Becoming a member of a Central Texas nonprofit organization requires meeting certain criteria and filing an application with the Internal Revenue Service (IRS) and the Texas Comptroller's Office. A “not-for-profit corporation” is a corporation whose share of the revenues can be distributed to its members, directors, or officers. To create a non-profit corporation, you must present a certificate of training to the Secretary of State. This certificate must include the purpose of the organization, which must be indicated in the certificate of incorporation.
The designation “501 (c) (”) refers only to a specific federal tax provision. If you need information about a federal tax provision or if a tax provision affects your certificate of incorporation, contact your own tax advisor, lawyer or the IRS. Many non-profit organizations use the term “member” as a synonym for “supporter” or “donor”. However, in addition to this use of fundraising, the Texas Code of Business Organizations establishes a non-profit corporation with a formal membership structure. According to section 1.002 (5) of the Texas Business Organizations Code, a “member of a non-profit corporation” is someone who has membership rights in the non-profit corporation under its governing documents.
The members of a non-profit corporation are similar to the shareholders of a for-profit corporation in that both members and shareholders may have important rights with respect to internal corporate governance. Unlike shareholders, members of a non-profit corporation are not usually owners and no shares are issued. When forming a non-profit corporation, you must determine if the corporation will have members and, if so, who will govern the corporation: the members, a board of directors, or both. A non-profit corporation is presumed to have members. If you are forming a non-profit corporation with no members, the certificate of incorporation must include a statement to that effect. The Texas Code of Business Organizations requires that a non-profit corporation have at least three directors, a president and a secretary.
The same person cannot be president and secretary at the same time. Officers and directors must be natural persons, but may be known by other titles. Any corporation can pay reasonable compensation for services provided to the corporation. Keep in mind that the Secretary of State does not determine what is considered reasonable compensation.
A document filed in 1993 in the IRS Continuing Education Program for specialists in exempt organizations analyzes reasonable compensation. This document is available on the IRS website. There are restrictions on political contributions from non-profit corporations. For information on this topic, you can contact your private lawyer, the Texas Ethics Commission (51) 463-5800, the Federal Elections Commission, and the IRS. You can also review Title 15 of the Texas Election Code.
The Texas Attorney General has legal authority to investigate charities that operate as non-profit corporations and inspect their books and records. The Secretary of State has no such authority. In addition, the IRS can revoke a non-profit corporation's tax exemption for violating federal tax laws. Under certain circumstances, the books and records of a non-profit corporation are also available to the public under the Texas Public Information Act (chapter 552 of the Government Code).Many organizations that file Form 990-PF must send a copy to certain state attorneys general; however, non-profit corporations are generally not required to file Form 990 with either the Texas Attorney General or Secretary of State. The IRS provides information on how to obtain copies of 990 forms, exemption requests, and related tax returns on its Form 990 resources and tools page. A non-profit corporation that is actively soliciting funds in Texas may be “transacting business” in Texas and must file an application for registration; however, if its contacts with Texas are made solely through interstate commerce or through independent contractors, it is likely not “transacting business in Texas”.The name of any Texas nonprofit organization can be reserved for 120 days by filing a name reservation form known as 501 form with the Texas Secretary of State.
The certificate of incorporation must include all necessary information about officers and directors as well as any other information required by law. To become an official member of any Central Texas nonprofit organization you must meet certain criteria established by law and file an application with both state and federal authorities. It is important to understand all legal requirements before filing any documents or making any contributions.
