Starting a Nonprofit in Texas - Frequently Asked Questions (FAQs)

FLYER

ALL CONTENT BELOW IS FROM THE TEXAS SECRETARY OF STATE WEBSITE:

Formation:

What is a nonprofit corporation?

A nonprofit corporation is created by filing a Certificate of Formation with the Secretary of State. See Form 202 (Word, PDF). A “nonprofit corporation” is a corporation no part of the income of which is distributable to members, directors, or officers. A nonprofit corporation may be created for any lawful purpose, which purpose must be stated in its Certificate of Formation.
Is a nonprofit corporation exempt from taxes?

A Texas nonprofit corporation is not automatically exempt from federal or state taxes. To become exempt, it must meet certain requirements and apply with both the IRS and the Texas Comptroller of Public Accounts.
How does a nonprofit organization, including a nonprofit corporation, become tax-exempt?

Exemption from federal taxes is determined by the IRS. IRS Publication 557, “How to Apply for Recognition of Exemption for an Organization,” describes the rules and procedures for requesting exemption. Questions about federal tax-exempt status can be directed to:

IRS
Exempt Organizations
1100 Commerce
Dallas, Texas 75242
(214) 767-6023 [Customer Service]
(214) 767-0040

Exemption from Texas state taxes is determined by the Texas Comptroller of Public Accounts . Questions can be directed to:

Texas Comptroller of Public Accounts
Exempt Organizations Section
(800) 531-5441 or (512) 463-4600
tax.help@cpa.state.tx.us
How do I form a “501(c)(3)” corporation?

Filing a Certificate of Formation with the Secretary of State creates a nonprofit corporation. Designations such as 501(c)(3) relate to federal tax provisions only. If you need information regarding those provisions or how they might affect a Certificate of Formation, you should contact your own tax counsel or the Internal Revenue Service. The Secretary of State’s Form 202 meets minimum state law requirements but does not include any additional statements that the IRS might require for tax-exempt status.
Do you have to be a U.S. citizen or a US resident to incorporate a nonprofit corporation in Texas? Do you have to be 18 or older to be an officer or director?

Neither the Texas Business Organizations Code nor the Texas Non-Profit Corporation Act restricts who can form or be a director in a corporation. An entity can impose age, residency, or citizenship requirements in its Certificate of Formation or other governing documents, if desired. Other laws might impose restrictions, and there may be issues related to a minor’s capacity to contract or to be an owner of an entity with a liquor license. For information on restrictions that might apply to the entity you are creating, consult your attorney, tax counsel, and/or the IRS.
What is a registered agent? What are the agent’s duties? Where may a registered office be located? Can the Secretary of State be the registered agent of a corporation, limited liability company, or limited partnership?

A registered agent is an individual Texas resident, domestic entity, or foreign entity that has qualified or registered to transact business in Texas that is responsible for receiving service of process or official notices addressed to an entity.

An entity’s registered office must be a physical address where the registered agent can be served with process during business hours. It cannot be a post office box that is part of a commercial mail or message service unless that commercial enterprise is the registered agent or the registered office is in a city with a population under 5,000.

The Secretary of State cannot serve as an entity’s registered agent.
Where can I get a corporate seal, stock certificates, or a minute book?

Neither the Texas Non-Profit Corporation Act nor the Texas Business Organizations Code requires a corporation to have a corporate seal; therefore the Secretary of State does not have information or regulations on how to design a seal or where to obtain one. Seals, stock certificates, and corporate minute books can be purchased from book stores, office supply stores, or corporate service companies.
Can I file my corporation’s bylaws with the Secretary of State?

No. The bylaws of a corporation are documents kept by the corporation at its principal office. No statute permits the filing of bylaws with the Secretary of State; therefore, the Secretary of State cannot accept them for filing.
Can one person be the sole director and officer of a nonprofit corporation?

The Texas Non-Profit Corporation Act and the Texas Business Organizations Code require a nonprofit corporation to have at least three directors, one president, and one secretary. The same person cannot be both the president and secretary. Officers and directors must be natural persons.
Can a nonprofit corporation pay a salary to its officers, directors and/or employees?

Yes. Any corporation may pay reasonable compensation for services rendered to the corporation.
Can a nonprofit corporation give political contributions?

