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S OUTHWEST B ORDER N ONPROFIT R ESOURCE C ENTER

S OUTHWEST B ORDER N ONPROFIT R ESOURCE C ENTER. Starting a Nonprofit . THE UNIVERSITY OF TEXAS-PAN AMERICAN. What We Do. Capacity Building Opportunities Online Directory Assist with Start-up Nonprofits Online Library Foundation Center Online

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S OUTHWEST B ORDER N ONPROFIT R ESOURCE C ENTER

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  1. SOUTHWEST BORDER NONPROFIT RESOURCE CENTER Starting a Nonprofit THE UNIVERSITY OF TEXAS-PAN AMERICAN

  2. What We Do • Capacity Building Opportunities • Online Directory • Assist with Start-up Nonprofits • Online Library • Foundation Center Online • Educate Students as Resource for Nonprofits community.utpa.edu/sbnrc

  3. Nonprofits Stats • Texas • 2011- 92,622 Nonprofit Organizations • 2003- 86,933 Nonprofit Organizations • Rio Grande Valley • Cameron- 733 • Hidalgo- 1,000 • Starr- 34 • Willacy- 44 National Center for Charitable Statistics

  4. Forming a Nonprofit Tax-Exempt Corporation in Texas • What is a nonprofit corporation? • Forming an organization to serve an unmet need • Benefits and limitations of a nonprofit corporation

  5. What is a Nonprofit Corporation? • A corporation in which income is NOT distributed to a members • Tax-Exemption under section 501(c)(3) • Purposes: religious, charitable, scientific, testing for public safety, literary, educational, or prevention of cruelty to children or animals

  6. Forming an Organization to Serve an Unmet Need • MISSION: • What is the primary purpose of the nonprofit? • Does the community have an unmet need? • VISION: • What target audience will be served? • RESEARCH: • What are competing organizations already providing? • Is there a strong commitment from organizers and participants to build the nonprofit? • Is there an adequate source of funds to support the organization?

  7. Benefits and Limitations of Nonprofits • Benefits: • Members and directors are shielded from personal liability • Organization can be eligible to receive government or community development loans and grants • Limitations: • Nonprofit cannot be organized for the purpose of financial profit for its members or directors • Nonprofits are absolutely precluded from engaging in partisan political campaign activities and their lobbying is heavily regulated

  8. What is a Community Development Organization? • Characterized by community based leadership and its work primarily in the development of affordable housing, job training, and small business assistance • There are four independent bases for federal tax-exemption for a nonprofit community development organization: • Relieving the poor and distressed • Combating community deterioration • Eliminating discrimination • Lessening the burdens of government

  9. Steps Needed To Form a Nonprofit Corporation • Step 1: Check availability of name with the Texas Secretary of State in Austin at www.sos.state.tx.us/corp/forms_boc.shtml

  10. Steps Needed To Form a Nonprofit Corporation • Step 2: Prepare Certificate of Formation in the document filed with the Secretary of State to form the nonprofit corporation. • Certificate of formation must include: • Purpose Clause – Mission/Vision • Initial Directors – Directors constituting the initial board (minimum of 3) • Incorporator – The person who signs the certificate of formation • Registered Agent and Address – The agent is the incorporator or the officer of the corporation. The registered office generally cannot be a post office box • Members - The nonprofit corporation needs to be governed by voting members, board of directors, or a combination of the two

  11. Steps Needed To Form a Nonprofit Corporation • Step 3: File the certificate with the Secretary of State • The incorporator needs to submit the completed Certificate of Formation in duplicate together with a $25 filing fee. • This is mailed to: P.O. Box 13697, Austin, TX 78711-3697.

  12. Steps Needed To Form a Nonprofit Corporation • Step 4: Prepare Bylaws • Meetings • Leadership • Provisions for Membership • Quorum • Controls • Committees • Fiscal Year • Bylaw Amendments

  13. Steps Needed To Form a Nonprofit Corporation • Step 5: Meeting of initial directors to adopt bylaws and transact business • Adopt Bylaws • Elect Officers • 501(c)(3) Application

  14. Steps Needed To Form a Nonprofit Corporation • Step 6: Apply for a federal Employer Identification Number (EIN) • In order to be tax-exempt, an organization must obtain a Federal Employer Identification Number and is needed whether or not the organization has members • Complete an IRS form SS-4, available on the IRS website at www.irg.gov • EIN is obtainable easily online at https://sa2.www4.irs.gov/modiein/individual/index.jsp

  15. Steps Needed To Form a Nonprofit Corporation • Step 7: Prepare federal tax-exemption application • Must file a Form 1023 with the IRS at www.irs.gov. The site contains step by step directions of what a Form 1023 entitles

  16. Steps Needed To Form a Nonprofit Corporation • Step 8: Apply for sales, franchise and hotel tax-exemption from Texas comptroller • To apply for state exemption based on the federal exempt status, complete Form AP-204 located at www.window.state.tx.us/taxinfo/exempt/index.html

  17. Steps Needed To Form a Nonprofit Corporation • Step 9: Apply for property tax-exemptions from the local tax appraisal district • To receive the exemption, an organization should submit Form 50-299 at www.window.state.tx.us/taxinfo/taxforms/02-form06.html

  18. Should an Organization Use a Lawyer to Help Gain Tax-Exempt Status? • A lawyer is not required, but may help you by avoiding unnecessary mistakes which might jeopardize your ability to incorporate or gain tax-exempt status • Lawyer will also advise on certain corporate responsibilities • Lawyer may also be able to recommend an accountant to comply with ongoing federal and state tax, bookkeeping, and reporting obligations

  19. What are the Legal Obligations of a Tax-Exempt Nonprofit? • A nonprofit corporation must: • Hold an annual meeting • Refrain from making a loan to a director. • Maintain current and accurate financial records • Prepare annual reports in accordance with accounting standards • Keep records, books and annual reports at its principle office for three years for public inspection • Keep current registered agent on record • Submit IRS Form 990 every tax year • Submit Secretary of State Form 802-General Information

  20. How is a Nonprofit Organization Monitored? • The Board of Directors • Private Watchdog Groups (National Charities Information Bureau and the American Institute of Philanthropy) • The State (The Attorney General’s Office) • IRS • Individual Donors and Members

  21. Questions?

  22. Thank You!sbnrc@utpa.edu956-665-7566

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