Our Step By Step Guide

How to Form a nonprofit corporation In Texas

Forming a nonprofit corporation provides liability protection for any type of business, and should be among the first steps you take as a new business owner. Starting a nonprofit corporation can help you protect your personal assets while adding legitimacy to your company. Follow our step by step guide or let us handle the paperwork on your behalf, ensuring your business is filed quickly and accurately.

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Why start your business in Texas?

For the last two years, Texas has ranked as the best state to start a business. While the reasons behind its ranking vary, small businesses thrive in The Lone Star State. This includes nonprofit corporations, which Texas provides a wide range of government-backed programs to assist with funding. Setting up a Texas nonprofit corporation may be the next, best step for your business. Let's look at how to begin.

Two Ways to Register Your Business

MyCorporation® can help you file all of the necessary documents to form your nonprofit corporation in Texas.

File and submit the formation paperwork yourself

Our free guide provides you with all of the information you'll need to form your nonprofit corporation in Texas. Bookmark this page as a reference so you can return easily as you complete each step of the process.

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See other business types

Are you looking for another entity type? We offer several other guides for the state of Texas.

A nonprofit corporation is a business formed with the purpose of furthering a particular social cause or advocating for a specific point of view. Rather than earning a profit, a nonprofit corporation reinvests its revenue to achieve its objective instead of distributing that income to its shareholders.

Nonprofit corporations, at their core, are a variation of a traditional C corporation formed to provide public benefit. While much of the structure and set-up process is similar between the two entities, setting up a nonprofit properly has a few additional caveats to be aware of including applying for federal and state tax exemptions.

Nonprofits are most popularly known for being tax exempt. This means they do not pay income tax on the money they receive on their income. If your business plans to operate only for scientific, research, educational, religious, or charitable reasons, a nonprofit would be your best entity fit.

The Benefits of a Non Profit Corporation

  • Protect your Personal Assets
    Starting a nonprofit corporation designates your business as a separate legal entity, preventing you from being personally responsible for any debts accrued by your business.
  • Build Credibility
    Establishing a professional identity for your nonprofit demonstrates the charitable intentions of your business to the community, providing additional credibility and trust.
  • Tax Advantages
    Non profit corporation owners can apply for tax exemption under certain circumstances, allowing more money to go towards the charitable cause your business was created for.

Compare the main entity types below

Entity Type
Liability
Taxation
Maintenance
Limited Liability Company Combines limited liability protection with a pass-through tax structure. IRS rules allow LLCs to choose between being taxed as partnership or corporation. The easiest entity to maintain with the least amount of formal annual requirements.
Corporation Owners / shareholders have limited personal liability for business related debts. Separate taxable entity, corporate profits among owners and corporation. Meetings are required to maintain corporate status. Stock may be sold to raise capital.
Non-Profit Corporation A corporation formed for a charitable, educational, religious, literary, or scientic purpose. Contributions to charitable corporation are tax-deductible. Can get tax exempt status with the IRS. Annual reports, minutes, meetings are required to maintain nonprofit / tax exempt status.
Tip: Try our free entity choice tool. Answer a few simple multiple choice questions about your business, and our tool can recommend the entity type that best fits the needs of your business.

Now that you have decided to start a nonprofit, you need to determine the charitable mission and purpose for the business. In order to comply with IRS regulations, it's important that your business is organized for an exempt purpose. Your business may not engage in political activities and must not overcompensate its members.

The next step is to decide on a name for your business. For nonprofits, it's important that you choose a name that clearly represents the mission of your organization. Be sure that the name you choose is easy to pronounce and memorable. Once you've decided on a name for your business, you should conduct a quick trademark search. This can help you find out if the name you want has already been taken and reduce the possibility of rejection. It's also best come up with one or two alternatives, in case the name you want to register is not available in Texas.

Tip: A business name check is included with every one of our business formation packages. We check with the state to determine the availability of your business name automatically. You can also conduct a nationwide business name search here.

Most states require that you designate a registered agent for your business, and Texas is no exception. A registered agent (often abbreviated as RA) acts as the state's means to communicate with a business. An RA is responsible for receiving legal and official documents related to the business. This may be an individual or third party service that agrees to accept legal papers on the corporation's behalf. A corporation may not act as its own registered agent for service of process.

A registered agent can be any individual who resides in Texas, or a third party registered agent service like MyCorporation who will act as a registered agent on behalf of the business. The agent must have a physical street address in Texas, and a P.O. Box is not accepted. In many cases, smaller businesses will designate a director of officer of the corporation to serve as the registered agent to start and select a new agent later when the business grows.

Registered agent information is publicly available. This may cause privacy concerns for business owners who do not wish to list their personal contact information for everyone to see. It is also common for the registered agent to become a target of spam or robocalls since this private information is relatively easy to obtain. Registered agents are highly valued for their discretion. For example, if you did not have a registered agent and your business was served with lawsuit paperwork the documents would be delivered directly to your business address. This could be incredibly embarrassing for the business owner, especially if this happened in front of customers. An RA will accept the documents privately to ensure additional privacy, organize the materials, and then deliver them to the business owner. This is why many business owners opt for a third-party registered agent service like MyCorporation to act as a registered agent on behalf of their business.

Another issue that may arise is that in the case of a lawsuit, these documents would be hand delivered directly to the registered agent. In the case that you used your business location for this purpose, this could occur in front of your customers. This is why many business owners opt for a third-party registered agent service such as MyCorporation to act as a registered agent on behalf of their business.

Tip: Our Deluxe and Premium formation packages include a full year of registered agent services for your business. We also offer standalone registered agent services which you can add to your business later.

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This may sound similar to the process of filing Articles of Incorporation for Corporations. The same document must also be filed for Texas nonprofit corporations in order to legally create a nonprofit.

