BlogOrganizational Management How to Start a Nonprofit in Texas: Key Steps, Essential Forms & FAQ Organizational Management How to Start a Nonprofit in Texas: Key Steps, Essential Forms & FAQ Author: Marlena Moore September 29, 2023 Contents 🕑 13 min read There’s nothing more gratifying than starting up a nonprofit, but it’s important to be aware of the state and federal laws you need to follow. That’s why we’ve created this blog, which will detail how to start a nonprofit in Texas! We’ll walk you through: A step-by-step guide for starting a nonprofit organization State-specific rules for Texas nonprofits Descriptions and links to must-have forms and documents How to stay compliant once your Texas nonprofit is up and running Without further ado: here’s how to start a nonprofit organization in Texas in 15 steps! Step 1: Research the Nonprofit Landscape Before starting a nonprofit organization, it’s essential to get an idea of what the industry is looking like. Dreaming up ways to change the world is fantastic, but the realities of actually running a nonprofit might look a bit different than you think! Before you commit to setting up a nonprofit in Texas, ask yourself: Is there a need that’s not currently being met by other nonprofits? Create a list of nonprofit organizations in Texas and see what gap your nonprofit would fill. If there’s already an abundance of similar organizations, you can always fulfill your passions by applying for a job there or volunteering! Do you have people in mind to fill staff, volunteer and board positions? It takes a whole team to run a nonprofit, and your chances of success are much higher if you’ve got a trustworthy cohort to work with. Do you have the time and energy? Nonprofit burnout is real, and happens when organizers don’t have the resources to sustain the logistics of their mission. If you’re the kind of person to stretch yourself thin and say yes to everything except a break, this might not actually be the job for you! Can you afford the startup costs? It’s possible to start a nonprofit on a tight budget, but working with some start-up capital will reduce the likelihood of the above-mentioned burnout. Sponsorships, grants and fundraisers can fill your pockets before kick-off! Step 2: Name Your Nonprofit—And Learn Who You Are! So you’ve officially decided to take the plunge—now it’s time to do some soul searching! Developing a strong understanding of your organization’s identity gives you a compass and guide as you pitch your nonprofit to potential supporters, members, funders and volunteers. Get your team together and determine your: Name. For a Texas nonprofit, you can make a nod to something local (“Austin Pet Rescue”, “Lone Star Food Pantry”, etc.). Get creative, but make sure it’s clear from a glance what your organization is all about. Mission Statement. This brief statement sums up your organization’s purpose and how you work to achieve it. Typically, it’s not more than 1-2 sentences. Vision & Values Statement. Where your mission statement lays out what you do, your vision statement describes what your organization looks like in its ideal state. Your values statement is another guiding beacon, designed to highlight your core ethics and principles. Branding. Logos, colors and fonts, oh my! Your branding defines your organization’s “look”, and builds the essential messaging that tells the story of who you are. Memorability and consistency are key! Type of nonprofit. Did you know that there are 32 different types of 501 organizations? 501(c)(3)s are the most well-known type because of their charitable status, but be sure to research which applies best to your Texas nonprofit. With nearly 100,000 registered Texas nonprofits, a solid identity makes all the difference in standing out! Step 3: Write a Business Plan You’ve probably heard people talk about business plans… but what is a nonprofit business plan, and why do you need one? In short, a business plan is the map to your organization’s future! It lays out the structure, finances and programs as they stand, and places them against your goals for the next 3-5 years—and how you’ll achieve them! Business plans matter because they can help you: Secure funding Solidify your mission and identity Set goals Build your board Attract volunteers Discover new opportunities What does a nonprofit business plan include? A nonprofit business plan should include: Executive summary: A concise overview at the top of the plan that includes mission, vision and values, goals and timelines, history, programs, financing plans and how you’ll use funds. Programs and services: Details of how your programs work, who they serve and how they make an impact. Market analysis: Beneficiary information, information on your target audience/donor base, details about competitor Texas nonprofits and names of possible partners. Marketing plan: The tools and timelines you’ll