How to start a nonprofit in Texas: Step-by-step guide

But here’s what many new founders don’t realize: Texas also has its own unique requirements and compliance rules that differ from other states. From registration paperwork to charitable solicitation laws, knowing what to expect can save you time, stress, and costly mistakes down the line.

That’s where this guide comes in. We’ll walk you through each step—from forming your organization and applying for 501(c)(3) status to staying compliant with ongoing state and federal regulations. We’ll also cover some often-overlooked essentials like fundraising regulations, reporting requirements, and building a donor-ready infrastructure from day one.

Step 1: Research and plan your nonprofit

Before you dive into the paperwork, take a step back and think about your nonprofit’s purpose. What problem are you solving? Who will you help? How will you fund your work? These questions might seem basic, but having clear answers now will save you a lot of headaches later.

Define your mission and purpose

Every successful nonprofit starts with a strong mission. Your mission statement should explain what your organization does, who it serves, and why it matters—all in one or two sentences. A well-defined mission keeps you focused and helps potential donors and supporters understand your cause.

Conduct a needs assessment

You might have a great idea, but is there a real need for your nonprofit? Take time to research similar organizations in Texas. Talk to people in your community. Find out if your nonprofit fills a gap or if you’d be better off partnering with an existing group.

Draft a business plan

Yes, even nonprofits need a business plan. This document outlines your goals, funding sources, and operational plans. It doesn’t have to be complicated, but it should cover:

• Your programs and services – What will your nonprofit actually do?
• Funding strategy – Will you rely on grants, donations, or memberships?
• Budget – How much will it cost to run your nonprofit, and where will the money come from?
• Growth plan – How will your nonprofit expand its reach over time?

Taking the time to research and plan now will make the rest of the process much easier. You’ll be more prepared when it’s time to register your nonprofit and apply for tax-exempt status.

Step 2: Choose a name and structure

Picking the right name for your nonprofit isn’t just about creativity—it has to follow legal rules, be easy to remember, and clearly reflect your mission. Plus, you’ll need to decide on the right legal structure to make sure your organization is set up for long-term success.

Follow Texas naming rules

The Texas Secretary of State has specific guidelines for nonprofit names. Your name must be unique, meaning no other business or nonprofit in Texas can already be using it. You can check availability by searching the Texas business name database on the Secretary of State’s website.

Also, your name can’t suggest that your nonprofit does something illegal or mislead the public. Some words (like “bank” or “university”) may require special approval.

Make it clear and memorable

Beyond the legal stuff, think about how your name sounds to potential donors and supporters. It should:

• Clearly connect to your mission.
• Be easy to say and spell.
• Work well as a website domain (check if the .org version is available).

If you’re stuck, try brainstorming with your team or asking potential supporters what they think.

Select a legal structure

Most nonprofits register as nonprofit corporations because it provides liability protection and makes it easier to apply for federal tax-exempt status. In Texas, you’ll need to follow the Texas Business Organizations Code to properly set up your nonprofit corporation.

Some organizations might consider alternatives, like trusts or unincorporated associations, but those usually don’t qualify for 501(c)(3) tax-exempt status. If your goal is to accept donations and qualify for grants, a nonprofit corporation is usually the best choice.

Step 3: Recruit your board of directors

Your board of directors is one of the most important parts of your nonprofit. These are the people who will help guide your organization, make big decisions, and ensure you stay compliant with the law. Choosing the right board members now can save you from challenges down the road.

Understand Texas requirements

The Texas Business Organizations Code requires nonprofits to have at least three directors. They don’t have to live in Texas, but they must be at least 18 years old. Your nonprofit will also need a registered agent—a person or business responsible for receiving legal documents on your behalf.

Roles and responsibilities

A strong board does more than just attend meetings. They help with fundraising, financial oversight, and strategic planning. Typically, nonprofits have at least these key positions:

• President (or Chair) – Leads the board and oversees major decisions.
• Secretary – Keeps records of meetings and legal documents.
• Treasurer – Manages the nonprofit’s finances and budgeting.

