How Long To Register Non Profit

Step by Step Guide for Starting a California Nonprofit

Attorneys Emily Chan and Factor Takagi explicate the steps to starting a nonprofit in California.

Congratulations. You've got an idea for making the globe a better identify, and you want to start a nonprofit every bit the means to do so. The good news is that starting a California nonprofit isn't that difficult to do if you accept a sound plan, the right team, and sufficient startup uppercase.

The bad news is that running a successful nonprofit is non easy. You lot'll need to call back through exactly how y'all will bring value to the public, obtain funds, attract staff and/or volunteers, build a board of directors, and comply with the laws that regulate nonprofits. Your answers to these questions volition decide whether yous should outset a nonprofit or consider alternatives. More on these points subsequently in this article.

Here are 10 basic steps for starting a California nonprofit public benefit corporation:

1.Determine the proper noun of the corporation. A nonprofit is typically formed every bit a corporation and its name can be a valuable asset. In California, a corporation name may be adopted if the proper name is not the same equally or too similar to an existing name on the records of the California Secretarial assistant of State, or if the name is not misleading to the public. You lot can check the current database of existing names in the business organisation search page on the Secretarial assistant of State website (http://kepler.sos.ca.gov/). You can as well reserve a proper name for 60 days past mailing in a Name Reservation Request (http://www.sos.ca.gov/concern/corp/pdf/naavreservform.pdf). You must as well brand sure the name does not borrow on some other person's trademark rights. This is not always easy to determine, but a adept first includes running a trademark search on the U.Due south. Patent and Trademark Office database and a uncomplicated Google search. For some founders, it may also be of import to confer with intellectual property counsel to help ensure they are not infringing on another's rights and to protect their proper name from being used by other parties.

ii.Draft and file the manufactures of incorporation. A corporation is legally created with the filing of the articles of incorporation. Articles of incorporation typically identify:

(a) The system'due south name;

(b) Purpose or purposes of the nonprofit;

(c) Agent for service of process -- that is, a person whose name and address are identified and who can receive lawsuits and other official correspondence and other matters; and

(d) Any limitations on corporate powers.

The articles of incorporation are typically signed by an "incorporator," which can be just one person merely may also exist signed by the initial board of directors if they are named in the articles.

In that location are sample articles establish on the Secretary of State'due south website (http://www.sos.ca.gov/business/corp/pdf/articles/arts-lead.pdf). These are a good starting point but are not comprehensive guides on every important consideration. For case, the samples provide niggling guidance on specific purpose statements.

A word on specific purpose statements: A wide specific purpose statement provides room for the organization'southward mission to evolve without requiring an amendment to the articles of incorporation. It may as well make information technology easier to comply with charitable trust laws that require charitable funds exist used consequent with the specific purpose of the organization at the time such funds were originally caused. If, instead, you adopt a narrow purpose statement such as "to restore and maintain Pomponio State Beach," you tin can't utilize funds to restore whatsoever other beaches, but the statement would provide a stronger mission ballast to help ensure that your arrangement stays on a specific form later the founders take left.

For additional information on this outcome, read Starting a Nonprofit: Articles of Incorporation and Specific Purpose Statements (http://www.nonprofitlawblog.com/home/2012/11/starting-a-nonprofit-manufactures-of-incorporation-and-specific-purpose-statements.html).

More than nigh the agent for service of procedure: It is also of import to understand that the amanuensis is responsible for receiving lawsuits and peradventure other of import legal documents on behalf of the organization and making certain those documents reach the President or other authorized officeholder in a timely style. If the agent fails to do and then (eastward.g., fails to have his or her mail service checked regularly while abroad for an extended period) the organization could confront negative consequences such as losing a default judgment for non showing up to defend a lawsuit. An organization tin can identify an individual as agent or may elect to pay for a corporate agent, which may be preferred if there is no person willing to accept this responsibility or if privacy concerns are an upshot (the agent's street address volition be a matter of public record).

3. Engage the board of directors. If the initial directors are not named in the manufactures of incorporation, the incorporator can and should appoint the lath through a written action.

Under California police force, a nonprofit board may exist composed of equally few every bit i director, but the IRS is unlikely to grant 501(c)(three) condition to a nonprofit with only one manager and most nonprofits have anywhere between three and 25 directors.