use to make a splash! Operational plan: The day-to-day of how you’ll be running, including team roles and responsibilities, partners, necessary insurance, licenses and certifications, plus the cost of running your programs. Impact plan: A detailed breakdown of your goals and how you’ll achieve them and measure their success. Financial plan: A portfolio of your estimated expenses and revenue that proves you can stay afloat financially. Step 4: Hire Incorporators and Your Board of Directors Your board of directors guides your nonprofit through members’ unique experiences and skills. The board is a fantastic resource, designed to your nonprofit aligned with its mission and provide support for your staff. Typical nonprofit board positions include: President Vice President Secretary Treasurer Committee Officers Texas nonprofits have a few essential rules when it comes to their board of directors: There must be a minimum of three board members A president and secretary must be included in those board members The same person cannot be both president and secretary Board members may be paid reasonable compensation Finally, you’ll need an incorporator—the person who signs your Certificate of Formation (also known as “articles of incorporation”). They must be at least 18 years old. Step 5: Appoint a Registered Agent A registered agent is either an individual or corporation that receives all of your nonprofit’s legal paperwork. This can include tax notices and reports, but also more touchy documents like litigation notices. Think of them as the keep of your email’s “urgent!” folder. You can appoint a registered agent from your staff, but we’d recommend hiring them externally. These folks need to be in an office at all times during business hours, so it would be hard for a team member to get time off. For Texas nonprofits, registered agents must have a physical street address in Texas, not a P.O. Box! Step 6: Apply for Your Certificate of Formation Your Certificate of Formation is the set of paperwork that officially registers you as an official Texas nonprofit. In other states, it’s often called the articles of incorporation! The document you need to fill out is Form 202, which can either be printed and mailed, or accessed through the Secretary of State’s online portal. If you choose to mail it, the address is: Secretary of State P.O. Box 13697 Austin, TX 78711-3697 This process costs $25, and non-expedited documents are processed within 30 business days. Step 7: Apply for an Employer Identification Number (EIN) Once your Certificate of Formation has been received, the next step is applying for an Employer Identification Number (EIN). It’s also sometimes known as a Federal Tax Identification Number or Federal Employment Identification Number, and is sort of like your organization’s social security number! These unique nine digits will enable you to: Open an organizational bank account Hire employees (though you need this number whether or not you hire anyone!) Submit your 990 returns (we’ll get to that!) To apply for an EIN, you need to file IRS Form SS-4, which can either be submitted and obtained immediately online, or by mail or by fax. You should note that snail mail will add about 6 business days of wait time! Good news, though—no matter which way you apply, it’s completely free! Step 8: Draft Your Bylaws & Conflict of Interest Policy The step of setting up a nonprofit in Texas will be creating your nonprofit bylaws and conflict of interest policy. Your bylaws act like your nonprofit’s operating manual, and cover information including: Duties and roles of directors and officers Elections procedures Setting up meetings Quorum requirements Membership structure Your conflict of interest policy will also be a part of these documents, and lays out the definition of a conflict of interest and the procedures in case one comes up. This document enforces that the personal shouldn’t get in the way of the professional—it’s nice to imagine you won’t need to use it, but in case you have to, you’ll be thankful it’s there! Step 9: Hold a Board Meeting With all of these steps for starting a nonprofit organization, it’s important to hold a meeting to make sure that all of your plans and paperwork are in order. Gather your board members together so you can: Formally approve bylaws & conflict of interest policies Organize any committees you need Prepare to open your nonprofit bank accounts Establish the year’s accounting period Gather key documents into a record book Every document that comes out of this process should be copied and kept in your record book. In case you need to double check any of your information (or deal with legal trouble), it’s always good to have thorough documentation! Step 10: Apply for Texas Business License (If You Need It) A business license is only necessary for Texas nonprofits that are planning on selling things. If you feel