Generally, political and social action activities are permissible purposes for a nonprofit corporation; however, certain activities may affect a nonprofit corporation’s tax-exempt status. For more information, contact the Texas Ethics Commission, (512) 463-5800, the Federal Elections Commission, or the IRS.
Who has authority to investigate the activities of a nonprofit corporation?

The Attorney General has statutory authority to (1) investigate charities that operate as nonprofit corporations, and (2) inspect the books and records of all corporations, including nonprofit corporations. The Secretary of State has no such authority.

The IRS can revoke a nonprofit corporation’s tax exemption for violations of federal tax laws.
Are the books and records of a nonprofit corporation available for inspection?

The Texas Non-Profit Corporation Act and the Texas Business Organizations Code require nonprofit corporations to maintain financial records and minutes of certain proceedings and make them available to members for examination and copying. The board of directors is required to prepare or approve an annual financial report. In general, all records, books, and annual reports must be available to the public for inspection and copying. These provisions do not apply to (1) corporations that solicit funds only from their members; (2) corporations that do not intend to solicit and do not actually receive contributions in excess of $10,000 during a fiscal year from sources other than their members; (3) proprietary schools; (4) religious institutions; (5) trade associations or professional associations whose principal income is from dues and member sales and services; (6) insurers; (7) charitable organizations concerned with conservation and protection of wildlife, fisheries, or allied natural resources; or (8) alumni associations.

Under certain circumstances, a nonprofit corporation’s books and records are available to the public under the Texas Open Records Act (chapter 552 of the Government Code). Section 552.003(1)(A) of the Open Records Act defines “governmental body” to include the “part, section, or portion of an organization, corporation, commission, committee, institution, or agency that spends or that is supported in whole or in part by public funds.” For more information on the Open Records Act, contact the Attorney General.
Does a nonprofit corporation file IRS Form 990 with the Secretary of State?

No; however, under certain circumstances, a nonprofit corporation files Form 990 or 990-PF with the Charitable Trust Section of the Texas Attorney General.

Unincorporated Nonprofit Associations:

What is an unincorporated nonprofit association?

The Texas Uniform Unincorporated Nonprofit Association Act (TUUNAA), as codified in the Texas Business Organizations Code, defines an unincorporated nonprofit association as an unincorporated organization consisting of three or more members joined by mutual consent for a common nonprofit purpose. All unincorporated nonprofit associations, whether or not the entities are tax exempt, are subject to TUUNAA. For more information, see Form 208 (Word 31kb , PDF 21kb ).
Does an unincorporated nonprofit association have to file anything with the Secretary of State?

No. An unincorporated nonprofit association may, but is not required to, file an appointment of an agent for service of process ( Form 706 Word 80kb , PDF 51kb ). In addition, the association may, but is not required to, file a statement of authorization as to real property with the county clerk.

Registration:

Does my foreign nonprofit corporation need to file an Application for Registration?

A foreign filing entity must file an Application for Registration if it “transacts business” in Texas. Texas statutes do not specifically define “transacting business;” however, BOC § 9.251 lists 14 activities that do not constitute “transacting business.” Generally, a foreign entity is transacting business in Texas if it has an office or an employee in Texas or is otherwise pursuing one of its purposes in Texas. The Secretary of State cannot give a legal opinion as to whether a particular foreign entity is “transacting business” in Texas.
If the foreign entity intends to or is already transacting business in Texas, what are the penalties for not filing an Application for Registration?

If a foreign entity transacts business in Texas without registering,

the entity cannot maintain an action, suit, or proceeding in a Texas court until it registers;
the attorney general can enjoin the entity from transacting business in Texas;
the entity is subject to a civil penalty equal to all fees, taxes, and penalties that would have been imposed if the entity had registered when it was first required to do so; and
if the entity has transacted business in the state for more than ninety (90) days, the Secretary of State will impose a late filing fee for an Application for Registration equal to the registration fee for each year or part of year of delinquency.

Amnesty Period. A foreign entity that should have obtained a Certificate of Authority to transact business in Texas before January 1, 2006, but failed to do so will not be penalized so long as it files an Application for Registration on or before January 31, 2006. BOC § 402.012.

