How to Start a Nonprofit in Texas in 10 Steps [2024]

Starting a nonprofit in Texas requires careful planning, strategy,  and a whole lot of forms. To learn how to launch your own charity, follow these 10 steps and best practices.

10 steps to create a nonprofit in Texas

• Step 1. Choose the right type of nonprofit 

• Step 2. Choose a name

• Step 3. Recruit your team

• Step 4. Appoint a Registered Agent

• Step 5. Incorporate your nonprofit

• Step 6. Obtain an Employer Identification Number (EIN)

• Step 7. Draft nonprofit bylaws

• Step 8. File for tax exemptions

• Step 9. Follow compliance

• Step 10. Start fundraising

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Step 1. Choose the right type of nonprofit 

501(c) 3 organizations are the most common type of nonprofit. When people hear “charity,” this is the kind of organization they think of. However, there are lots of different charitable organizational classifications.

When starting your own nonprofit, you'll need to consider which is best for you. The decision will impact the structure, governance, and operations of your organization. 

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In Texas, as in many other states, there are several common types of nonprofit entities to consider. Some of the main options include:

• 501(c)(3) public charity: These organizations are organized and operated exclusively for charitable purposes. They can receive tax-deductible donations and grants, and they must adhere to strict IRS regulations regarding their activities and finances.

• 501(c)(4) social welfare organization: This type of nonprofit organization is also tax-exempt, but it focuses on promoting social welfare or advocacy efforts. Unlike 501(c)(3) organizations, donations to 501(c)(4) organizations are not tax-deductible for donors.

• 501(c)(6) business league or chamber of commerce: This type of nonprofit organization is tax-exempt and is most common for nonprofits that use memberships as part of their fundraising efforts. In this classification, donations to 501(c)(6) organizations are not tax-deductible for the donor.

When choosing the right type of nonprofit organization for your needs, you'll want to consider your mission, long-term goals, and tax-exempt needs.

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Step 2. Choose a name

While choosing a name for your nonprofit might not seem like a big to-do, it's a crucial step. 

When selecting a name, you'll need to ensure that it complies with Texas state laws and is not already in use by another entity. You can check the availability of your desired name through the Texas Secretary of State's website.

And, of course, you'll need to ensure that the name reflects your mission, values, and goals.

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Step 3. Recruit your team

In Texas, you cannot start a nonprofit on your own. In fact, you're required to recruit at least three directors as well as other board members. 

When assembling a board of directors, choose wisely. These candidates will need to be committed to your organization's mission and bring diverse skills and perspectives to the table. Plus, they need to be reliable and trustworthy.

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Typically, those who want to start a nonprofit in Texas will need to recruit: 

• Incorporators: Every nonprofit must have at least 3 incorporators — and a president and secretary are required. These are individuals who are responsible for signing and filing the Articles of Incorporation with the Texas Secretary of State to establish your nonprofit organization as a legal entity formally. ‍

• Directors: The Board of Directors is responsible for providing governance, oversight, and strategic direction for your nonprofit organization. They'll also need to be present at Board meetings.

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Step 4. Appoint a Registered Agent

A registered agent is an individual or entity designated to receive legal and official documents on behalf of the nonprofit organization.

In Texas, all nonprofit corporations are required to appoint a registered agent who has a physical address (not a P.O. Box) in the state. The registered agent must be available during normal business hours to receive legal and official correspondence, such as service of process (lawsuits), tax notices, and other important documents regarding state tax exemption.

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Step 5. Incorporate your nonprofit

Next, you'll need to file Articles of Incorporation with the Texas Secretary of State to establish your nonprofit organization as a legal entity officially. When completing Form 202, in accordance with the Texas Business Organizations Code, include information such as the nonprofit association name, purpose, registered agent, and initial board of directors.

Form 202, or The Certificate of Formation for a Nonprofit Corporation, can be applied for by mail, fax, online, or in person for a $25 fee.

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Step 6. Obtain an Employer Identification Number (EIN)

Next, you'll need to apply for a federal employer identification number from the Internal Revenue Service (IRS). An EIN is a unique nine-digit number used to identify your organization for tax purposes, including opening a nonprofit bank account and applying for tax-exempt status. To do this, you'll need to fill out the Form SS-4. This application process is free, and you can complete it at any time.

