How to Start a Nonprofit in California

1. Name Your Organization

   Your organization’s name establishes its brand and is also important for incorporating with the state. The legal name of your nonprofit corporation may not conflict with any other organization registered in the state. Make sure the name is available and meets state requirements.

   Name Search:	California Secretary of State - Business Programs Division Name search
   Suffix:	Not required.  CCC §5122.a

2. Choose a California nonprofit corporation structure

   California offers four corporate structures for nonprofit corporations.

   • Religious corporations are primarily or exclusively for religious purposes such as a church.
   • Public benefit corporations are those seeking IRS exemptions 501(c)(3) or 501(c)(4) and/or similar California state tax exemptions. These organizations are organized for charitable purposes, act as a civic league, or as a social welfare organization.
   • Mutual benefit corporations are other nonprofits that may or may not seek IRS and California tax exemptions. A mutual benefit corporation may not create the impression that the corporate purpose is public, charitable, or religious, nor create the impression that it is a charitable foundation.
   • Mutual benefit common interest development (CID) corporations are formed under the Davis-Stirling Common Interest Development Act to manage a common interest development (for example, a homeowner’s association). Common interest development associations can also be unincorporated.

3. Recruit Incorporators and Initial Directors

   The incorporator is the person who signs the Articles of Incorporation for your nonprofit. You will need at least one, but can have more than one. Directors make up the governing body of your nonprofit corporation and are stakeholders in your organization’s purpose and success. You’ll want to identify three, unrelated individuals to meet IRS requirements. You will also want to be aware of any age or residency requirements.

   California director requirements:

   Number: minimum 1 Qualifications: None. No residency requirement. No membership requirement. Term: 1 year, 4 year maximum unless the corporation has no members, in which case 6 years is the maximum term Quorum: majority Committee: minimum 2 directors No director may vote by proxy

   California officer requirements:

   A corporation shall have a chair of the board, who may be given the title chair of the board, chairperson of the board, chairman of the board, or chairwoman of the board, or a president or both, a secretary, a treasurer or a chief financial officer or both, and any other officers with any titles and duties as shall be stated in the bylaws. Elected by the board Two or more offices may be held by the same individual, except the president may not also serve as secretary or treasurer.

4. Appoint a Registered Agent

   A registered agent is responsible for receiving legal notices on behalf of your organization. The appointed registered agent must be physically located in the state and maintain an office that is open during regular business hours. As a nationwide registered agent, our service is designed to receive your legal documents and provide secure access to those documents through your online account. Our local California registered agent office is located in Sacramento, CA. We offer registered agent service independently or as part of our nonprofit formation packages.

5. Prepare and File Articles of Incorporation

   Your nonprofit’s articles of incorporation officially mark the creation of your organization. They document where and when the organization was formed and capture other information necessary to verify its existence. While requirements for language vary from state-to-state, there are some basic provisions that the IRS will look for when you apply for 501(c)(3) exemption. It is important to customize the articles for your organization and make sure you meet the state and IRS requirements. Meeting these requirements from the start will help avoid having to make amendments later or risk getting your 501(c)(3) application rejected. Some states will also require you to publish your articles of incorporation, so be mindful of any deadlines and publishing instructions.

   Agency:	California Secretary of State - Business Programs Division
   Form:	The state provides Articles of Incorporation for a Domestic Nonprofit Corporation templates. There are four templates available:   Form ARTS-MU: Articles of Incorporation - Mutual Benefit Corporation Form ARTS-PB-501(c)(3): Articles of Incorporation - Public Benefit Corporation Form ARTS-RE: Articles of Incorporation - Religious Corporation Form ARTS-RE: Articles of Incorporation - Common-Interest Development Corporation
   Filing Method:	Mail, in-person or online.
   Agency Fee:	$30
   Turnaround:	Current state processing times or pay for preclearance and expedite services
   Law:	California Corporations Code - Title 1: Corporations - Division 2: Nonprofit Corporation Law
   Original Ink:	Not Required
   Notarization Required?:	Not Required

6. File Initial Report

   After filing articles of incorporation, you must file an initial report.

   Agency:	California Secretary of State - Business Programs Division
   Filing Method:	Online
   Agency Fee:	$20
   Turnaround:	~1 business day online. See current processing times.
   Due:	You must file an initial report within 90 days of incorporation.
   Law:	California Corporations Code section 6210
   Penalties:	Failure to file this Statement of Information by the due date may result in the assessment of a $50.00 penalty.
   Notes:	We recommend filing online. Every domestic nonprofit corporation formed to manage a common interest development under the Davis-Stirling Common Interest Development Act (for example, a homeowners’ association) must also file a Statement By Common Interest Development Association (Form SI-CID) together with the biennial Statement of Information. Original signatures are not required.