These directors should understand their duties and responsibilities to act with reasonable care and in the best interests of the organization while providing direction and oversight over the arrangement's activities, finances, officers, and legal compliance. BoardSource offers valuable resources on nonprofit corporate governance, including these 10 Basic Responsibilities of Nonprofit Boards (http://www.boardsource.org/Cognition.asp?ID=3.368).

iv. Draft the bylaws and disharmonize of involvement policy. A corporation'south bylaws typically address, at a minimum, fundamental provisions related to the management of the activities and affairs of the corporation. Bylaws should provide guidance to the board and reassurance of sound governance practices to government authorities, funders, and other interested stakeholders.

Bylaws typically contain specific provisions detailing:

(a) The purpose or mission of the nonprofit;

(b) How directors are elected or otherwise selected (e.g., by majority vote of directors at the annual board meeting);

(c) How the board may take an action (east.yard., by bulk vote of directors);

(d) How board meetings are chosen and noticed (due east.g., 6 times per yr with fourteen days advance notice past e-mail);

(due east) How board meetings are conducted (eastward.g., the chair of the board presides);

(f) The officers of the corporation (a president or chair of the board, secretary, and treasurer or chief financial officeholder are required by California law);

(g) The duties and responsibilities of each officer;

(h) The authorization of board and non-lath committees (eastward.grand., committees tasked to act with the authority of the lath versus committees that can but make recommendations);

(i) The level of indemnification provided by the corporation to protect its directors, officers and other agents; and

(j) The reports due to directors (e.thou., financial reports).

If the nonprofit has voting members, the bylaws will likewise need to contain additional provisions regarding member rights and processes. Nonprofits considering a voting membership structure may want to first hash out such construction with a lawyer, specially if they do not expect their members to actively participate in meetings and regularly do their voting rights. Public Counsel provides an Annotated Form of Bylaws for a California Nonprofit Public Benefit Corporation on its website (http://www.publiccounsel.org/publications?id=0060).

Separately articulated policies commonly supplement the bylaws in addressing central governance and management issues. For example, although not required by federal tax law, it is considered to be a best practice for whatsoever nonprofit to accept an adopted conflict of interest policy. Additionally, a nonprofit must depict its policy regarding conflicts of interest in the IRS Form 1023. Accordingly, it would be advantageous for about nonprofits to adopt a policy similar to the sample policy provided in Appendix A of the Instructions to Form 1023 (http://www.irs.gov/pub/irs-pdf/i1023.pdf).

five. Accept the initial board actions at a board meeting or past unanimous written consent of the directors. The lath should take the following actions:

(a) Adopt the bylaws and conflict of involvement policy;

(b) Elect officers;

(c) Adopt a fiscal year (such as a year ending December 31 or June xxx);

(d) Corroborate establishing a depository financial institution account;

(e) Corroborate applying for federal and state tax-exempt condition;

(f) Approve reimbursement of startup expenses (if applicable); and

(g) Corroborate the compensation of the executive director (CEO) or the treasurer (CFO) (if applicable).

six. Obtain an employer identification number (EIN). An officeholder or authorized third party designee may apply for and obtain an EIN online (http://www.irs.gov/Businesses/Small-Businesses-&;-Self-Employed/Use-for-an-Employer-Identification-Number-(EIN)-Online).

7. File the initial registration form (Grade CT-ane) with the California Chaser General'due south Registry of Charitable Trusts. This annual registration is required for the majority of nonprofit public benefit corporations and must be filed within xxx days afterwards receipt of assets. The Form and Instructions are available online (http://oag.ca.gov/charities/forms). The corporation's articles of incorporation and bylaws should be included in the initial filing. The Form 1023 awarding and federal determination letter (Step 9) should be submitted upon receipt of the decision letter to complete the filing. Check out this livestream webinar from the Attorney General's office on March 26th at 1pm: https://oag.ca.gov/charities/initialregistration-alive.

8. File the Statement of Information (Form SI-100) with the Secretary of Country. The Statement must initially be filed within 90 days of the date of incorporation. This biennial filing requirement, which identifies the organization's address, principal officers, and agent for service of process, can be filed online (https://businessfilings.sos.ca.gov/) or by mail.

ix. Apply for federal tax exemption with the Internal Acquirement Service (IRS) and receive a conclusion letter from the IRS. Completing the Form 1023 application for exempt status nether Internal Acquirement Code (IRC) Section 501(c)(iii) (http://www.irs.gov/pub/irs-pdf/f1023.pdf) may be the near challenging function of the startup procedure. It is a legally-driven and comprehensive inquiry covering 11 Parts and eight Schedules. A critical department for careful completion is Part IV, Narrative Description of Your Activities, which asks (http://www.irs.gov/pub/irs-pdf/i1023.pdf):

For each by, present, or planned activity, include data that answers the post-obit questions.

