A Texas Nonprofit Corporation is sometimes called a Texas Not-For-Profit Corporation.

A Texas Nonprofit Corporation is an organization that is legally registered with the Texas Secretary of State.  While the federal government must approve the tax-exempt status of a Texas Nonprofit Corporation, a Texas Nonprofit Corporation is not initially registered with any US government agency.

A Texas Nonprofit Corporation is an organization that works to serve some kind of public interest rather than to provide financial benefit to any particular individuals or entities.

Many Texas Nonprofit Corporations have much in common with Texas For-profit Corporations.  This includes the liability protection that comes with a legally registered Texas Nonprofit Corporation.  A lot of Texas Nonprofit Corporations hire managers and employees just like a Texas For-profit Corporation does.  The application process for a Texas Nonprofit Corporation is very similar to that of a Texas For-Profit Corporation.

Contrary to popular belief, Texas Nonprofit Corporations can and do make money.  In a Texas Nonprofit Corporation, any profits must legally go directly back into the Texas Nonprofit Corporation.

The short answer is no. The state of Texas does not legally require a lawyer to form a Texas Nonprofit Corporation.  However, if there is anything about forming a Texas Nonprofit Corporation that you're not sure about you should seek the advice of a competent Texas lawyer, a Texas accountant, or both BEFORE you Incorporate.

Once you have made the decision to Form a Texas Nonprofit Corporation, a lawyer can file your documents and act as a middle man for a few hundred dollars an hour; or you can use an online service provider like All Business Documents to perform these services and save money that you can use in your new Texas Nonprofit Corporation.

A Texas Nonprofit Corporation is formed to provide some kind of public or community benefit.  Unlike the other types of Texas Corporations and LLCs, a Texas Nonprofit Corporation may be eligible for certain benefits, including tax exemptions on both the state and federal levels.  Depending on the nature of the organization, some Texas Nonprofit Corporations may not be eligible for tax exempt status.  A Texas Nonprofit Corporation may also be eligible for public and private grants.  A Texas Nonprofit Corporation is formed in a similar way as that of forming a Texas For-profit Corporation.  Texas Nonprofits must file Certificate of Formation in the same way that Texas For-profit Corporations do.

A Texas Nonprofit Corporation comes with the same liability protection as the other types of Texas Corporations.  The main difference between a Texas Nonprofit Corporation and a Texas For-profit Corporation is how the profits of the Texas Corporation are distributed,  In a Texas For-profit Corporation profits can be distributed to shareholders.  Texas Nonprofits are legally required to use the income to further a goal that benefits the community or some part of the public.

The most common types of Texas Nonprofit Corporations are:

• Texas Public-benefit Nonprofit Corporations
  Organized for the general public benefit, rather than for the interest of its members or shareholders
  Formed primarily for social, educational, recreational or charitable purposes
  Examples are food banks and youth sports organizations
• Texas Religious Corporation
  Organized to promote religious purposes
  Subject to less complicated filing and reporting requirements than other types of Corporations
  May be exempt from regulations governing non-religious groups performing the same services
• Texas Mutual-benefit Nonprofit Corporation
  Serves its members in ways other than just distributing profits to them
  Cannot obtain IRS tax-exempt status as a charitable organization
  Pays the same taxes as For-profit Corporations
  Examples are homeowners associations or a public utility companies

While most federal tax exempt organizations are Nonprofit Corporations, registering a Texas Nonprofit Corporation does not automatically qualify the Texas Nonprofit for tax exempt status at the federal level.  The IRS recognizes various types of tax exempt Nonprofit Corporations.  To receive federal tax exempt status a Texas Nonprofit Corporation must file forms with the Internal Revenue Service.  The forms can get very complex depending on the nature of the Nonprofit.

Also, a Texas Nonprofit Corporation cannot legally use its resources for propaganda or to further a political cause or to support a candidate for public office.

One of the major responsibilities of a Texas For-profit Corporation is to increase shareholder value.  For most Texas Corporations the pursuit of shareholder value is done without regard for specific benefits to the public.  The only benefits that matter are those that benefit the shareholders, who are the owners of the Texas Corporation.  Texas For-profit Corporations often face pressure to abandon social goals in order to increase their bottom line.

Texas Nonprofit Corporations are formed to provide some kind of public benefit but may be restricted in their ability to raise capital when they need to grow.

The state of Texas has created a new kind of For-profit Corporation which has a legal responsibility to include some kind of public benefit in their Corporate operating requirements.  A Texas Corporation of this kind is called a Texas Benefit Corporation or a Texas B Corporation.

Benefit Corporations are a hybrid between a For-profit and nonprofit Corporation.  Operating capital is easier to raise for a Texas Benefit Corporation and the Texas Benefit Corporation is required to provide some kind of public benefit.