Other board members can help with networking, marketing, or special projects, depending on your needs.

How to choose the right people

Look for board members who are:

• Passionate about your cause.
• Experienced in areas like finance, law, or nonprofit management.
• Willing to commit time and effort to support the organization.

Avoid filling your board with just friends and family. You need people who will challenge ideas, bring fresh perspectives, and keep your nonprofit on the right track.

Adopt governance policies

To keep your board organized and legally compliant, you’ll need to create a few key policies:

• Bylaws – The rules for how your nonprofit operates.
• Conflict of Interest Policy – Ensures board members act in the best interest of the nonprofit.

Step 4: Prepare and file the certificate of formation

Now that you have your board in place, it’s time to make your nonprofit official. In Texas, this means filing a certificate of formation with the Texas Secretary of State. This document legally establishes your nonprofit and allows you to apply for federal tax-exempt status later.

What is the certificate of formation?

Think of this as your nonprofit’s birth certificate. It includes key details about your organization, like:

• Your nonprofit’s name.
• The purpose of your organization (must align with IRS rules for tax exemption).
• The names and addresses of your board of directors.
• Your registered agent’s name and address (this is the person or company that receives official legal notices).
• A statement saying your nonprofit will not distribute profits to individuals.

How to file it

You can file your certificate of formation online, by mail, or by fax through the Texas Secretary of State’s office. The filing fee is $25. If you file online, it’s usually processed faster.

Step 5: Obtain an employer identification number (EIN)

Once your nonprofit is officially registered with the state, the next step is getting an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This is like a Social Security number for your nonprofit—it’s required for taxes, opening a bank account, and hiring employees. Even if you don’t plan on having employees, you still need an EIN.

How to apply for an EIN

Getting an EIN is free, and the process is simple. You can apply in one of three ways:

• Online – The fastest method. You’ll get your EIN immediately after completing the application on the IRS website.
• By mail – Fill out IRS Form SS-4 and mail it in (processing takes about four weeks).
• By fax – Fax the completed Form SS-4 to the IRS, and they’ll fax back your EIN within four business days.

What you’ll need to apply

The application will ask for:

• Your nonprofit’s legal name (as listed on your certificate of formation).
• Your business address.
• The name and Social Security number of a responsible party (usually a board member or founder).
• Your nonprofit’s purpose.

Once you have your EIN, you can open a nonprofit bank account, apply for tax-exempt status, and handle other important financial tasks.

Step 6: Draft bylaws and other governing documents

Bylaws are the rules that guide how your nonprofit operates. They outline everything from how decisions are made to how board members are elected. While they don’t have to be filed with the state, they’re required for 501(c)(3) tax-exempt status and will help keep your organization running smoothly.

What to include in your bylaws

Your bylaws should cover:

• Board structure – How many directors you’ll have, their roles, and how they’re elected.
• Meeting rules – When and how board meetings are held, including voting procedures.
• Conflict of interest policy – A required policy that ensures board members act in the nonprofit’s best interest.
• Membership (if applicable) – If your nonprofit has members, define their rights and responsibilities.
• Amendments – How changes to the bylaws can be made in the future.

Other governing documents

In addition to bylaws, most nonprofits also draft:

• A conflict of interest policy – The IRS requires this to prevent board members from making decisions that benefit themselves financially.
• An OFAC compliance policy – If your nonprofit operates internationally, you may need a policy ensuring you don’t support organizations or individuals on the U.S. sanctions list.

Making it official

Your board of directors should review and approve the bylaws at an official meeting. Keep a signed copy in your records—you’ll need it when applying for tax-exempt status.

Step 7: Apply for federal tax-exempt status

Now that your nonprofit is legally registered and has its governing documents in place, it's time to apply for federal tax-exempt status with the Internal Revenue Service (IRS). This is what allows your nonprofit to avoid federal income taxes and lets donors make tax-deductible contributions.

Which form should you file?

