|A non-profit is a corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive.
The process of creating a non-profit in California is similar to any corporation. The first step will be to find a name and make sure that this name is not too similar to an already existing name in California. Also the name you choose can’t contain any word prohibited by the State such as “Bank” or “Federal”.
For more information about choosing a name for your business, please visit our website at https://www.pacificalawyer.com/blog/choose-register-business-name/.
You might also want to check the National Center of Charitable statistics to make sure that there are not already too many organizations that serve the same cause you have in mind for your non-profit. Indeed, states such as California already have a high number of charitable organizations and it is always better to make sure that there is room for yours.
The next step will be to decide which legal structure to adopt for your non-profit. In California there are 3 main types of legal structures:
Prior to drafting the articles of incorporation you should appoint the incorporators or initial directors. California law requires a minimum of one incorporator but it is recommended to appoint at least three if you are planning on filing for tax exemption with the IRS.
You also have to appoint an agent for services of process. The agent will be responsible for receiving service of lawsuits and possibly other important legal documents on behalf of the organization. The agent will make sure that those document are transmitted to the President or other authorized officer. If the agent fails in his duty it could result in negative consequences for the corporation.
The corporation will be legally created with the filing of the articles of incorporation. Keep also in mind that in California you have to register and file the Form CT-1 before your start fundraising.
The articles of incorporation should be drafted very carefully because their content will have a major impact on whether the IRS grants you the federal tax exemption or not.
It is recommended to adopt a broad purpose statement that will allow the organization’s mission to evolve without requiring an amendment to the articles of incorporation. You especially have to make sure that the purpose meets the IRS requirements. Also, the articles of incorporation must include a statement saying that your non-profit will not engage in illegal political or legislative actions.
You also have to prepare bylaws for your corporation. The bylaws must comply with the California State Law and are basically the internal rules and procedures your corporation will follow including: holding meetings; electing officers and director and the duties of each other; and every other corporate formalities required by California.
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