Benefit Corporations do not have any special tax breaks or benefits.  Benefit Corporations are taxed just like any other Texas Corporation is taxed.

To qualify as a Texas Benefit Corporation, a Corporation must have an explicit social or environmental mission, and a legally binding fiduciary responsibility to take into account the interests of workers, the community and the environment as well as its shareholders.  A Texas Benefit Corporation must also publish independently verified reports on its social and environmental impact alongside its financial results. 

Some examples of the specific public benefit that a Texas Benefit Corporation must provide, among others, include:

• Providing low-income or under served individuals or communities with beneficial products or services
• Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business
• Preserving the environment
• Improving human health
• Promoting the arts, sciences or advancement of knowledge

If needed, we can help you form a Benefit Corporation in Texas.

No one person or group of people can own a Texas Nonprofit Corporation.  Once it is incorporated, the Texas Nonprofit Corporation is a separate legal entity from its founders, directors, officers, and employees.  The Texas Nonprofit Corporation itself owns assets of the business and is entitled to receive all revenues from its operation.  Any equity in a Texas Nonprofit Corporation belongs to the organization itself, not to the founders, board of directors or staff.

In addition, a Texas Nonprofit Corporation cannot be sold to another individual, corporation or organization.

Contrary to popular belief a Texas Nonprofit Corporation may actually make a profit.  Many Texas Nonprofit Corporations derive much of their funding from tax-exempt donations.  Sometimes a Texas Nonprofit Corporation can receive more in donations that the costs to actually run the organization.

A Texas For-Profit Corporation may distribute any excess assets to its owners or shareholders.  There is no distribution of assets in a Texas Nonprofit Corporation.

In a Texas Nonprofit Corporation all of the money earned by or donated to the Texas Nonprofit organization is used in pursuing the organization's objectives as stated in its Certificate of Formation.  Any excess capital after the close of the Texas Nonprofit Corporation's fiscal year must be kept in the Texas Nonprofit's accounts.

The state of Texas does not have a Corporate income tax so there is no need for a Nonprofit Exemption from Texas Corporation income taxes.

501(c) refers to a section of IRS code which deals with tax exempt organizations including, but not limited to, Nonprofit Corporations.

The most common type of tax-exempt organization falls under section 501(c)(3) of the IRS code.  This section of the IRS code allows a Texas Nonprofit organization to be exempt from federal income tax if its activities include any of the following purposes:

• Charitable
• Religious
• Educational
• Scientific
• Literary
• Testing for public safety
• Fostering amateur sports competition
• Preventing cruelty to children or animals

There are other types of 501(c) tax exempt organizations defined in the IRS code - 29 of them - but 501(c)(3) tax exempt organizations are by far the most common in the state of Texas and the US.

One advantage to qualifying to be a 501(c)(3) tax exempt organization is that most foundations will only make grants to 501(c)(3) Nonprofits. 

Tax exemption does not excuse a Texas Nonprofit organization from maintaining proper records and filing any required annual or special-purpose tax returns if they are required.  Failure to file required returns such as Form 990 (Return of Organization Exempt From Income Tax) may result in fines.

One prohibition for 501(c)(3) organizations is that they are prohibited from conducting political campaign activities to intervene in elections to public office.  There are, however, provisions which may allow some 501(c)(3) organizations to legally lobby to influence legislation.

BEFORE you apply with the IRS for 501(c)(3) Tax Exempt status it will need the following:

• Certificate of Formation approved by the Texas Secretary of State
• Bylaws
• Federal Employer Identification Number (EIN)
• Statement of purpose that meets IRS requirements
• Statement that your Nonprofit Corporation will not engage in prohibited political or legislative activities
• A Plan of Dissolution describing the distribution of assets upon dissolution

There is also very specific language which needs to be included in your Certificate of Formation which are filed with the Texas Secretary of State if you want to get 501(c)(3) Tax Exempt Status.

When a Nonprofit Corporation dissolves all remaining assets must be distributed to other active Nonprofits.  None of the remaining assets can be distributed to any directors, members or staff.

If you want to apply for 501(c)(3) Tax Exempt Status we will make sure your Certificate of Formation include everything that the IRS needs before we submit them to the state.

When a Texas Nonprofit Corporation wants to cease operations, any assets of the Texas Nonprofit Corporation must be distributed to other Nonprofits which were formed for similar purposes as the Texas Nonprofit Corporation which is closing.

Under no circumstances can a Texas Nonprofit Corporation distribute any remaining assets to its founders, directors or employees.

If you are ready to Form a Texas Nonprofit Corporation simply choose which Texas Nonprofit options that you want in the upper right corner of this screen then click the Next Step button.  You will be directed to a screen on which you can enter your specific a Texas Nonprofit information and finalize your order.

If you have any questions regarding our Texas Nonprofit services you can call us at 855-771-2477.