FORMATION OF

A NONPROFIT
CORPORATION

FEBRUARY 2, 2021
TAX CLINIC IS ACCEPTING
APPLICATIONS
• 2-semester clinic
• 5 hours per semester
• You do 8 hours in the clinic a week, with 2 flex hours for a
total of 150 hours a semester
• Any hours you do over that amount count toward the
required pro bono hours
• Contact Elma Moreno
• Any thoughts on nonprofit vs. for-profit?
– TOMS?
– Example from book?
– TOVA Coffee House?
– Do you understand what you need to
discuss with a client and why?
https://tovacoffeehouse.org
https://www.trla.org/nonprofits
HAVE TO BE ORGANIZED AND
OPERATED FOR A 501(C)(3) PURPOSE

• State law
• Federal law
 FORMATION OF A NONPROFIT
CORPORATION: STEP 1
• Need a name
– Check availability with the
Secretary of State
– Consider reserving
FORMATION OF A NONPROFIT
CORPORATION: STEP 2
• Prepare Certificate of Formation
– There is a form provided by Texas Secretary of State
• https://www.sos.state.tx.us/corp/forms/202_boc.pdf
• Pg. 7: SOS does not contain required tax language that
must be included to get 501(c)(3) tax-exempt status

• Or prepare and use your own form

– Purposes Clause, Initial Directors, Incorporator, Registered
Agent/Address
FORMATION OF A NONPROFIT
CORPORATION: STEP 3
• File Certificate of Formation with Secretary of State
• Pay filing fee
• Certified copy filed with IRS tax exemption application
• Nonprofit corporation exists on the date stamped on the
Certificate of Formation
FORMATION OF A NONPROFIT
CORPORATION: STEP 4
• Prepare Bylaws
– The bylaws are the rules governing the internal structure and internal management
of the organziation

• Not filed with Secretary of State, but is filed with IRS

tax exemption application
• Frequency of meetings, where meetings held, how
Board of Directors selected (plus number, how long
terms, removal), voting, controls (signing checks,
signing legal documents, etc.), committees, action
without a meeting, fiscal year, among other things
FORMATION OF A NONPROFIT
CORPORATION: STEP 5 & 6
• Meeting of Initial Directors to adopt Bylaws and conduct other formation
business (or written consent in lieu of meeting)
– Adopt Bylaws
– Elect officers, appoint committees
– Authorize preparation of IRS exemption application
– Select bank and authorize opening of account, authorize check signers
– Select location of principal office
– Select insurance company
– Select accounting firm
– Etc.
• Apply for Federal Employer Identification Number (EIN)
– Need for IRS exemption application
– Need to open bank account
FORMATION OF A NONPROFIT
CORPORATION: STEP 7
• Prepare IRS exemption application and pay application fee
– Form 1023-EZ
– Form 1023
• Once approved by IRS, then nonprofit will receive
“determination letter”
FORMATION OF A NONPROFIT
CORPORATION: STEPS 8
• Apply for state and local tax exemptions
– Sales Tax
– Corporation Income/Franchise
– Hotel Occupancy
– Property Tax