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A nonprofit is an entity or association created to promote and maintain the well-being and greater good of a community, in which profits (or surplus) are directed towards the business and mission rather than divided among the owners and shareholders. Nonprofits are often tax exempt. There are several different types of nonprofits, each with its own purpose, structure, regulations and limitations, and tax implications.

Advantages:

• Only your corporation's assets or property are vulnerable to your nonprofit's lawsuits or creditor claims. The personal property of trustees, officers, and managers is not at risk.

Disadvantages:

• Planning a nonprofit requires significant time and effort.
• If control, autonomy, and independence in running your organization are important to you, nonprofit status may not be right for you.

Starting your nonprofit in Texas doesn’t have to be a complicated process. Here are a few simple steps:

1. Doing research. Is your nonprofit serving a mission in the community? And do you have the means to maintain it?
2. Making your case. Write your mission statement, think about a name, select your directors carefully.
3. Filing. Rocket Lawyer can help you with this step!

Although they’re used interchangeably, a 501(c)(3) and a nonprofit are not the same thing. 

A nonprofit is an organization that meets the requirements of its state law. While most people think of nonprofits as charitable organizations, states recognize many types of nonprofits, including many that do not perform charitable activities. Insurance companies, industry-specific professional societies, homeowners' associations, and social clubs are just a few examples of nonprofits that are not necessarily 501(c)(3) organizations. 

A 501(c)(3) organization, on the other hand, is an additional application on a federal level. It’s a nonprofit organization that is exempt from most state and federal income tax because it applied for recognition as exempt from tax under section 501(c)(3) of the Internal Revenue Code. A 501(c)(3) organization must operate for exempt purposes. The exempt purpose must be charitable, scientific, educational, religious, literary, public safety, amateur sports competition, or the prevention of cruelty to children or animals.

In addition to 501(c)(3), the IRS recognizes 26 other types of nonprofit organizations. The most familiar type is charitable organizations. Others include:

• 501(c)(4) Civic League, Social Welfare Organization, or Local Employee Association.
• 501(c)(5) Labor, Agricultural and Horticultural.
• 501(c)(6) Trade or Professional Association.
• 501(c)(7) Social or Recreational Club.
• 501(c)(8) Fraternal Societies.
• 501(c)(9) Employee Beneficiary Association.
• 501(c)(12) Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like Organizations.
• 501(c)(14) State Chartered Credit Union and Mutual Reserve Fund.
• 501(c)(19) Veterans Organizations.
• 501(c)(29) CO-OP Health Insurance Issuers.

• File a Certificate of Formation, which is similar to Articles of Incorporation, with the Secretary of State, using Form 202.
• If your nonprofit was initially registered in a state other than Texas, file a Nonprofit Corporation Application for Registration using Form 302.
• File a Consent of Registered Agent to Appointment, using Form 401-A.
• If you want to reserve a business name, file a Name Reservation, using Form 501.
• If your nonprofit was initially registered in a state other than Texas, file a Name Registration, using form 502.
• If your nonprofit will use an assumed name, file Assumed Name Form 503.
• File a nonprofit periodic report, or informational report, if requested, using Form 802. The Secretary of State can't request an informational report more than once every four years. If an informational report is requested, you must file it within 30 days, as failure to do so may result in forfeiture of your nonprofit status and possibly involuntary termination.
• To obtain status as a 501(c)(3) corporation with exemption from federal income taxes, file Form 1023, Application for Recognition of Exemption with the IRS.
• To retain your tax-exempt status, file Form 990-N, Form 990-EZ, or Form 990 with the IRS, depending on your nonprofit's annual gross income.
• Meet the requirements of Texas Comptroller of Public Accounts to obtain tax-exempt status.
• The Secretary of State's Form 202 meets minimum state law requirements for tax-exempt status.

Fees for registering a nonprofit can differ from county to county and even specific times of the year. Some fees may also be dependent on how much the nonprofit is expected to earn or has earned in previous years. 

There are a few fees that you may be charged when you register a Texas nonprofit. They include the following:

Texas state filing fees and processing times: 

• State fee: $25.68.
• State processing time: 2-3 weeks.
• Rocket Lawyer state filing fee: $0 $99.99.
  • First filing FREE* for Rocket Legal+ members.
  • Get additional filings HALF OFF with Rocket Legal+.