7. Obtain an Employer Identification Number (EIN)

   This unique, nine-digit number is assigned by the IRS to identify your nonprofit. All types of nonprofits will apply for an EIN, not only those that hire employees. You will use your EIN to open a bank account, apply for 501(c)(3) status, and submit 990 returns to the IRS.

   Agency:	Internal Revenue Service (IRS)
   Form:	IRS Form SS-4
   Instructions:	Applying for an EIN without a SSN/TIN: Online applications are not accepted if an individual does not have a SSN/TIN. Form SS-4 must be completed, signed, and faxed to the IRS, leaving the SSN/TIN field blank or adding the terminology "foreign" to that line item. To follow up on the application, call the IRS and ensure they received the application.  Depending on the agent you speak with, you may be able to obtain the EIN over the phone. The IRS may then fax the EIN documentation back to you.
   Filing Method:	Mail, phone, fax, or online.
   IRS fee:	$0
   Turnaround:	Immediately online or by phone. 4 business days by fax. 4-5 weeks by mail.
   Notes:	The IRS website is only available during certain hours. Print your EIN before closing your session. For additional guidance, see IRS Pub 1635: Understanding Your EIN.

8. Store Nonprofit Records

   As you launch your nonprofit, you will receive a number of official documents. Organizing these documents in one place will save you headaches down the road. You will soon have numerous items to keep in your records including your EIN letter, bylaws, meeting minutes, 501(c)(3) determination letter, and more.

   
   
   

   A great way to maintain necessary documentation is Records Manager, our software for storing records securely, tracking directors and officers, and getting notified of meetings.

9. Establish Initial Governing Documents and Policies

   Your bylaws are the governing document for your nonprofit. They serve as your organization’s operating manual and should be consistent with your articles of incorporation and the law. When your Board of Directors meets for the first time, you’ll review and ratify the bylaws and they will be a roadmap for governance from there.

   At the same time, you’ll also want to create and adopt a conflict of interest policy. A conflict of interest is when someone in a key position in your nonprofit has competing interests and is making choices that could benefit themselves to the harm of the organization. Personal interests should be set aside and organizational interests prioritized. If a conflict of interest does arise, it should be disclosed immediately.

   Your application to the IRS for 501(c)(3) exemption will require that both the bylaws and the conflict of interest policy are approved and adopted. Once they’ve been adopted, safely store them in your Nonprofit Records Kit.

10. Hold Organizational Meeting of the Board of Directors

    The initial organizational meeting of your Board of Directors will be incredibly productive. At this meeting you will approve the bylaws, adopt the conflict of interest policy, elect directors, appoint officers, and approve resolutions such as opening the organization’s bank account. Important decisions are being made so be sure to record them in the meeting minutes.

11. Get California State Tax Identification Numbers/Accounts

    You will need to apply for a California Employer Identification Number if you will have employees.

    Submit to:	State of California - Employment Development Department http://www.edd.ca.go
    Filing method:	Online
    Fee:	$0

    To apply for a seller's permit (if your nonprofit collects sales tax on items sold), use tax account, and other permits and licenses:

    Submit to:	California State Board of Equalization http://www.boe.ca.gov
    Filing method:	Online at eReg
    Fee:	$0

    Until your organization applies for and obtains California tax-exempt status, it is subject to franchise and income taxes. This includes $800 minimum franchise tax. You do not need to register with the Franchise Tax Board, but you may need to pay tax until you receive your exemption.

    Guidance:	Introduction to Tax-Exempt Status
    More Information:	State of California - Franchise Tax Board https://www.ftb.ca.gov

12. Apply for 501(c)

    Applying for 501(c) tax exemption can feel like the most daunting step in bringing your nonprofit dream into reality, but obtaining tax exemption comes with many benefits. You will be able to apply for grants and grow your fundraising success in addition to being exempt from IRS income tax. 501(c) is the chapter of the Internal Revenue Code that regulates nonprofit organizations. Like others, you may be most familiar with 501(c)(3) nonprofits, including charities and foundations. 501(c)(3) nonprofits apply using Form 1023 or Form 1023-EZ. Review the criteria for each application and make sure you meet the eligibility requirements set out by the IRS. Other types of nonprofits, including 501(c)(4)s and 501(c)(6)s, apply using Form 1024. After reviewing and approving your application, the IRS will return a Determination Letter officially recognizing your exemption.

