Considering starting a nonprofit in California? The most effective startup founders and boards follow these steps to establish their nonprofits.
So, you want to save the world? You have identified an unmet need in your community, and fueled by your passion for helping others, you’ve decided to start a nonprofit. While there are many different types of nonprofits, the steps toward starting any of these are pretty similar. All you need is a sound plan, the right team, and sufficient funding.
1. Name Your Organization
Give your organization a name that’s easily recognizable and memorable. Your nonprofit’s name needs to be registered with the California Secretary of State. To be approved, the name must be distinct from others on the agency’s records.
Once you come up with a name, fill out a Name Reservation Request Form. You may list three names on the form, in order of preference, and the first available name will be reserved for 60 days. The form includes a $10 filing fee and can be mailed or dropped off in person at the Secretary of State’s office for an additional $10 special handling fee.
2. Recruit a Board of Directors
Directors make up the governing body of your nonprofit. They are considered to be stakeholders in your organization’s purpose and success, so recruit the right members to champion your nonprofit and lead it to success.
Under California law, a nonprofit board may include just one director, but the IRS may take issue with granting recognition of 501(c)(3) status to a nonprofit with only one director. It’s commonly recommended that nonprofits have between three and 25 directors.
3. File Articles of Incorporation
Your nonprofit’s articles of incorporation mark the creation of your organization. This document encompasses information about where and when your organization was formed. It captures all the necessary information that could be used to verify its existence.
To ensure the articles of incorporation meet state and IRS requirements, consult the California Secretary of State’s articles of incorporation template. The form can be mailed, filled out online, or submitted in-person with a $15 handling fee. Through June 2023, there are no filing fees associated with articles of incorporation.
4. Obtain Employer Identification Number (EIN)
To be legally identified, you will need to obtain a unique, nine-digit identifier (EIN) from the IRS. An EIN enables you to open a bank account and apply for 501(c)(3) status. To apply for an EIN, use the IRS Form SS-4.
5. Establish Governing Documents and Policies
Your nonprofit’s governing documents and policies are meant to serve as your organization’s manual. When your board of directors convenes for the first time, they’ll need to establish these policies.
Note that your application to the IRS for 501(c)(3) exemptions requires your bylaws and conflict of interest policy are approved and adopted. To store bylaws and host effective board meetings, consider leveraging board meeting software.
6. Apply for California Tax Exemptions
By achieving tax-exempt status, your organization won’t have to pay tax on certain nonprofit income. To file for tax-exemptions, use Form 3500, or Form 3500A if you have a federal exemption letter. If approved, you’ll receive a grant letter.
Application processing could take up to four months. You can request a rush if you meet one of the following criteria:
- You’re in good standing, want exemption under 23701d (501(c)(3), and have a pending and verifiable grant of $3,000 or more, and you’re required to be tax-exempt to receive the funds
- You’re suspended and in legal action (court records must be provided)
Call the Exempt Organizations Unit at 916-845-4171 to see if you qualify for rush consideration. If you qualify for rush processing, the call center staff will give you further instructions
Getting Started With OnBoard
As you apply for grants and seek donations, your nonprofit will be in competition with over 144,000 California nonprofits. To operate effectively, your board will need tools to streamline meetings and improve governance.
OnBoard is designed to work the way you do, addressing the real-world needs of a nonprofit organization in California and reducing complexities so boards can work smarter, move faster, and achieve their goals. Good boardwork starts with focused meetings. Download our free board meeting agenda template to easily create an agenda focused on conducting a purpose-driven meeting.
Frequently Asked Questions
How Much Does it Cost to Start a Nonprofit in California?
Through June 2023, there are no fees associated with filing articles of incorporation. The form can be mailed, filled out online, or submitted in person with a $15 handling fee.
What Qualifies as a Nonprofit in California?
An entity that has filed articles of incorporation for nonprofit with the California Secretary of State qualifies as a nonprofit in California.
Do Nonprofits Need a Business License in California?
Yes, your California nonprofit will need a business license, which is issued by the city or county where your nonprofit is registered.
How Many Nonprofit Organizations are in California?
There are 144,728 nonprofit organizations in California, according to Independent Sector.
About The Author
- Jillian Walker is a customer success manager who specializes in helping nonprofit organizations get the most from their board meetings. She's also the founder of the Indianapolis-based non-profit TraceIndy, which is dedicated to connecting professional women across communities
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