Much like a corporation, the nonprofit's application must include basic information about the Texas nonprofit corporation including the company name, business address, mailing address, registered agent name and address, the nonprofit's purpose, effective date of the nonprofit corporation, and signature of at least one individual acting as an authorized representative. The filing fee for a nonprofit corporation's certificate of formation is $25.

What information should be included in the Articles of Incorporation?

As noted above, information required in the Articles of Incorporation covers basic information as it pertains to the Texas nonprofit corporation.

Bylaws are the detailed set of rules agreed upon and adopted by the board of directors of the nonprofit. Think of these as an instruction manual to run the business. They include rules and procedures related to meetings you will hold, and notes on the ways you will elect officers and directors of the business.

While bylaws are not required for nonprofit corporations in the state of Florida, it is recommended that nonprofit corporations still maintain and keep a record handy. In a pinch, you may refer to the Florida Department of State's guidebook Florida Not for Profit Corporations Act to help answer any questions you may have about nonprofit corporations in Florida.

If you are not sure how to create corporate bylaws, you can purchase MyCorporation's customized Minutes and Bylaws package. Inside our package you will find internal documents required to fulfill your corporate formalities and properly operate your business after it has been incorporated.

The first board meeting for your business is often referred to as the organizational meeting of the board. During this meeting, the initial directors of the business will adopt the corporate bylaws, set the fiscal year, and appoint corporate officers.

This meeting and all future meetings of the board of directors must be recorded in corporate minutes. Minutes are documents that detail what was discussed and any decisions the business makes during meetings. They are kept with the corporate records.

Corporate minutes are required for all Texas nonprofit corporations by law. Falling behind on this critical task can cause your business to fall out of good standing, and even jeopardize its tax-exempt status. It is important to maintain a corporate minute book. Inside you may keep originals or copies of all the signed and approved minutes or Actions by Unanimous Consent from any special or annual meetings of the corporation's shareholders and directors.

An EIN (also referred to as a Federal Tax ID) is a nine-digit number that is issued by the IRS and used to uniquely identify your business for tax purposes. Think of it as a Social Security Number (SSN) for your business, except an EIN is less sensitive. Like an SSN, an EIN allows you to:

  • Open business checking, savings, or investment accounts
  • File taxes for the business
  • Complete payroll for employees if applicable
  • Obtain lines of credit and credit cards, and build credit for your business
  • Apply for applicable business licenses when required
  • File for tax exempt status

You will only need a few pieces of information to file, including your mailing address and legal business name. You can apply online with the IRS by downloading IRS Form SS-4, or work alongside a third party organization like MyCorporation to complete an EIN application.

Tip: If a Texas nonprofit corporation pays more than $100 in wages to employees each calendar quarter, you'll need to obtain a State Employer Identification Number, or SEIN. In order to do this, you will need to register with the Texas Employment Development Department (EDD).

Your nonprofit corporation is not automatically tax exempt. In order to become tax exempt, you will need to take certain steps to obtain this status. First, you will need to file for exempt status with the Internal Revenue Service using either Form 1023 or Form 1024, depending on the classification of your organization. In some cases, you may be eligible to file Form 1023-EZ, a streamlined version of the application for recognition of tax exemption. You can avoid a $25 fee if you file for federal tax exemption before filing with the state.

Even if you have obtained federal exemption for your organization, you still need to submit an Exempt Application form (FTB 3500) to the Franchise Tax Board to obtain state level exemption. Although most of Texas's laws dealing with tax exemption are like those found in the Internal Revenue Code, obtaining state exemption is a separate process from obtaining federal exemption.

You can learn more about the process directly from Publication 557 from the IRS.

It is advised that your nonprofit corporation checks in with the Texas Secretary of State for this section. Many charities and nonprofit organizations aren't required to register with the State. Instead, they may need to register with the Office of the Attorney General depending on their solicitation methods.

In Texas, most small businesses require a combination of business licenses and permits at the federal and agency levels. The SBA outlines the process for how to apply for licenses and permits in the state of Texas. Additionally, consider checking in with the Texas Department of Licensing and Regulation. This website provides a thorough look into types of licenses businesses may need to obtain and file with the county or state.

You can learn more about the specific licenses applicable to your business by checking with the city offices where you will conduct business, or by using MyCorporation's business license compliance package. Our skilled professionals will do the work for you. We identify all of the licenses required by your business and provide you with the information you need in order to file.

nonprofit corporation Formation Packages

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Frequently asked questions

According to the Texas Secretary of State, Nonprofit Corporation filing documents are processed in the order received when filed online and by mail. Typically, a Nonprofit Corporation is processed within 4-6 weeks. Check in with the Texas Secretary of State for further details on processing and expedited processing dates.

In order to keep your nonprofit in good standing, there are reoccurring requirements that must be met.

  • All nonprofits must file a Statement of Information with the Secretary of State every two years.
  • All nonprofits must hold an annual meeting of the directors logged in their corporate minutes.
  • All nonprofits (except schools, hospitals, and religious organizations) need to file the annual registration renewal fee report. The fee for the report may vary, so check in with the Texas Department of State for further guidelines.

In order to form a nonprofit corporation in Texas, you will be required to pay various fees and taxes. The breakdown of the required fees is as follows:

  • Certificate of Formation - $25
  • Reservation of Entity Name - $40
  • Articles/Certificate of Amendment - $25

In total, expect to set aside at least $90 to form a Nonprofit Corporation in Texas.

According to the Texas Business Organizations Code, foreign entities must file an application for registration for foreign or out-of-State entities with the Texas Secretary of State. This includes LLC entity formations if the business transacts business in Texas. Entities that do not register may face severe penalties including late filing fees.