    Completing the federal application for tax exemption is significantly easier with the assistance and support of a professional. Find someone with the expertise to ensure the correct application is being used and is completed accurately. A well-prepared application takes time, over 100 hours by IRS estimates, so put yourself on the path to success by finding a specialist to walk alongside you in the journey - from start to tax-exempt finish!

    Agency:	Internal Revenue Service (IRS)
    Form:	IRS Form 1023, IRS Form 1023-EZ, or IRS Form 1024
    Instructions:	IRS Instructions for Form 1023, IRS Instructions for Form 1023-EZ, or IRS Instructions for Form 1024.  Also see guidance IRS Pub 557: Tax-Exempt Status for Your Organization.
    Filing Method:	Mail
    Agency Fee:	$275 for organizations filing Form 1023-EZ and $600 for organizations filing Form 1023.
    Turnaround:	1023-EZ average: <1 month. 1023 average: 3-6 months.

    

13. Report Beneficial Ownership Information to FinCEN

    As of January 1, 2024, millions of entities in the US need to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) as part of the Corporate Transparency Act (CTA). Nonprofits without 501(c) tax exemption formed before that date must submit BOI by December 31, 2024, while those formed after must submit it within 30 days of formation. Once 501(c) tax exemption is granted, the organization may claim an exemption from BOI reporting requirements via an update filing to FinCEN. Our BOI Reporting Service includes up to four initial, updated, and corrected reports per year, ensuring the data you report to FinCEN is updated.

14. Apply for State Tax Exemption(s)

    With your IRS Determination Letter in hand, make sure you familiarize yourself with your state’s requirements for recognizing your nonprofit’s tax-exempt status. This is an area where requirements vary state-by-state. Many states issue their own tax-exempt certificate that can be used for sales and use tax purposes, but it may require application and periodic renewal.

    To file to obtain exemption from state income tax:

    Agency:	California Franchise Tax Board
    Form:	Form 3500: Exemption Application or Form 3500A: Submission of Exemption Request
    Agency Fee:	$25 ($0 for exemption request)
    Notes:	Use form FTB-3500a if you have received an IRS Determination Letter and form FTB-3500 if you have not.

    To file to obtain Sales Tax Exemption:

    Agency:	California Department of Tax and Fee Administration
    Notes:	Few nonprofits are eligible for sales tax exemption in California. Volunteer fire departments, veteran's organizations, qualifying youth organizations, religious organizations, and few others may be eligible for exemption. See the Sales and Use Taxes: Exemptions and Exclusions guide to see if your organization is eligible to apply for an exemption.

    Exemption from local property taxation, known as the Welfare Exemption, is available to qualifying organizations through a program jointly administered by the Board of Equalization and county assessors' offices in California.

    Guidance:	California Tax Service Center - Nonprofit/Exempt Organizations
    More information:	California State Board of Equalization http://www.boe.ca.gov

15. Register for Charitable Solicitation (Fundraising)

    This is another area where laws differ from state to state, but most states require any nonprofit soliciting donations to register to do so on an annual basis. This means registering in the state prior to soliciting any resident of that state. Registering in your home state is essential, but you may also need to register other states depending on the scope of your organization.

    California Charitable Solicitation Registration

    Agency:	California Attorney General - Registry of Charities and Fundraisers
    Law:	California Government Code § 12585; California Code of Regulations, Title 11 § 300
    Foreign Qualification is Prerequisite:	No
    Registered Agent (Special Agency) Required?	No

    One-Time Exemption Registration

    More Details

    Exemption Eligible Organizations:	The United States, any state, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or to any of their agencies or governmental subdivisions A religious corporation sole or other religious corporation or organization that holds property for religious purposes, or to any officer, director, or trustee thereof who holds property for like purposes A cemetery corporation regulated under Chapter 12 (commencing with Section 7600) of Division 3 of the Business and Professions Code A committee as defined in Section 82013 that is required to and does file any statement pursuant to Article 2 (commencing with Section 84200) of Chapter 4 of Title 9 A charitable corporation or unincorporated association organized and operated primarily as a religious organization, educational institution, hospital, or a health care service plan licensed pursuant to Section 1349 of the Health and Safety Code Educational institutions as defined by Section 10251 of the Corporations Code
    Law:	California Government Code § 12584
    Notes:	If you believe you are exempt, submit a letter requesting exemption, a copy of the organization's founding document(s), and IRS determination letter for review. Exemptions are reviewed on a case-by-case basis.

