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How to form a nonprofit corporation

Wanting to be a part of something bigger than yourself which is meant to help people is a drive that many individuals have. As many people learn, sometimes the best way to get things done is to do them yourself. If you have an idea that you think could help your community, state or further, a great way to formalize your efforts is with a nonprofit organization.

There are several benefits to a nonprofit – one of the greatest being tax exemption or reduction. You will also be eligible for public and private grants, work in a structure designed to put your mission above personal gain and be protected from creditors.

Forming a nonprofit corporation

It is important to understand that nonprofit organizations begin as nonprofit corporations. Once you have established your nonprofit corporation, you will be able work with the Secretary of State to be recognized as a 501(c)(3), or a tax exempt nonprofit organization.

This is how you can get the ball rolling on becoming a nonprofit corporation:

  • Select a board of directors – Texas requires a nonprofit corporation to have a board of at least 3 directors. Directors can be individuals that are at least 18 years old, a corporation or other legal entity.
  • Name your nonprofit – You must also decide on a name for your new entity. The Secretary of State’s website will tell you if your proposed name is available for a minor fee.
  • Establish your organizations bylaws – You will also be required to draft a formal set of internal operating procedures. These do not need to be filed with the state.
  • Hold an inaugural board meeting – An organizational meeting of the board must be held in which the board formally approves the nonprofit’s bylaws, appoint officers and set and approve transactional matters. Accurate minutes of the meeting must be recorded.
  • Create a corporate record log – Keeping records is vital to any business. Setting up a corporate log to house each board meeting’s minutes, certificate of formation, your nonprofits bylaws and other important documents will go a long way if there are legal or internal problems in the future.

These six major steps are the groundwork for being recognized as a nonprofit corporation by the Texas Secretary of State. Once you have been recognized as such, you may begin the process of obtaining federal and state tax exemptions.

Being a part of a religious, charitable, scientific, literary or educational nonprofit is an effort worth taking pride in. With hard work and dedication, your nonprofit is sure to touch and improve the lives of many.

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