Launching a Nonprofit

Starting a nonprofit in California:  you can do it yourself, or we can help.

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You have a vision for making your community better. You are not alone. At last count, there were more than 185,000 active nonprofit corporations in California. Do you want to make it one more?

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Should I start a nonprofit?

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Founding a nonprofit is not the right solution for everybody. There are pros and cons to launching your own nonprofit. You probably have an idea about some of the potential advantages such as tax exemptions, receiving charitable donations, and access to grants, but can you describe the disadvantages? For a short video talking about the pros and cons of starting a nonprofit, check our YouTube channel or download our One Pager on the pros and cons of starting a nonprofit.

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Still not sure? Before you invest your time and money, you might want to consult an attorney to evaluate whether nonprofit status is right for your specific situation. If you would like to schedule a free 30 minute consultation about the pros and cons of founding your own nonprofit organization, you can schedule a call here. 

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DIY: How to start a nonprofit in California.

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If you've decided that establishing a nonprofit is the right decision, here are some of the steps to get yourself off to the right start under Federal and California law: 

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• Draft articles of incorporation

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There are less than a half dozen things that are required to be included in the articles of incorporation and a bunch of optional items. If you are planning to seek tax exemption from the IRS, there is particular language that they will be looking for in the articles of incorporation about what activities the organization can do and what will happen to the nonprofit's assets if and when it dissolves. If you have been told by the IRS that your articles of incorporation prevent you from getting tax-exempt status, there is information about amending your corporate papers here.

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You can download a free fillable form of articles of incorporation from California's Secretary of State here. 

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• File the articles of incorporation with the state

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If you mail the articles of incorporation (either the California fillable form or your own documents), the address is:

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Secretary of State

Business Programs Division - Business Entities

P.O. Box 944260

Sacramento, CA 94244-2600

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If you hand carry the documents, the address is:

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Secretary of State

Business Programs Division - Business Entities

1500 11th Street

Sacramento, CA 95814

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You can also form your nonprofit using the California Secretary of State's Online Business tool here.

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• Draft bylaws of the nonprofit

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California corporations, including nonprofit corporations, need to have bylaws. The point of bylaws is to set out how your nonprofit is going to be run. The bylaws can be adopted by the incorporators (if no directors have yet been chosen) or by the first board of directors.

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• Appoint or elect the founding members of the board of directors

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A nonprofit corporation in California is required to have a board of directors, and the majority of the board is required to be independent. The articles of incorporation or bylaws will set out the number (but not less than three) and terms of services of the directors. 

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• Conduct the first "organizational" meeting

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Once the nonprofit is incorporated, there must be an initial organizational meeting, called by the incorporators (if there are not yet any directors named) or by the directors. You will want to keep minutes of the actions taken at the organizational meeting (and every subsequent meeting for that matter) and keep those records at your organization's principal place of business.

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After establishing the nonprofit, you might want to:

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• Apply for tax exempt status from the IRS

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The IRS says this:  "Although most federal tax-exempt organizations are non-profit organizations, organizing as a non-profit organization at the state level does not automatically grant the organization exemption from federal income tax. To qualify as tax-exempt from federal income taxes, an organization must meet requirements set forth in the Internal Revenue Code." 

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If you want to be tax-exempt, you will need to file an application with the IRS. Those forms are required to be filed online now. If you want to be treated as a 501(c)(3), you file a form 1023 (filing fee of $600) or 1023-EZ (filing fee of $275). If you want to be treated under a different section of 501(c), you file a form 1024 (filing fee of $600). If you want to learn more about the difference between 501(c)(3) and the other subsections, check out our YouTube video here. 

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• Apply for California tax exemption.

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• Register with the California Attorney General's Office Registry of Charitable Trusts.

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Next Steps.

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Starting your nonprofit on a solid foundation involves more than doing the bare minimum. Your next steps might include:

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• Completing a conflict of interest policy and training your key personnel on it

• Creating a policy on executive compensation

• Drafting volunteer liability waivers

• Building your employee handbook

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Legal help in starting your California nonprofit.

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For clients who have hired M.G. Morris Law, P.C., as their Outside General Counsel, the start-up package includes all of the above, and it is automatically included in your legal services subscription. To discuss, log in to your secure client portal and send a message, or just call the firm. If you would like to schedule a phone or video call, you can do so via this link.

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If you are not yet a client, the firm offers a flat-fee nonprofit startup package. Learn more about what is included in the flat fee package here.

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If you would like to learn more about the firm's Outside General Counsel service, there is more information here.