Does a foreign nonprofit corporation have to register to transact business in Texas if its only contact with the state is solicitation of funds or donations?

A nonprofit corporation that actively solicits funds in Texas may be “transacting business” in Texas and should file an Application for Registration; however, if the corporation’s contacts with Texas are only through interstate commerce (for example, by mail or by telephone) or independent contractors, then the corporation is probably not “transacting business” in Texas.

Amending Or Correcting:

Must I file a Statement of Change of registered office address when the location has not changed, but the address has been changed due to a postal or “911” change?

Yes. A corporation must continuously maintain a registered office address in Texas. Texas statutes do not distinguish between a “voluntary” change of address and an “involuntary” change of address. The only way to change a registered office address is to file a Statement of Change . See Form 401 (Word 89kb , PDF 53kb ).
How can I correct a typographical error in a filed instrument?

You can file Form 403 (Word 92kb , PDF 59kb) to correct (1) inaccurate records of an action referred to in the instrument, (2) inaccurate or erroneous statements of fact, and/or (3) defects in execution, acknowledgement, or verification.
Can I use Form 403 (Articles/Certificate of Correction) to cancel a filing instrument?

No. Articles or Certificates of Correction can only be used to correct errors or inaccuracies in drafting or execution of a filed instrument. Articles or Certificates of Correction cannot cancel a filing or add, alter, or delete a statement which would have caused the instrument not to conform to law at the time it was originally filed.
If a foreign corporation with a Certificate of Authority or registration to transact business in Texas converts, or “re-domesticates,” under the laws of its home state to a corporation formed and governed under the laws of another jurisdiction, what must it file with the Texas Secretary of State?

A foreign entity that “re-domesticates” must amend its Certificate of Authority or registration to show its new jurisdiction of formation. See Form 406 (Word 86kb, PDF 52kb ). If the entity is not governed by the Texas Business Organizations Code (BOC), Form 406 must be accompanied by a certificate from its new jurisdiction of formation evidencing the re-domestication. If the entity is governed by the BOC, it does not have to submit any evidence of re-domestication.

Reserving a Name:

If I reserve a name for an LLC or LP, can I use the name to form a nonprofit corporation?

Yes. Name reservations are now “generic” and can be used to form any type of filing entity.
Can a reserve a name online?

Yes! You can file name reservations through SOSDirect 24 hours a day, 7 days a week.
Can I withdraw or cancel a name reservation before the end of the 120-day reservation period?

Yes. See Form 507 (Word 43kb , PDF 31kb).
Can I renew a name reservation?

Yes! A name reservation may be renewed by filing a new application during the 30-day period preceding the expiration of the current reservation. See Form 501(Word 43kb , PDF 31kb).
Is there a limit on the number of times I can reserve an entity name?

No.

Assumed Name:

Should an assumed name certificate be rejected if there is a certificate already on file for the same or a similar name?

Chapter 71 of the Texas Business & Commerce Code (PDF) does not authorize rejection of an assumed name certificate on the basis of a name conflict. Therefore, there may be multiple assumed name certificates on file with the secretary of state for the exact same name. An assumed name certificate provides information about the underlying business’s identity and location. It does not give the registrant any right to use the assumed name in a way that violates the law, infringes on the rightful use of the name by others, and it does not prevent anyone else from filing the same assumed name or using the name to form a new entity with the secretary of state. It is up to each business entity to protect its name and good will.
Must an assumed name certificate have an original signature and be notarized?

Secretary of State filings: You do not need to submit an assumed name certificate with an original signature. Faxed copies and photocopies of signed certificates are acceptable for filing. Assumed name certificates filed with the secretary of state do not need to be notarized. Form 503 (Word, PDF) may be used for purposes of filing with the secretary of state.
County Clerk filings: Assumed name certificates filed at the county level must have original signatures of each person whose name is required to be stated in the certificate. If the person is not an individual, the certificate must be signed by an officer, general partner, member, manager, representative, or attorney in fact of that person, and be notarized. A certificate that is signed and acknowledged by an attorney in fact also must include a statement that the attorney in fact has been duly authorized in writing by the principal to sign and acknowledge the assumed name certificate to be filed. Contact each county for information on its filing procedures. Please note that secretary of state Form 503 cannot be used to file an assumed name certificate at the county level.
Can I amend an assumed name certificate to change incorrect or dated information?

