Many organizations exist without the benefits of incorporation. Becoming a corporation protects the leaders of the nonprofit from being legally responsible for its debt or lawsuits. Nonprofits based in Texas who wish to become corporations must follow the guidelines outlined in the Texas Non-Profit Corporation Act.
Texas Non-Profit Corporation Act Requirements
The Texas Non-Profit Corporation Act requires the entity to file articles of incorporation and a certificate of formation with the secretary of state’s office. Nonprofits organizations that want tax exempt status must also include a set of bylaws and file with the Internal Revenue Service. Bylaws detail the procedures the nonprofit will follow as it conducts its business.
After a nonprofit becomes a corporation, it must file a report every four years that outlines basic information about the organization. The report must include information including the corporation’s name, address, contact information for all directors and officers, and the registered office and agent, which is the person that receives any court filings or claims made against the corporation.
Articles of Incorporation
The articles of incorporation are various documents detailing specific information about the organization such as its name, address, and how long the entity will last. Also to be included is a statement about the organization’s purpose as a nonprofit. Nonprofit organization purposes include charitable, religious, patriotic, educational, agricultural, fraternal, athletic, and scientific.
The articles of incorporation must also explain whether members of the organization or a board of directors will manage the entity’s operations. Nonprofit organizations that appoint a board of directors must have at least three of its members sit on the board.
Once a nonprofit organization becomes a corporation, it does not automatically receive tax-exempt status. The entity must file additional documents with the government at both the state and federal level requesting this status. When granted, tax-exempt status removes the nonprofit’s obligation to pay both sales and franchise taxes. Nonprofit corporations whose purpose is charitable, educational, or religious may also be exempt from paying taxes on hotel expenses when its officers and members travel for business.
Navigating the Texas Non-Profit Corporation Act can be complicated. Nonprofits desiring to incorporate can contact the business formation attorneys at Bennett, Weston, LaJone & Turner, P.C., for help.