FAQ's
What is a nonprofit?
A nonprofit (abbreviated "NPO,""nonprofit"
or "not-for-profit") is an entity formed for
purposes other than making a profit. Nonprofits
are formed pursuant to different state laws than
standard for-profit corporations; however, the
process of forming a nonprofit is very
similar.
In order to form a Texas nonprofit, a
nonprofit certificate of incorporation must be filed
with the appropriate state agency and the necessary
state filing fees paid. The formation documents must
include certain clauses and information, such as a
very detailed business purpose statement, in order
for the entity to qualify for tax-exempt status.
To be considered tax-exempt, nonprofits must
apply for federal and state (if applicable)
tax-exempt status. Tax-exempt status is not
automatically granted once the nonprofit is
formed. To apply for federal tax-exempt status, Form
1023 must be filed with the Internal Revenue Service
(IRS). For state requirements, it is best to contact
the department responsible for taxation in the state
of formation. Please note: the Baba Law Firm does
not assist with the preparation and filing of Form
1023.
Like standard for-profit corporations, nonprofits
provide limited liability protection. The personal
assets of the directors, members and officers
typically cannot be used to satisfy the debts and
liabilities of the nonprofit.
The most common type of nonprofit is the
501(c)(3), meaning it is formed in compliance with
Section 501(c)(3) of the Internal Revenue Code.
These nonprofits are organized and operate
for some religious, educational, charitable,
scientific, literary, testing for public safety,
fostering of national or international amateur
sports, or prevention of cruelty to animals or
children purpose permitted under this section of the
code. Nonprofits may also be formed for other
purposes pursuant to different sections of the
Internal Revenue Code. To qualify for federal
tax-exempt status as a nonprofit under a
different section of the code, your corporation must
comply with the requirements of that federal tax
code section.
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What paperwork is required to
form a nonprofit?
Nonprofit certificate of incorporation conforming to
state law must be prepared and filed with the proper
state authority and filing fees must be paid.
All you need to do is complete the intake order form
or place an order by phone and we will prepare and
file your certificate of incorporation. It’s
simple, just fill out the intake form or call our
office at 713-524-1920 to get started.
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Who can form a nonprofit?
There are no restrictions as to who can form a
nonprofit. There are no age, residency or other
legal requirements.
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What steps need to be taken to
form a nonprofit?
The first step is to file nonprofit certificate of
incorporation with the proper state agency. It is
important that the articles contain the required
clauses to ensure your nonprofit will qualify
for tax-exempt status. The Baba Law Firm prepares
and files nonprofit certificate of incorporation in
Texas on your behalf.
After the nonprofit articles of incorporation are
filed, tax-exempt status must be applied for at the
federal level and sometimes at the state level. To
apply at the federal level, a timely filing of Form
1023 must be made with the Internal Revenue Service
(IRS). The Baba Law Firm does not prepare IRS
Form 1023.
To determine what form needs to be filed at the
state level to obtain tax-exempt status, contact the
state department responsible for taxation.
Additionally, the nonprofit must comply with
corporate formalities and hold annual meetings of
directors, members and officers. Bylaws must also be
adopted. Documents that help you comply with these
corporate formalities are contained in the Baba Law
Firms’ Nonprofit Corporate Kit.
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What should I name my
nonprofit?
Choose the name of your nonprofit carefully.
It is very important that you portray the image you
want for your new nonprofit. Legally, the
name you select must not be “deceptively similar” to
any existing corporation or must be “distinguishable
on the record” of your state. For example, if a
corporation named Flower Corp. exists in your state,
you probably would not be allowed to name your
organization Flour Inc. It is possible that the
name you select will not be available; therefore we
ask for a second choice on the incorporation order
form.
Additionally, the name you choose must show your
business is incorporated. Texas requires that the
nonprofit name be followed by "Corporation,"
"Incorporated," "Company" or an abbreviation of
those terms, such as "Corp." or "Inc."
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What business purposes are
valid for a nonprofit?
To qualify for federal tax-exempt status under
501(c)(3) of the Internal Revenue Code, the
nonprofit must be organized and operate for some
religious, educational, charitable, scientific,
literary, testing for public safety, fostering of
national or international amateur sports, or
prevention of cruelty to animals or children purpose
permitted under this section of the code.
Nonprofits may also be formed for other purposes
pursuant to different sections of the Internal
Revenue Code.
The business purpose of the nonprofit must be
listed in the certificate of incorporation, and to
apply for tax-exempt status, it is very important
that the purpose be well described.
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What are the (Internal Revenue
Service) IRS classifications of nonprofits?
The Baba Law Firm prepares certificate of
incorporation for nonprofits in Texas
pursuant to section 501(c)(3) of the Internal
Revenue Code. Nonprofits formed under
501(c)(3) must be formed for some religious,
educational, charitable, scientific, literary,
testing for public safety, fostering of national or
international amateur sports, or prevention of
cruelty to animals or children purpose.
Nonprofits may also be formed for other
purposes pursuant to different sections of the
Internal Revenue Code. If you want us to form your
nonprofit pursuant to a different provision
of the Internal Revenue Code, please let us know the
Internal Revenue Code section in the purpose portion
of our order form.
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What is the correct term for
the owner(s) of a nonprofit?
Due to the fact that nonprofits are formed
for purposes other than making a profit, the entity
is a non-stock entity. As a result, there
technically are no owner(s) of a nonprofit.
Nonprofits are similar to for-profit
corporations, in that they are overseen by a board
of directors. The nonprofit directors are
responsible for making the major decisions for the
nonprofit, and also appointing and
supervising the officers of the nonprofit.
The officers are then responsible for the everyday
management of the nonprofit.
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How many directors are
nonprofits required to have?
Texas requires nonprofits to have a minimum
of three directors.
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How do I get started with the
incorporation process?
After deciding to form a nonprofit, nonprofit
articles of incorporation must be filed with the
state government and initial fees must be paid. If
you choose the Baba Law Firm to form your
nonprofit, we will complete these administrative
tasks quickly and effectively.
After your articles are filed, your nonprofit
must hold an organizational meeting where bylaws are
adopted and the incorporation process is completed.
All of this information should be kept in a
nonprofit record book. Our Nonprofit Corporate
Kit can assist you with these steps.
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