Forming a Nonprofit Corporation in California

California uses the term nonprofit public benefit corporation to refer to the public charity nonprofit corporation that is the focus of this Guide. Here are the steps to form a nonprofit public benefit corporation in California. You should read this page in conjunction with the general section on forming a nonprofit corporation, which has additional steps listed that are applicable to all states. You should also familiarize yourself with sections 5110 - 6910 of the California Corporations Code (abbreviated as "Cal. Corp. Code") and with the California Secretary of State's Business Portal.

1. Choose a business name and check for availability

  • Your nonprofit's name may not be the same as, or deceptively similar to, other corporate names on file with the Secretary of State (limited exceptions apply).
  • See the Name Availability section on the California Secretary of State's Business Portal for more details.

2. Recruit and/or appoint directors

  • You must have at least one director for your nonprofit public benefit corporation.
  • You must state the number of directors in either the articles of incorporation or the bylaws of your nonprofit public benefit corporation.
  • Directors do not have to reside within California, nor do they have to be of a certain age.
  • Under California law, no more than 49 percent of a board of directors may be interested persons. An interested person is a director who provides nondirector services to the nonprofit public benefit corporation and is paid for the services rendered. The law also extends to cover any close relative of the director. For more information, see Cal. Corp. Code § 5227.

3. Incorporate your Nonprofit Organization

You should read the general discussion on how to Incorporate your Nonprofit Organization in tandem with the steps outlined here.

a. Prepare and file articles of incorporation with the Secretary of State
  • Read Cal. Corp. Code § 5130 for more information on how to construct your articles. For example, the statute requires the following statement:
This corporation is a nonprofit public benefit corporation and is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for (public or charitable (insert one or both)) purposes.
  • You must file your articles of incorporation with Secretary of State's office. The filing fee is $30.

b. Create the bylaws

  • California law requires bylaws for your nonprofit public benefit corporation.
  • There are no set criteria for the content of bylaws, but they typically set forth internal rules and procedures.
  • You are not required to file bylaws with the Secretary of State, but you must keep a copy at the nonprofit public benefit corporation's principal place of business.
c. Prepare and file a Statement of Information with the Secretary of State
  • A Statement of Information is a public disclosure of information concerning a business entity operating in California, including:

i. a general description of what it does

ii. the names and address of its officers

iii. the address of its principal office

iv. the name and address of an agent to accept the delivery of legal and tax documents on behalf of the business entity

  • The filing fee is $20.
  • You can also do this online at the Secretary of State's website which has a simple, fill-in-the-blank form for the Statement of Information. Instructions are included.

d. Hold an organizational meeting

e. Create a Records Book

  • You will need a records book to store important documents concerning your nonprofit public benefit corporation.

4. Get your Employer Identification Number

Whenever you hire an employee in California, you must inform both the IRS and the State of California.

a. Federal
  • Request an Employer Identification Number ("EIN") from the IRS. This can be done via an online application.
  • The IRS details all of the necessary steps to complete, including verifying work eligibility and withholding allowances certificates, in Hiring Employees.
b. State
  • If you will be paying at least $100 to employees in a quarter (including the president), you are subject to California employment taxes and must register for a California employer account number within 15 days of paying that $100.

5. Register with the Office of the Attorney General

Once your nonprofit corporation receives donations, you must submit the Initial Registration Form CT-1 in the next 30 days to the Registry of Charitable Trusts at the California Attorney General's Office.

6. Apply for tax exemptions

All business entities are taxed in a variety of different ways. Once you've incorporated as a nonprofit public benefit corporation, you can start applying for tax exemptions.

a. Federal
  • The IRS lists a series of questions to help you determine whether your organization is eligible for federal tax exemption.
b. State
  • Apply for tax-exempt status in California by filing Form FTB 3500A, the Affirmation of Internal Revenue Code Section 501(c)(3), with the State of California Franchise Tax Board.
  • You will need to submit a copy of your federal determination letter if you have one.
c. Local
 

Last updated on January 31st, 2008

   
 
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