No. However, the law requires an assumed name registrant to file a new assumed name certificate when the information contained in the certificate is or becomes materially misleading. Certain events can cause the information in a certificate to become “materially misleading.” For example, a change in the registrant’s name, address, or business structure would be considered a material change. If a material change has been made, a new assumed name certificate must be filed within 60 days.
How often do I have to file an assumed name certificate?

An assumed name certificate must include a stated term or duration for the filing, which cannot exceed 10 years from the date of filing. The certificate expires at the end of the stated term or 10 years from the date of filing. If the registrant decides to continue using the same assumed name, a new assumed name certificate must be filed prior to the expiration of the current certificate.
What if I am no longer using an assumed name for my business?

If you have filed an assumed name certificate with either the secretary of state or with a county clerk and you are no longer conducting business under that assumed name, you may file a statement of abandonment.

The statement of abandonment must include the following:
- The assumed name which is being abandoned;
- The offices with which the assumed name certificate was filed and the date of filing;
- The office where the statement is being filed; and
- Each registrant’s name and residence or office address.
The secretary of state has a statement of abandonment form (504 - Word, PDF) that may be used to file an abandonment of an assumed name certificate recorded with the secretary of state. Because of the differences in execution requirements you cannot use Form 504 when filing a statement of abandonment on the county level.
Fees

Counties: Filing fees may vary depending on the county, so check with the county clerk in the county in which you intend to file.

Secretary of State: The secretary of state is required to collect $25 for each assumed name certificate and $10 for each statement of abandonment which is filed with this office.
Are there restrictions on the assumed names I can file?

Yes. An entity may not file an assumed name for its exact legal name because this does not meet the definition of an “assumed name.” This is true for both domestic entities and for foreign entities that are required to register with the secretary of state under a fictitious name.
- Example: If the legal name of your business is ABC, Inc:
  - You may not file an assumed name certificate for ABC, Inc.
  - You may file an assumed name certificate for ABC.
  - You may file an assumed name certificate for A.B.C., Inc.
  - You may file an assumed name certificate for Austin Boating Club.
- An assumed name certificate is not required to include an organizational identifier such as Incorporated, Inc., LLC, Limited, etc.
If I have an assumed name on file, when/how can I use the assumed name?

By filing an assumed name certificate, you are notifying the public that a particular business entity intends to conduct business under a name other than its legal name. This means that generally an entity may advertise under the assumed name, use the assumed name on business cards and letterhead, etc. However, if you have a question regarding how to sign any contracts or legal documents, or other uses of the assumed name, you should consult with a private attorney. The secretary of state’s office cannot offer advice on how any entity should use its assumed name.
Where do I file my assumed name certificate?

The following types of persons are required to file an assumed name certificate with the county clerk in each county in which a business office is or will be maintained. If the person does not maintain a business office in Texas, then in each county in which the person conducts business.
- Sole proprietorship
- General partnership or joint venture
- Estates
- Real Estate Investment Trusts
- Any other type of business entity not included above or those listed below as filing with the secretary of state.
The following types of Texas or foreign business entities are required to file an assumed name certificate both with the secretary of state and with the county clerk in the county where the registered office is located and, if different, in the county where the principal office is located. An entity that is not required to maintain a registered agent would file in the county where it maintains its office address (if it is a Texas entity) or in the county where it maintains its principal place of business in Texas (if it is a foreign entity).
- Corporations (for-profit, nonprofit and professional) or other incorporated entities
- Limited liability companies (including professional limited liability companies)
- Limited partnerships
- Professional associations
- Limited liability partnerships
I filed an assumed name certificate, but another business is using a name that is similar/the same as mine. What should I do?

You should contact a private attorney about what steps can be taken to protect your business name and good will in commerce. Filing an assumed name does not give you any right to use the assumed name in a way that violates the law, including the laws of unfair competition, unfair trade practices, copyright, and trademark, and it does not prevent anyone else from filing the same assumed name or using the name to form a new entity. The secretary of state and the county clerk will file an assumed name certificate without determining what rights, if any, you have to use the name. Consequently, more than one person can have the same assumed name on file.
I am using an assumed name, but I have not made the proper filings at the state or county levels. Are there any penalties?

