Nonprofit Formation & Development Attorney in Palm Desert, California

If you’re looking to start a nonprofit organization in California and seeking to enjoy tax-exempt status, there are several considerations to observe and several steps that need to be followed. While it’s possible to form a nonprofit as something other than a corporation, the Internal Revenue Service (IRS) might not grant it tax exemption, or alternately, the founders may be subjected to personal liability. Therefore, a nonprofit corporation may be your preferred route. Though filing for a nonprofit corporation in California is similar to forming a for-profit corporation, there are additional actions to take to enjoy tax-exempt status, along with governing regulations to consider as you pursue the goals of your organization.

For help in starting a nonprofit in California, contact the Law Offices of Jerry J Goldstein. Our attorney proudly serves clients throughout the Coachella Valley, including Palm Desert, as well as communities in and around Imperial, Los Angeles, Orange, Riverside, San Bernardino, and San Diego counties, among others. With more than two decades of experience in helping businesses of all types, we can advise and guide you in creating a nonprofit corporation that will meet all legal requirements and allow you to pursue the goals you embraced when you first envisioned your enterprise.

Types of Nonprofits in California

Generally, California recognizes the formation of four different types of nonprofit corporations:

• Public Benefit Corporation. This is a nonprofit organized for charitable, civic league, or social welfare purposes.

• Religious Corporation. This is a nonprofit organized to run a church or other religious organization.

• Common Interest Development Associations. This is a nonprofit organized to develop community housing projects or a stock cooperative.

• Mutual Benefit Corporation. This is a grab-bag category for nonprofits that are organized for other than charitable, religious, civic league, or social welfare purposes.

The California Secretary of State (SOS) provides different articles of incorporation forms for each type of nonprofit.

Organizing a California Nonprofit

Creating a legal nonprofit corporation in California follows many of the same steps as in organizing a for-profit corporation, but its purpose must be different, as described in the above categories.

The major steps include:

Choosing A Name: You need to pick a name for your nonprofit before you begin the filing process.

Draft And File The Articles Of Incorporation: You must file articles of incorporation with the California Secretary of State according to the nature of your nonprofit.

Appoint A Board Of Directors: Under California law, a corporation may have as few as one person on the board of directors, but the IRS may take issue with this for a nonprofit. It may be better to have at least three board members.

Create The Bylaws And Conflict Of Interest Policy: Bylaws govern how the board of directors operates and also stipulate the responsibilities of corporate officers. Though not legally mandated, the corporation should also adopt a conflict-of-interest policy to avoid self-dealing by directors.

Obtain An Employer Identification Number (EIN): An EIN is required by the IRS for tax statement purposes.

File The Registration Form With The Secretary Of State: This is required of most nonprofit public benefit corporations in California and must be renewed annually.

File The Statement Of Information: The Secretary of State must be given a Statement of Information every two years, and 90 days after incorporation, listing the organization’s address, officers, and agent for service of process.

Apply For Federal Tax Exemption: IRS Form 1023 must be filed online. The form is a complicated one that should be prepared with the assistance of a business attorney, as it is the basis for proving your activities are truly nonprofit-oriented.

Apply For California Tax Exemption: Once you receive a favorable IRS determination letter from your 1023 filing, you need to file with the Franchise Tax Board for state exemption.

Restrictions on Nonprofits

A charitable or religious nonprofit corporation recognized under section 503(c)(3) of the Internal Revenue Code faces several restrictions. It must not:

• Financially support or endorse—or oppose—any political candidate at any level (local, state, or national)

• Engage in any political lobbying activities to a “substantial degree”—the IRS sets limits financially and otherwise

• Distribute profits to members, officers, or directors

• Engage in unrelated activities that result in “substantial profits”

A violation of any of these restrictions can result in the loss of tax-exempt status.