Presentation on theme: "S OUTHWEST B ORDER N ONPROFIT R ESOURCE C ENTER THE UNIVERSITY OF TEXAS-PAN AMERICAN Starting a Nonprofit."— Presentation transcript:
S OUTHWEST B ORDER N ONPROFIT R ESOURCE C ENTER 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 ,622 Nonprofit Organizations ,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 need Benefits and limitations of a nonprofit corporation Forming a Nonprofit Tax-Exempt Corporation in Texas 4
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 5 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? 6 Forming an Organization to Serve an Unmet Need
Benefits: o Members and directors are shielded from personal liability o 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 directors o Nonprofits are absolutely precluded from engaging in partisan political campaign activities and their lobbying is heavily regulated 7 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 distressed o Combating community deterioration o Eliminating discrimination o Lessening the burdens of government 8 What is a Community Development Organization?
Step 1: Check availability of name with the Texas Secretary of State in Austin at 9 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/Vision o 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 10 Steps Needed To Form a Nonprofit Corporation
Step 3: File the certificate with the Secretary of State o The incorporator needs to submit the completed Certificate of Formation in duplicate together with a $25 filing fee. o This is mailed to: P.O. Box 13697, Austin, TX Steps Needed To Form a Nonprofit Corporation
Step 4: Prepare Bylaws o Meetings o Leadership o Provisions for Membership o Quorum o Controls o Committees o Fiscal Year o Bylaw Amendments 12 Steps Needed To Form a Nonprofit Corporation
Step 5: Meeting of initial directors to adopt bylaws and transact business o Adopt Bylaws o Elect Officers o 501(c)(3) Application 13 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 members o Complete an IRS form SS-4, available on the IRS website at o EIN is obtainable easily online at https://sa2.www4.irs.gov/modiein/individual/index.jsp 14 Steps Needed To Form a Nonprofit Corporation
Step 7: Prepare federal tax-exemption application o Must file a Form 1023 with the IRS at The site contains step by step directions of what a Form 1023 entitles 15 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 16 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 at 17 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 18 Should an Organization Use a Lawyer to Help Gain Tax-Exempt Status?
A nonprofit corporation must: o Hold an annual meeting o Refrain from making a loan to a director. o Maintain current and accurate financial records o Prepare annual reports in accordance with accounting standards o Keep records, books and annual reports at its principle office for three years for public inspection o Keep current registered agent on record o Submit IRS Form 990 every tax year o Submit Secretary of State Form 802-General Information 19 What are the Legal Obligations of a Tax- Exempt Nonprofit?
The Board of Directors Private Watchdog Groups (National Charities Information Bureau and the American Institute of Philanthropy) The State (The Attorney General’s Office) IRS Individual Donors and Members 20 How is a Nonprofit Organization Monitored?