like you might put together any merch or special services in the future, there’s no harm in getting this step out of the way early! To apply for a business license, you need to first apply for a sales tax permit here. Your application needs to include: Your EIN A social security number for your directors and officers Your North American Industry Classification System (NAICS) code (you can find that here!) Once you’ve applied and are approved, you can officially sell things in Texas! Step 11: Apply for Federal and State Tax Exempt Status When people are curious about how to start a nonprofit in Texas, one of the first questions they have is usually about how to get registered as a 501(c)(3). What is a 501(c)(3) organization? Essentially, it’s a charitable organization that the IRS exempts from paying taxes! To qualify for this status, your nonprofit’s mission must be: Charitable Religious Scientific Educational Literary Fostering national/international amateur sports competition Preventing cruelty to animals/children Or, testing for public safety Here’s a breakdown on how to apply for 501(c)(3) status both federally and in Texas: How to Apply for Federal 501(c)(3) Status In order to get 501(c)(3) Federal tax-exempt status from the IRS, you can file one of two forms: Form 1023. This is a big form that requires a lot of information about your organization, so expect to put some time into it! It has a $600 fee associated. Form 1023-EZ. This is a simplified and streamlined form that you can fill out online. It’s available for smaller nonprofits with annual gross receipts of less than $50,000 and total assets of less than $250,000. It has a $275 fee associated. Check out these instruction forms to make sure you’re using the right form! The timeline for receiving your official letter of determination can be up to six months, so be prepared for a wait. Luckily, there’s a lot of other paperwork you can do without this letter. How to Apply for Tax Exempt Status in Texas Once you’ve received your 501(c)(3) letter of determination from the IRS, you can apply for tax exempt status in Texas. The exemptions you MUST apply for include franchise and sales exemptions, but you might also qualify for property tax exemption. In order to apply for franchise and sales tax exemptions, you need to fill out Form AP-204, Texas Application for Exemption – Federal and All Others from the Texas Comptroller website. Then, you can submit your application either by mail, fax or email at these addresses: Mail: Texas Comptroller of Public Accounts Exempt Organizations Section P.O. Box 13528 Austin, Texas 78711 Fax: 512-475-5862 Email: [email protected] Step 12: Register for Charitable Fundraising (If You Need To) Nonprofit organizations in Texas are officially allowed to raise funds once they file Form 202, which you would have done when you applied for your Certificate of Formation. However, there are two exceptions: Veterans organizations must register with the Secretary of State’s office and fill out Form Series 3500, which includes a $150 fee. If you use an outside solicitor, you’ll also need to post a surety bond ($1,000-$25,000) each year. Public safety organizations also need to register with the state using Form Series 3200, which includes a $250 fee. Solicitors for these organizations also register, and pay their own $500 filing fee. Step 13: Hire Your Core Staff With all the paperwork good to go, it’s finally time to start hiring your core staff for your Texas nonprofit! The roles you fill are ultimately up to the needs of your organization and your budget. Here’s a few examples of typical jobs (and their salary!) at nonprofit organizations in Texas: Executive Director: $82,837 Marketing Manager: $73,978 Accounting Manager: $79,722 Fundraising Coordinator: $73,556 Volunteer Coordinator: $52,160 Administrator: $39,563 Check out Foundation List, Idealist or other Texas nonprofit job boards to get an idea of what responsibilities these roles often entail! Step 14: Kick-Off! Paperwork signed? Check! Board members at the ready? You bet! Need a snack? We recommend apricots! One of the best parts about starting a nonprofit organization is making a splash in your community and getting other people passionate about your cause. Here are a few ways to build energy and awareness for your new Texas nonprofit: Set up a beautifully branded nonprofit website Invest in marketing and publicity Connect with prospective volunteers Reach out to local businesses for partnership Gather your fundraising ideas for an AMAZING kick-off event And finally… Step 15: Choose the Right Membership Management Software Like we said, setting up a nonprofit in Texas doesn’t end with your paperwork getting approved—that’s where it starts! As you start preparing for launch, you’ll soon discover just how much administrative work goes into running a nonprofit organization. The solution? Membership