The IRS offers two main options:

• Form 1023 – This is the longer, more detailed application required for larger nonprofits or those with complex operations. Processing can take several months.
• Form 1023-EZ – A shorter, streamlined version for smaller nonprofits expecting annual gross receipts of $50,000 or less. Processing is typically much faster (sometimes just a few weeks).

Most small nonprofits qualify for Form 1023-EZ, but you can check the IRS eligibility worksheet to be sure.

What you’ll need to apply

• Your EIN (Employer Identification Number).
• A copy of your certificate of formation.
• A signed copy of your bylaws and conflict of interest policy.
• A detailed description of your nonprofit’s activities.
• Financial projections (if your nonprofit is new, estimated budgets for the next three years).

Application fees

• Form 1023: $600
• Form 1023-EZ: $275

These fees are non-refundable and must be paid when submitting your application.

What happens next?

Once the IRS reviews your application, they will send a determination letter confirming whether your nonprofit has been granted 501(c)(3) tax-exempt status. If approved, this letter is critical—you’ll need it to apply for state tax exemptions and prove your nonprofit’s tax-exempt status to donors and grantmakers.

Step 8: Apply for Texas state tax exemptions

Getting federal tax-exempt status is a big step, but your nonprofit also needs to apply for state tax exemptions in Texas. This will help your organization avoid state-level taxes, such as sales tax and franchise tax.

Which state tax exemptions do you need?

Texas offers two main tax exemptions for nonprofits:

1. Franchise tax exemption – Nonprofits must apply to be exempt from Texas’ corporate franchise tax.
2. Sales tax exemption – This allows your nonprofit to purchase goods and services without paying state sales tax.

How to apply for state tax exemptions

The Texas Comptroller of Public Accounts handles state tax exemptions. Here’s how to apply:

• Complete Form AP-204 (Texas Application for Exemption – Federal and All Others).
• Submit a copy of your IRS determination letter confirming your 501(c)(3) status.
• Provide a copy of your certificate of formation and bylaws.

You can mail or fax the application to the Texas Comptroller’s office, and processing typically takes a few weeks.

Do all nonprofits qualify?

Not every nonprofit automatically gets a sales tax exemption. Texas has specific rules about which types of organizations qualify, so check the Texas Comptroller’s website for details.

Step 9: Register for charitable solicitation and compliance

If your nonprofit plans to fundraise or accept donations, you may need to register for charitable solicitation in Texas. This ensures that your organization is legally allowed to ask for contributions and helps build trust with donors.

Do you need to register for fundraising in Texas?

Unlike some states, Texas does not require most nonprofits to register before soliciting donations. However, if your nonprofit falls into certain categories, you may need to file special registrations. These include:

1. Public Safety Organizations & Independent Promoters – If your nonprofit supports law enforcement, firefighters, or emergency services, you may need to register with the Texas Secretary of State.
2. Veterans Organizations – If your nonprofit raises funds on behalf of veterans, you may need to file an annual report with the state.

Even though registration isn’t mandatory for most nonprofits, transparency is key. Many donors check to see if an organization is listed in databases like GuideStar or Charity Navigator before giving.

Fundraising compliance best practices

Even if Texas doesn’t require registration, here’s what your nonprofit should do to stay compliant and build donor confidence:

• Register in other states – If you plan to raise money outside Texas, check the fundraising laws in those states. Some require registration before soliciting donations.
• Follow IRS rules for tax-deductible donations – Send donation receipts for tax purposes.
• Be clear about fundraising activities – If you use professional fundraisers, disclose how donations are used.

Step 10: Maintain compliance and ongoing reporting

Once your nonprofit is up and running, staying compliant with state and federal regulations is crucial. Failing to file the right forms can lead to fines or even the loss of your tax-exempt status.

Annual reports and filings

Texas does not require nonprofits to file an annual report with the state. However, your nonprofit may need to submit other important filings:

• IRS Form 990 – All tax-exempt organizations must file some version of this form every year. It provides financial details about your nonprofit’s income, expenses, and activities.
  