    Initial Registration

    More Details

    Form:	Form CT-1: Initial Registration Form
    Instructions:	Initial Registration Guide
    Filing Method:	Mail
    Agency Fee:	$50
    Turnaround:	2-3 months
    Original Ink:	Not Required
    Notarization Required?:	Not Required
    Notes:	Your organization must register within 30 days of receiving assets (property, funds, etc) that are held in a trust. Any authorized or director may sign. Signature need not be notarized. Some California counties and municipalities may require charities that solicit in-person to register prior to fundraising. Do not file a Form RRF-1 until the Initial Registration has been completed and approved.
    Before you Apply:	Domestic Applicants: Check the available exemptions to see if your charity is eligible for exemption from the full registration requirement. Appoint a registered agent to receive legal documents in California. If your charity meets the audit threshold, obtain an audited financial report to submit with your registration application. Look through the list of required attachments and make sure that you have each required document in hand before starting the registration application. Foreign Applicants: Check the available exemptions to see if your charity is eligible for exemption from the full registration requirement. Determine if foreign qualification is required for your entity. If so, you must file foreign qualification documents with the California Secretary of State and appoint a registered agent to receive legal documents in California. If your charity meets the audit threshold, obtain an audited financial report to submit with your registration application. Obtain a certificate of good standing from your home state (to be filed during the foreign qualification process). The certificate cannot be more than 6 months old when filing foreign qualification documents. Look through the list of required attachments and make sure that you have each required document in hand before starting the registration application.
    How to Apply:	Domestic Applicants: File formation documents with the California Secretary of State. File an exemption application with the California Franchise Tax Board to obtain a state tax exemption. Submit a completed Initial Registration Form and all required attachments to the California Attorney General - Registry of Charitable Trusts. Foreign Applicants: Determine if your organization is required to foreign qualify with the California Secretary of State.  File foreign qualification documents with the California Secretary of State. File an exemption application with the California Franchise Tax Board to obtain a state tax exemption. Submit a completed Initial Registration Form and all required attachments to the California Attorney General - Registry of Charitable Trusts.
    Required Attachments:	Articles of Incorporation, Articles of Organization, Articles of Association, or Trust Agreement (if incorporated, submit endorsed/certified original Articles of Incorporation and any endorsed amended articles stamped by the state in which domiciled) Bylaws IRS determination letter IRS form 1023 List of officers and directors Fundraising professional contact information and registration numbers (if applicable)

    Registration Renewal

    More Details

    Form:	Form RRF-1: Annual Registration Renewal Report Organizations that are not required to file and do not file IRS Form 990 or 990-EZ because they do not meet the revenue requirements must also file Form CT-TR-1: Annual Treasurer's Report. Charities that solicit for charitable purposes and collect more than 50% of their annual income and more than $1,000,000 in charitable contributions from donors in California during the previous calendar year, and spend more than 25% of their annual income on non-program activities as defined in the Business and Professions Code §17510.9 must submit Form CT-694: Annual Financial Solicitations Report at the time of the Annual Registration Renewal Report
    Filing Method:	Mail or online.
    Agency Fee:	The renewal fee is based on the registrant's total revenue for the prior fiscal year:   $25 for less than $50,000 total revenue $50 for between $50,000 and $100,000 total revenue $75 for between $100,001 and $250,000 total revenue $100 for between $250,001 and $1,000,000 total revenue $200 for between $1,000,001 and $5,000,000 total revenue $400 for between $5,000,001 and $20,000,000 total revenue $800 for between $20,000,001 and $100,000,000 total revenue $1,000 for between $100,000,001 and $500,000,000 total revenue $1,200 for greater than $500,000,000 total revenue
    Due:	Annually by the 15th day of the 5th month following the close of your organization's fiscal year. If your fiscal year closes on December 31, then renewal is due by May 15. Renewals can be submitted as early as the day following the charity's fiscal year-end.
    Due Date Extension:	Due dates are automatically extended for 6 months beyond the original due date, however, charities should file a copy of their IRS form 8868 when submitting their renewal if an IRS extension was granted.
    Original Ink:	Not Required
    Notarization Required?:	Not Required
    Penalties:	$25 per month late fees beginning the 31st day after the first delinquency letter was mailed. Additionally, the failure to submit renewal on time can result in loss of tax exemption and assessment of minimum tax of $800, plus interest, and/or fines or filing penalties. The Attorney General will notify the California Franchise Tax Board to disallow your state tax exemption. Directors, trustees, officers, and return preparers are personally liable for these fees and penalties - you cannot use charitable assets to pay them, they must be paid out of pocket!
    Notes:	Any authorized or director may sign. Signatures do not need not to be notarized. Online filing is available only for charities with a "Current" or "Current - Awaiting Reporting" status.
    Required Attachments:	IRS form 990 (Schedule B is no longer required and should be excluded) Audited financials (if applicable)

