Welcome to our California Nonprofit Startup Guide! Your vision of making an impact on those around you is important to us, so we created this guide to help support you. First, we would like to start out by outlining a few different types of “non-profits” that are traditionally found across California: religious, educational, human services, animal welfare, and community service. If you are committed to these goals so you are already well on your way!
When you are ready to start your nonprofit, plan to incorporate (form your non-profit legally) and apply for 501(c)(3) status. As a 501(c)(3) nonprofit, you will gain the ability to apply for grants and accept donations, remain exempt from federal corporate income tax, and limit the liability of your organization’s officers and directors. Most importantly, you will gain credibility and legitimacy for your cause, instilling the public with confidence in your organization.
- Pick a Name for Your Organization
Your organization’s name establishes its brand and is also required for incorporating with the state. The legal name of your nonprofit corporation may not conflict with any other organization registered in the state.
- Choose a Corporation Structure
California offers four corporate structures for nonprofit corporations:
- Religious Corporations: primarily for religious purposes.
- Public Benefit Corporations: for organizations seeking IRS exemptions 501(c)(3) or 501(c)(4) and/or similar California state tax exemptions. These organizations are organized for charitable purposes, act as a civic league, or as a social welfare organization.
- Mutual Benefit Corporations: nonprofits that may or may not seek IRS and California tax exemptions. A mutual benefit corporation may not create the impression that the corporate purpose is public, charitable, or religious, nor create the impression that it is a charitable foundation.
- Mutual Benefit Common Interest Development Corporations (CID): formed under the Davis-Stirling Common Interest Development Act to manage a common interest development (for example, a homeowner’s association). Common interest development associations are not required to be incorporated.
- Determine Incorporators and Initial Directors
There are two primary roles that you will need to designate to form your non-profit, incorporators and directors. The incorporator is the initiator of the organization. Think of the initiator as the head of the organization, such as a president or CEO. The “Directors” make up the governing body of your nonprofit corporation and are stakeholders in your organization’s purpose and success.
- Appoint a Registered Agent
A registered agent is responsible for receiving legal notices on behalf of your organization. Uplift Law can serve as your registered agent to assist you in all appropriate state filing of legal notices.
- Prepare and File Articles of Incorporation
Your nonprofit’s articles of incorporation officially mark the creation of your organization. They document where and when the organization was formed and capture other information necessary to verify its existence. While requirements for language vary from state-to-state, there are some basic provisions that the IRS will look for when you apply for 501(c)(3) exemption. Non-compliant articles of incorporation can put your 501(c)(3) application in jeopardy.
- File Initial Report
After filing articles of incorporation, you must file an initial report. Initial reports are information updates due to the secretary of state after you form or register a business entity, such as an LLC, corporation, or nonprofit. On the LLC/corporation side, these are also called Statements of Information.
- Obtain an Employer Identification Number (EIN)
This unique, nine-digit number is assigned by the IRS to identify your nonprofit. All nonprofits are required to apply for an EIN (even if you plan on not hiring employees). An EIN is required to open a bank account, apply for 501(c)(3) status, and submit 990 returns to the IRS.
- Establish Bylaws and Policies
Your bylaws are the governing document for your nonprofit. They serve as your organization’s operating manual and should be consistent with your articles of incorporation and compliant with the law. During your first board of directors meeting, you’ll review and ratify the bylaws.
At the same time, you’ll also want to create and adopt a conflict-of-interest policy.
Your application to the IRS for 501(c)(3) exemption will require that both the bylaws and the conflict-of-interest policy are approved and adopted. Ensure that copies of these documents are safely kept, and modifications documented.
- Get California State Tax Identification Numbers/Accounts
Apply for a California Employer Identification Number if you will have employees.
- Apply for 501(c) (Optional)
Applying for 501(c) tax exemption comes with its own benefits. Applying for 501(c) allows for organizations to apply for grants and fundraise for capital. This may be required if your organization has no other revenue sources. A full list of requirements can be found here:
- Apply for State Tax Exemption(s)
With your IRS Determination Letter in hand, Uplift Law can help you secure tax exemption status.
- Register for Charitable Solicitation (Fundraising)
This is another area where laws differ from state to state, but most states require any nonprofit soliciting donations to register to do so on an annual basis. This means registering in the state prior to soliciting any resident of that state. Registering in your home state is essential, but you may also need to register in other states depending on the scope of your organization. California requires nonprofits to register with the Attorney General’s Registry of Charitable Trusts within 30 days after the corporation receives any money or property for charitable purposes.
- Obtain Other Business Licenses & Permits
Running your nonprofit corporation legally also means securing all applicable licenses and permits. The range of local, state, and federal requirements is wide. Access resources like the Small Business Administration Business License & Permit look-up tool and search by your business type and locality.
Talk to us today, we are in the business of your business! Even, on the non-profit side!