  • Form 990-N – For nonprofits with less than $50,000 in annual revenue.
  • Form 990-EZ – For nonprofits with less than $200,000 in revenue.
  • Form 990 – For nonprofits with $200,000 or more in revenue.
• Texas Franchise Tax Exemption Renewal – While most 501(c)(3) nonprofits are exempt from this tax, some may need to renew their exemption with the Texas Comptroller’s Office every few years.
• Charitable solicitation renewals (if applicable) – If your nonprofit is a veterans organization or public safety nonprofit, you may need to file an annual report to stay registered.

Keeping good records

Texas law requires nonprofits to keep important documents on file, including:

• Bylaws and board meeting minutes
• Financial statements and donation records
• Copies of IRS Form 990 filings

Good record-keeping helps you stay compliant, avoid legal trouble, and build donor trust.

What happens if you don’t file?

If you fail to file IRS Form 990 for three years in a row, your nonprofit will automatically lose its tax-exempt status. Getting reinstated can be a long, expensive process—so it’s critical to stay on top of your filings.

By following these steps, your nonprofit will stay in good standing and continue making an impact for years to come.

Bringing it all together

Starting a nonprofit in Texas takes time and effort—but when done right, it means your organization is legally recognized, tax-exempt, and positioned for long-term success.

From choosing a name and filing the right paperwork to securing tax-exempt status and staying compliant, every step plays a role in making your nonprofit legally sound and financially stable.

The key to success is planning ahead and staying organized. Make sure you have a clear mission, a strong board, and a strategy for funding and compliance. With the right foundation, you can focus on what really matters—making an impact in your community.

And remember, you don’t have to do it all alone. Harness has helped countless nonprofits simplify fundraising, engage donors, and streamline operations. Whether you need tools to manage donations, communicate with supporters, or optimize your fundraising strategy, Harness is here to help.

Frequently asked questions

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

The filing fee for the certificate of formation is $25, payable to the Texas Secretary of State. If you apply for federal tax-exempt status, the IRS filing fee is $275 for Form 1023-EZ or $600 for Form 1023. Other costs may include legal fees, website setup, and fundraising expenses.

How long does it take to start a nonprofit in Texas?

The timeline depends on several factors. The certificate of formation is typically processed within 5-10 business days (or faster if filed online). Getting an EIN takes minutes, but IRS tax-exempt approval can take several weeks to months, depending on whether you file Form 1023-EZ or Form 1023.

Do I need a certificate of formation for my nonprofit?

Yes. In Texas, you must file a certificate of formation with the Secretary of State to legally establish your nonprofit. This document is required to apply for tax-exempt status and operate legally.

What is the difference between Form 1023 and Form 1023-EZ?

Form 1023 is the full application for 501(c)(3) tax-exempt status, used by larger or more complex nonprofits. Form 1023-EZ is a simplified version for smaller nonprofits with annual revenues under $50,000. Form 1023-EZ is faster and easier to complete, but not all organizations qualify.

What ongoing reports are required to maintain a tax-exempt organization?

Most nonprofits must file IRS Form 990 each year. The type of Form 990 depends on your nonprofit’s revenue. Some nonprofits also need to renew their Texas sales tax exemption and file reports if they engage in charitable solicitation (e.g., veterans organizations).

Can a nonprofit lose its federal tax-exempt status?

Yes. The most common reason is failing to file IRS Form 990 for three consecutive years. Engaging in prohibited activities, like excessive political lobbying or private benefit, can also lead to revocation of tax-exempt status.

Do I need a business license for my nonprofit in Texas?

Texas does not require a general business license for nonprofits. However, some nonprofits may need special permits or licenses depending on their activities (e.g., selling goods, hosting events, or operating certain services).

Can an LLC be a nonprofit in Texas?

In most cases, no. Limited Liability Companies (LLCs) are typically for-profit entities. However, under specific conditions, an LLC can be a nonprofit if it’s wholly owned by a tax-exempt organization and meets IRS guidelines.

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