    Reinstatement

    More Details

    Instructions:	Delinquent or suspended organizations do not have to undergo the reinstatement process. To get back into compliance, they must submit all past-due filings and all applicable late fees. The requirements may vary by organization, and the registration number should be used to confirm them.  The timeframe from delinquency to suspension varies based on the organization Organizations that have gone from a suspended status to a revoked status must submit a reinstatement petition for consideration. Reinstatement is NOT guaranteed in these cases. The requirements may vary by organization, and the registration number should be used to confirm them.  The timeframe from suspension to revocation varies based on the organization
    Filing Method:	Mail
    Agency Fee:	Fees vary by organization and the registration number should be used to confirm the fees due
    Penalties:	Charities suspected of violating the California Supervision of Trustees and Fundraisers for Charitable Purposes Act are subject to an investigation by the Attorney General. If found to be violating this Act, the Attorney General can issue one or more of the following judgments: suspend a registration cease and desist orders civil penalties of up to $1,000 per act or omission civil penalties of up to $10,000 per act or omission with the intent to deceive or defraud Upon application from the Attorney General, the court can grant one or more of the following:  temporary or permanent injunction appoint receiver restitution other relief as the court deems appropriate
    Required Attachments:	Reinstatement Petitions include (at the minimum):  All required past-due filings and applicable late fees Proof of compliance/good standing with the IRS, California Franchise Tax Board, and California Secretary of State If not in good standing, provide a written statement of the steps taken to comply Written explanation of why the organization failed to comply with the registration and reporting requirements and failed to respond to notices from the Registry of Charities and Fundraisers Written explanation that will provide sufficient assurance to the Registry of Charities and Fundraisers that there has been no loss of charitable assets, there will be no harm to the public if the registration is reinstated, and if the petition is granted the organization will be able to comply with the annual registration and reporting requirements and no violations will occur in the future

    Change of Fiscal Year

    More Details

    Form:	Form RRF-1: Annual Registration Renewal Report
    Agency Fee:	Varies
    Notes:	File a Form RRF-1 for the partial-year (along with all required attachments). The renewal fee will be required based on the total revenue for the reporting period.

    Supplemental Reporting
    Notification from Platform Charities

    More Details

    Filing Method:	Online
    Agency Fee:	$0
    Due:	Within 30 days of entering into a partnership with a charitable fundraising platform, unless notification was already provided through the platform charity’s registration as a trustee/charity, or through registration of the partnering platform.
    Law:	11 CA ADC § 315
    Notes:	Every platform charity registered as a trustee/charity in California must file Form PL-3 with the Registry when the platform charity enters into a partnership with a charitable fundraising platform to facilitate solicitations on that charitable fundraising platform, unless: notification was already provided through the platform charity’s registration as a trustee/charity, or through registration of the partnering platform. If a platform charity entered into a partnership with more than one charitable fundraising platform in the last 30 days, submit one Form PL-3 for all partnerships.

    Cancelation

    More Details

    Form:	Form RRF-1: Annual Registration Renewal Report
    Filing Method:	Mail or online
    Agency Fee:	Varies depending on gross annual revenue.
    Notes:	To close out your registration, file a final report with the required fee along with a letter explaining that you would like to cancel your registration. Domestic organizations must also submit proof of dissolution with Secretary of State and distribution of assets.

    To fundraise nationally or online, please see our Fundraising Compliance Guide. Our services manage your initial, renewal, and exemption filings in every state.

16. Obtain Other Business Licenses & Permits

    Running your nonprofit corporation legally also means securing all applicable licenses and permits. The range of local, state, and federal requirements is wide. Access resources like the Small Business Administration Business License & Permit look-up tool and search by your business type and locality.

    In California:

    • Bingo is subject to state and local oversight. Apply for a bingo license in your city and/or county. The California Registry of Charitable Trusts ensures that the funds go towards charitable purposes.
    • Raffles require an additional filing and fee when filing your annual registration form with the Attorney General's Registry of Charitable Trusts.

Frequently Asked Questions

You’ve made it! You turned your passion into a legitimate nonprofit corporation exempt under IRS 501(c) and are benefiting your community. That solid foundation on which you built your organization requires ongoing maintenance. Investing in maintaining compliance with all of the government agencies is an ongoing responsibility and commitment needed to ensure your vision continues long into the future. Check out our compliance guide to learn more!

Once you have registered your nonprofit per the steps listed above, you will need to maintain compliance with all of the government agencies. Staying current with the IRS and state requirements is an ongoing responsibility. Continue reading our California nonprofit compliance guide to learn more!

Continue reading "California Nonprofit Compliance"

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