Yes. The Texas Business & Commerce Code §§71.201, 71.202 provide for civil and criminal penalties for noncompliance with the assumed name provisions of Chapter 71.

Name Changes:

How does my business entity change its name?

An entity that is governed by the Texas Business Organizations Code (BOC) changes its legal name by filing a Certificate of Amendment. See Form 424 (Word 80kb , PDF 90kb) . An entity that is not governed by the BOC changes its legal name by filing Articles of Amendment. See Forms 404-409.

Dissolution and Termination:

Can the incorporators or organizors of a nonprofit corporation dissolve the corporation when the corporation never began business?

No. Neither the Texas Nonprofit Corporation Act nor the Texas Business Organizations Code permits a nonprofit corporation to dissolve or terminate by act of its incorporators or organizers under any circumstances.
Can a nonprofit corporation be reactivated after it has filed Articles of Dissolution or a Certificate of Termination with the Secretary of State?

The Texas Non-Profit Corporation Act does not provide for a nonprofit corporation to revoke dissolution proceedings. Once the Secretary of State issues a Certificate of Dissolution, the corporation cannot be reinstated or reactivated.

The Texas Business Organizations Code provides that a nonprofit corporation can revoke a voluntary decision to wind up at any time before a Certificate of Termination is filed. After a Certificate of Termination is filed, the corporation can be reinstated within 3 years under certain circumstances. See Form 811(Word 108kb, PDF 84kb).

Required Reports:

Is an electric cooperative formed under the Utilities Code required to file a Periodic Report under article 9.01 of the Texas Nonprofit Corporation Act or § 22.357 of the Texas Business Organizations Code?

Yes. The Texas Miscellaneous Corporation Laws Act, article 1302-1.03, provides that all corporations organized under special statutes are subject to the provisions of the Texas Nonprofit Corporation Act (TNPCA) to the extent the special statute is not inconsistent with the TNPCA. The TNPCA, article 1396-10.04G, provides that all corporations organized on a nonprofit basis under special statutes, which do not contain some of the provisions found in the TNPCA, are subject to those provisions of the TNPCA. Similarly, the Texas Business Organizations Code provides that a not for profit corporation created under a special statue is subject to Title 1 and Chapter 22, to the extent not inconsistent with the special statute. Consequently, all nonprofit corporations, regardless of the statute under which they are formed, must file a report.
Can I change the preprinted information on my Periodic Report?

You can change the following preprinted information on the report simply by crossing it out and filling in the correct information:
1. registered agent’s name
2. registered office address
  
  You cannot change the corporation’s name simply by crossing it out; instead, you must file Articles of Amendment or a Certificate of Amendment. See Name Changes, above.
Can I file a Periodic Report even if the Secretary of State has not asked for one?

Yes. Although a nonprofit corporation is not required to notify the Secretary of State of changes to officer/director information, a nonprofit corporation can file a Periodic Report even if the Secretary of State has not asked for one; however, filing a voluntary report does not affect your duty to timely-file a report when the Secretary of State asks you to.
What happens if I don’t file my Periodic Report within the time specified by the Secretary of State?

A nonprofit corporation that fails to file the Periodic Report within 30 days from the date that the report is sent by the Secretary of State forfeits its right to transact business in Texas. A forfeited corporation cannot maintain any action, suit, or proceeding in any Texas court or amend its Articles of Incorporation or Certificate of Formation. It can, however, defend any action or suit; furthermore, forfeiture does not impair the validity of any contract.

The corporation can relieve itself of forfeiture by filing the Periodic Report within 120 days of the date the Secretary of State mailed notice of forfeiture. If the corporation does not file the report within this 120-day period, the Secretary of State will involuntarily dissolve or terminate the corporation, or revoke its Certificate of Authority or registration.
If a nonprofit corporation is involuntarily dissolved, terminated, or revoked for failure to file its Periodic Report, can it reinstate?

Yes. It can reinstate at any time by filing the required report (Form 802 Word 126kb, PDF 143kb) and paying the filing fee.