• • • What is the activity?
    • Who conducts the activeness?
    • When is the activity conducted?
    • Where is the activity conducted?
    • How does the action further your exempt purposes?
    • What percentage of your total fourth dimension is allocated to the activity?
    • How is the activeness funded?
    • List whatsoever alternate names nether which you operate, including whatever "aka" (too known as) or "dba" (doing business as) names.

Form 1023 too requires information regarding (a) organizational construction; (b) bounty and other financial arrangements with officers and directors, and certain highly paid employees and independent contractors; (c) members and other individuals and organizations that receive benefits from the organization; (d) organizational history (east.k., an organisation that was spun off or previously fiscally sponsored by some other organization may need to complete an additional schedule every bit a successor organization); (e) specific activities; and (f) actual and/or projected argument of revenues and expenses (which should be consistent with any identified activities).

Function X is designed to make up one's mind the organization'due south classification equally either a private foundation or a public charity. Public charity status is generally the more than favorable tax condition, simply requires an arrangement to run across certain requirements. For most organizations, this means passing a public support test over a five-year measuring period. For organizations that volition receive a large bulk of their support from few sources over their start five years, monitoring and managing of the public back up ratio may be critically important. Public Charity Condition Simplified (a little) is a helpful online resource from Insight Centre for Customs Economical Development (http://www.insightcced.org/uploads/publications/legal/public_charity_status_simplified.pdf).

The filing fee for Course 1023 is currently $850 for all but the smallest organizations.

The IRS may typically take 3-four months or longer to process a Form 1023 application for exempt condition. However, the waiting catamenia may be much longer if the application contains errors, omissions, or other data that require additional development by a special IRS department. The IRS application process is further explained on its Where Is My Exemption Application website (http://www.irs.gov/Charities-&-Not-Profits/Where-Is-My-Exemption-Awarding%3F).

10. Employ for California tax exemption with the California Franchise Tax Lath (FTB) and receive an affirmation of exemption letter from the FTB. Organizations with a 501(c)(3) federal conclusion letter can request California affirmation of tax exemption under California Revenue & Taxation Code section 23701d from the FTB past filing Form 3500A along with a re-create of the IRS determination alphabetic character. The FTB will recognize the system's exemption from land income taxes equally of the federal effective date. An organization that does not accept a 501(c)(3) federal determination letter is otherwise required to file the more complicated Grade 3500 for state income revenue enhancement exemption. There is no fee for Course 3500A and a $25 fee for Grade 3500.

You tin find a downloadable grade at

https://www.ftb.ca.gov/forms/misc/3500a.pdf

Do you need to work with an attorney to start a nonprofit?

Although the majority of nonprofits are ready up without the help of lawyers, it's easy to make mistakes that become plush to correct later (such as unwisely creating voting membership structures, calculation unlawful provisions to template bylaws, violating the commerciality doctrine, etc.). We recommend having experienced professionals involved -- such as attorneys, board members with nonprofit incorporation experience, and experienced consultants. Don't discount the value of a knowledgeable chaser.

Should You Start a Nonprofit?

Now that you know how to start a California nonprofit, yous should thoughtfully consider whether this is the right option for your ideas and for the public benefit. There may be other ways to carry out your dreams, including working nether the umbrella of an existing nonprofit, Run into Alternatives to Forming a Charitable Nonprofit (http://apps.americanbar.org/buslaw/blt/2009-07-08/takagi.shtml). One often overlooked alternative is fiscal sponsorship, a relationship that may let a grouping to house a charitable projection inside an existing nonprofit with the ability to spin it off at a later date. For more information on fiscal sponsorship, run across Fiscal Sponsorship Basics from the Bar Association of San Francisco. (http://world wide web.sfbar.org/forms/vlsp/financial-sponsor-memo.pdf)

Most Emily Chan and Gene Takagi:

Attorneys Emily Chan and Gene Takagi wrote this guide for the California Association of Nonprofits as function of their pro bono work.

Emily Chan, an associate with the NEO Law Group, was recognized as the 2012 Outstanding Nonprofit Lawyer – Young Attorney by the Nonprofit Organizations Commission of the American Bar Association. Gene Takagi is managing attorney of the NEO Police Group, an adjunct professor at the University of San Francisco, and contributing editor of the Nonprofit Law Blog.

Y'all can achieve them at www.neolawgroup.com or 415-977-0558.

Source: https://calnonprofits.org/10-feature-articles/201-step-by-step-guide-for-starting-a-california-nonprofit

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