If your federal employer identification number application is approved, you'll receive your EIN immediately upon completion of the online application process. If you applied by mail, fax, or phone, it may take several weeks to receive your EIN by mail.

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Step 7. Draft nonprofit bylaws

With your board, develop bylaws that outline the internal rules and procedures for operating your nonprofit organization. Include provisions for governance, membership, meetings, decision-making processes, and other key aspects of organizational management.

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Step 8. File for tax exemptions

Next, you'll need to file for tax-exempt status, in order to become a tax exempt organization, on both the federal and state level.

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• Federal tax-exempt status: If your nonprofit organization qualifies for federal tax exemptions under section 501(c)(3) of the Internal Revenue Code, you can apply for recognition of tax-exempt status with the IRS. This involves completing and submitting IRS Form 1023 or Form 1023-EZ, along with supporting documentation and the appropriate filing fee.

• State tax exception: Certain types of nonprofit organizations, such as those that solicit donations from the public, must adhere to Texas law. That means applying for Texas state tax exempt status and state income tax exemption with the Texas Comptroller.

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Step 9. Follow compliance

Once you've submitted all of the correct paperwork, and everything has been approved, you're ready to start making an impact.

However, part of being a registered charity in Texas requires ongoing compliance. Ensure that your nonprofit organization complies with all applicable state and local regulations governing nonprofits in Texas. This may include filing an annual report (Form 990), maintaining proper records, and adhering to charitable fundraising and solicitation laws.

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Step 10. Start fundraising

Once you've completed all the necessary paperwork and legal requirements, it's time to get started! 

Once your nonprofit organization is established, focus on building capacity and sustainability. Develop programs and services that align with your mission, cultivate relationships with donors and supporters, and implement sound financial management practices to ensure the long-term success of your organization.

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This might involve meeting with your board of directors to determine exactly how you'll meet your goals. This might include:

• Determining fundraising activities (auctions, crowdfunding, etc.)

• Mapping out donor engagement

• Identifying our target audience

• Developing a brand voice 

• Necessary staff or volunteer involvement

• Budget constraints

• Resources needed

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How much does it cost to start a nonprofit in Texas?

Form neededCost

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Tax-exempt application

IRS Form 1023 or Form 1023-EZ

$275 - $600

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Incorporation fee

Form 202

$25

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EIN

Form SS-4

$0

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Legal fees

N/A

Varies

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When creating a nonprofit in Texas, there are a lot of factors that can impact your costs. However, there are some common expenses associated with starting a charitable organization like: 

• Incorporation fee: Filing Articles of Incorporation with the Texas Secretary of State is $25.

• Tax-exempt application fee: Submitting IRS Form 1023 (Application for Recognition of Exemption) or Form 1023-EZ (Streamlined Application for Recognition of Exemption) on the IRS website costs between $275 - $600.

• Legal fees: While it's possible to prepare and file the necessary paperwork for incorporating a nonprofit on your own, many organizations choose to work with an attorney to ensure compliance. Legal fees for incorporating a nonprofit can vary depending on the complexity of the organization and the services provided by the attorney.

• Additional expenses: Depending on the needs and goals of your nonprofit organization, there may be additional expenses associated with starting and operating the organization. This could include costs for developing a website, marketing and outreach materials, or fundraising activities.

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Can you make a living by starting your own nonprofit in Texas?

In short, yes, you can make a living by starting your own nonprofit. However, when it comes to paying yourself a salary, there are a few things to keep in mind:

• Funding and revenue: Your salary will most likely depend on how much money your organization brings in through various sources of funding. If, for example, your nonprofit brings in over $2 million annually, as opposed to $200,000, you might be able to pay yourself a bit more.

• Legal and ethical considerations: Nonprofit organizations are subject to legal and ethical standards that govern executive compensation and financial practices. It's essential to ensure that any salary or compensation you receive as a nonprofit leader is reasonable, justifiable, and compliant.