501C IRS filing fees and processing times

• IRS exemption-status fee: $275 for shorter applications or $600 for applications requiring more detailed information (including LLCs, organizations with higher income or value, foreign organizations, churches, schools, some healthcare organizations, and some research organizations).
• IRS processing time: typically 6-12 months.
  • Simple applications may be processed more quickly.
• Rocket Lawyer IRS filing fee: $599 $1,199.
  • Rocket Legal+ members get HALF OFF.

The Business Services team at Rocket Lawyer are pros when it comes to the requirements for registering a nonprofit and the steps and processes required to file in Texas. They can help you gather and file the necessary information quickly and at an affordable price. Rocket Legal+ members get their first business registration filing for free, paying only the state filing fees, and also get access to professional services for up to half off, including registered agent services, tax prep and filing, trademark registration, and more.

If your nonprofit does not have a physical address in Texas (P.O. boxes are not acceptable substitutions), you may be required to have a registered agent. Registered agents accept official and legal correspondence on behalf of your organization. While you are setting up your nonprofit, why not set up Rocket Lawyer as your registered agent at the same time? Better yet, if you have a Rocket Legal+ membership, you can save on your business registration and your registered agent services with the membership that pays for itself.

Businesses can save up to $2,500 per year with a Rocket Legal+™ membership. This calculation is based on total savings on an initial business registration and registered agent, trademark, and business tax filing services for Rocket Legal+ members (a total cost of $924.97) compared to Rocket Legal members (a total cost of $1,949.96). This is in addition to savings on the average cost of 5 hours for document preparation by a non-Rocket Lawyer network attorney at the average attorney hourly rate in the U.S. of $300 (an estimated cost of $1,500 when purchased without any form of Rocket Lawyer membership) compared to unlimited use of customizable business documents for both Rocket Legal+ and Rocket Legal members at no extra cost.

Yes. Grants can be used for general purposes, or to help your organization meet its operating expenses. If a grant is awarded for a specific project, you should take steps to restrict the funds to that project.

A mission statement clarifies your goals and explains how you plan to meet them. As a guideline, describe what, where, when, and how your nonprofit's purpose will be met, as well as who is going to help your nonprofit meet it. It may take a few tries to narrow your ambitions down into a workable plan.

Although you're creating a nonprofit because you want to give back to your community, you still have to meet certain requirements to protect yourself and to ensure that you achieve your organization's goals. When you create a mission statement, you can explain your organization's purpose. Consider what problem or issue your organization wants to address, then focus your statement on including the efforts and values that will guide your nonprofit to these goals.

After you achieve nonprofit status, you must turn your attention to keeping it. This involves filing your Certificate of Formation for a Nonprofit Corporation, the Consent of Registered Agent to Appointment, the Nonprofit Corporation Application for Registration, and keeping current with your nonprofit periodic reports or informational reports.

Here are some additional best practices for retaining your nonprofit status:

• Keep detailed records of all sources of income.
• File annual reports.
• Keep unrelated activities separate from your nonprofit, and pay separate taxes on them. Unrelated activities could jeopardize your nonprofit status if they make up a substantial portion of your business.
• Ensure that the time and resources spent on your nonprofit are related to the organization's exempt status.
• Maintain detailed records of corporate meetings.
• Make sure that if and when your nonprofit dissolves, its assets are distributed to another tax-exempt group.
• Do not make loans to any of your directors or officers.
• Do not issue shares of stock or pay out dividends or other shares of income to members, directors, or officers.

• North Texas Nonprofit Resources: "Grant Central Station" has provided grant writing, fundraising, and development consulting services to North Texas nonprofits since 2004.

If you are planning to operate in another state, you may need to register a nonprofit in that state. Rocket Lawyer can help you determine which states you should register in.

Other states may have their own rules for foreign nonprofits that originate in Texas or domestic nonprofits that also operate in Texas. Talk to an attorney to understand the legal and tax requirements for the state(s) in which you plan to operate.