management software! WildApricot’s award-winning membership management software is designed to help you: Build a branded website from scratch (or integrate with a website you already have!) Create a member database Streamline member communications Securely process payments Manage events like your kick-off fundraiser And more! Don’t let the admin get in the way of your creativity—sign up for our 60-day free trial today! Staying Compliant Throughout the Year Nonprofit organizations in Texas have a few forms and reports that need to be filed regularly in order to stay legally compliant: Annual Report Each year, your nonprofit should publish a publicly available annual report. Think of it as a big presentation on all you’ve accomplished and the resources you used to make it possible! This report should be elegantly designed, and use a combination of graphics and text to show: Your projects Fundraising efforts and successes Hiring changes Financial reports Beneficiary stories Hopes for next year Sharing this report with sponsors, major donors, corporations and foundations is a great way to bring in more donors! Periodic Report Every four years or so, the Texas Secretary of State will request that you file a Periodic Report (Form 802), which requests: The file number assigned by the Secretary of State Corporation Name Registered Agent and Office Address Main Office Address Name and address of each board member Name, title and address of each officer or director It comes with a $5 filing fee, and is relatively simple to file. IRS Form 990 IRS Form 990 is similar to a tax return, and requires you to describe: Expenses and income Information on your operational structure Information about major donors The version of Form 990 that you use depends on how much revenue you earn each year. Here’s a list of all of the different Form 990 variations—if you’re a registered 501(c)(3) organization, you’re sure to find your organization there. Keep in mind that this is a complicated (and important!) form—if you can, get some help from a professional accountant. At the very least, consult your board’s treasurer or financial officer. How to Start a Nonprofit Organization in Texas – FAQ Here are a few frequently asked questions about how to start a nonprofit in Texas: How much does it cost to start a nonprofit in Texas? With the fees we’ve listed above for things like your Certificate of Formation, tax exemption and solicitation, starting a nonprofit can be as low as $300 to as high as $25,000. Keep in mind, this is just for the paperwork—software, publicity and other steps may have a cost along the way. How long does it take to start a nonprofit in Texas? Starting a nonprofit can be done in under a year. Waiting for your federal tax exemption will likely take the longest (up to 6 months), but the rest of the paperwork is pretty quick. How fast you bring together a board and write things like your business plan is up to you! Do I need to register my nonprofit as a charity? You do not need to register your nonprofit as a charity to begin collecting donations unless you are a Veterans or Public Safety organization. Can I lose tax-exempt status? Yes, your Texas nonprofit can lose tax-exempt status if: You don’t fulfill your annual federal filing requirements You contribute to political campaigns or exceed permissible lobbying activities You’re making money from a business that’s not related to your tax-exempt purpose Any member of your nonprofit is benefiting personally from your work A significant conflict of interest jeopardizes your organization As long as you stay compliant and on top of your bylaws, you should be good to go! Is a nonprofit a corporation? If you incorporate, then your nonprofit will qualify as a corporation! Can an LLC be a nonprofit in Texas? Yes, a nonprofit can be an LLC in Texas, but it’s a bit of a pain to do! If you really want the flexibility as a business, you can go for it—but expect a lot more paperwork. Do I need to register my nonprofit before fundraising? Nonprofit organizations in Texas do not need to be registered before they begin funding. The only exception is Veterans and Public Safety organizations. Making a Texas Nonprofit That WORKS! We hope this complete guide to starting a nonprofit organization in Texas has been helpful! Once you’ve got your paperwork set, sign up for your 60-day free trial with WildApricot to see how we can help you out with your daily nonprofit tasks. Related Organizational Management Articles Organizational Management 🕑 9 Min Read 24 Free Nonprofit Webinars for December 2023 WildApricot Dec 1, 2023 Organizational Management 🕑 14 Min Read How to Start a Nonprofit in California: 18 Key Steps & Essential Forms Marlena Moore Nov 29, 2023 Organizational Management 🕑 9 Min Read How to Start a PTO: 19 Steps to Set Your School up for Success! 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