• Staff: If your nonprofit employs other staff members, like a marketing director, accountant, or other role, you'll need to factor in their salaries and benefits. Or, alternatively, some nonprofits run almost entirely on a volunteer basis.

• Transparency and accountability: It's important to note that executive salaries at nonprofits are typically public. Transparency and accountability are essential to ensure that compensation decisions are fair, reasonable, and aligned with the organization's mission and financial resources.

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Best practices for starting a nonprofit in Texas

Thoroughly research your mission

Before starting a nonprofit, conduct research to ensure there is a genuine need for your services or programs in your community. To define your mission and objectives, consider questions like:

• What problem has gone unaddressed in this community?

• Why is this issue important?

• Who will benefit from our work and why?

• Who will be interested in supporting our work and why?

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Use nonprofit-friendly technology

When creating your nonprofit, and assembling all of your fundraising activities and programs, it's essential to choose technology that is built for nonprofit use. Though lots of fundraising and donor management websites have nonprofit tools, they're not specifically designed for charitable use. 

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A nonprofit-specific platform can offer nonprofits tons of crucial features, like:

• Custom donation forms

• Event management tools

• Online donation acceptance and management 

• Raffle and lottery management 

• Donor management 

• Marketing and communication tools

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And, when considering what technology to use, be sure to consider the price. Most fundraising and donor management sites can cost a lot — taking away from both your ability to make an impact, and pay yourself. 

Instead, choose an online platform that is 100% free.

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Build a strong board of directors

When creating your required Board of Directors, it's essential to choose them wisely. When recruiting, be sure to consider if they:

• Are mission-aligned: Board members who are genuinely committed to your organization's cause will be more motivated to contribute.

• Contribute diverse skills: Aim to recruit a diverse group of individuals with a wide range of skills, expertise, and backgrounds.

• Have nonprofit knowledge: Seek board members who have a good understanding of nonprofit governance, legal requirements, and financial management.

• Have availability: Choose individuals who have the capacity to dedicate sufficient time and effort to their board responsibilities and who are willing to make a meaningful contribution to the organization.

• Provide a network: Board members with strong networks and connections can help open doors to fundraising opportunities, strategic partnerships, and community support for your nonprofit. Consider candidates who have a wide reach and the ability to leverage their connections to benefit the organization.

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Plus, be sure to establish clear term limits for board members. Implement a succession plan to ensure smooth transitions when board members complete their term.

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Develop a business plan

A well-thought-out plan will help you stay focused and organized as you navigate the challenges of starting a nonprofit. This might include mapping out your:

• Programs and services: Describe what your nonprofit will do to fulfill its mission.

• Target audience: Identify who will benefit from your programs and services.

• Market position: Research similar nonprofits to understand your competition.

• Marketing and outreach efforts: Explain how you'll reach your target audience.

• Organizational structure: Describe how your nonprofit will be organized.

• Financial plan: Outline your income and expense activity, including the ways to raise funds and spend money.

• Impact measurement: Explain how you'll measure your nonprofit's success and impact.

• Risk management: Identify potential risks and how you'll handle them.

• Timeline: Create a timeline for launching and growing your nonprofit.

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Learn how this Texas nonprofit raised over $94k — and saved $4k in fees with Zeffy

Jack Jack's Pack Street Dog Rescue, based in central Texas, helps rescue, rehab, and reunite/rehome lost, dumped, and abused dogs.

Like most nonprofits, this charitable organization was determined to make a lasting impact in the animal community by hosting an online fundraiser. 

However, to do so required the right tools and technology — mainly software that would allow them to create a custom donation form that could be shared through channels social media and email. Plus, Jack Jack's organization wanted to provide donors with multiple ways to give, including the option to give recurring donations and one-time contributions. 

The most difficult part is that they needed all of these tools for free. 

With Zeffy, Jack Jack's was able to raise just shy of $100,000 using Zeffy's customizable donation forms and donation management tools. The best part? It cost them $0 to do it.

Unlike other platforms, which charge nonprofits thousands of dollars in fees, Zeffy doesn't charge charitable organizations a cent. Meaning that all the money raised goes directly to the cause‚ and in this case, to helping needy animals recover and heal.