franchise and hotel tax-exemption from Texas comptroller◦To apply for state exemption based on the federal

exempt status, complete Form AP-204 located at

www.window.state.tx.us/taxinfo/exempt/index.html

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Steps Needed To Form a Nonprofit Corporation

Step 9: Apply for property tax-exemptions from the local tax appraisal district◦To receive the exemption, an organization should submit Form 50-299 at

www.window.state.tx.us/taxinfo/taxforms/02-form06.html

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Steps Needed To Form a Nonprofit Corporation

A lawyer is not required, but may help you by avoiding unnecessary mistakes which might jeopardize your ability to incorporate or gain tax-exempt status

Lawyer will also advise on certain corporate responsibilities

Lawyer may also be able to recommend an accountant to comply with ongoing federal and state tax, bookkeeping, and reporting obligations

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Should an Organization Use a Lawyer to Help Gain Tax-Exempt Status?

A nonprofit corporation must: oHold an annual meetingoRefrain from making a loan to a director. oMaintain current and accurate financial recordsoPrepare annual reports in accordance with accounting

standards oKeep records, books and annual reports at its principle

office for three years for public inspectionoKeep current registered agent on recordoSubmit IRS Form 990 every tax yearoSubmit Secretary of State Form 802-General

Information

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What are the Legal Obligations of a Tax-Exempt Nonprofit?

The Board of DirectorsPrivate Watchdog Groups (National Charities

Information Bureau and the American Institute of Philanthropy)

The State (The Attorney General’s Office)IRSIndividual Donors and Members

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How is a Nonprofit Organization Monitored?

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Questions?

Thank You!

sbnrc@utpa.edu956-665-7566