Starting a Nonprofit Organization Under California Law – a Beginners Guide
Thinking of starting a nonprofit organization? Here’s a brief beginners guide on how to start one in the state of California.
Those who want to start a nonprofit organization should start with a purpose in mind. The purpose should not focus on profiting for oneself but to further a cause. Typically, if you want to start a nonprofit it may be because you want to get paid to help further a social cause or provide a public benefit.
California is a great place to start a nonprofit. That is because California has a big philanthropic mindset with non-profit foundations donating eight billion dollars annually.
Looking to start a non-profit organization and join others in California that bring in over 200 billion dollars of revenue annually? Read this quick guide to find out how.
Seven Steps to Forming a Nonprofit Organization
There are two ways to form a nonprofit organization. You can either do it yourself or hire an attorney to do it for you. Doing it yourself will take more time but save you some money. Hiring an attorney will move the process more quickly and get it done the right way. Here are the seven steps below.
1. Choose the Nonprofit’s Name
The name you choose will help establish your nonprofit’s brand. Choose a name that aligns with your mission and follows California’s naming rules.
2. Choose Your California Nonprofit Organization Structure
There are 4 different Nonprofit Structures to choose from. Each structure has a certain purpose, different tax exemptions and Articles of Incorporation forms to fill out.
Not eligible for state or federal tax exemptions. This type of nonprofit cannot make the public think their purpose is for a charitable, religious, or public benefit. It cannot imply that it is a charitable organization.
Eligible for state and federal tax exemptions. They are designed to function as a social welfare organization, a civil league, or a charitable organization.
These nonprofits’ function as a religious organization or for religious purposes. These are also eligible for state and federal tax exemptions.
Common Interest Development
This type of organization is required to use the Davis Stirling Common Interest Development Act as a guide. These nonprofits include organizations such as an Homeowners Association.
3. Appoint a Registered Agent
This person can be someone who is within the company such as yourself. You can also hire a professional service authorized to do business in California.
4. Select Directors and Officers
Directors are responsible for overseeing the operations of the organization and managing important business of the organization. The Directors form the board of directors. Officers oversee the daily operations and management of the entity.
5. File the Articles of Incorporation
The official forms for filing for a nonprofit in California are called the Articles of Incorporation. The type of information you will need to provide for the Articles includes your corporate name, business address, registered agent, registered office purpose statement, and signatures.
6. Operating Procedures and Housekeeping
You will need to file an SI100 form within 90 days of filing for a nonprofit corporation. You can do this online. Other housekeeping duties include preparing nonprofit bylaws and conflict of interest policies, as well as obtaining an EIN.
7. Apply for 501(c)(3) Status
Normal corporations pay a federal income tax on their gross revenue. As a nonprofit organization, your goal is to raise money to advance a cause. The federal government allows nonprofits to have a tax exemption on profits so more money can go towards their cause.
Nonprofit Corporations benefit from limited liability protection, enhanced ability to apply for grants and discounted rates on stamps. It is important to understand that only 501(c)(3) Organizations are tax exempt.
A nonprofit organization that is tax exempt is able to give the maximum amount of funds towards their social benefit or cause. If you’re wanting to start a nonprofit and are in need of legal advice, feel free to reach out and ask us any questions you may have.