Incorporating a California Public Benefit Nonprofit and Filing for 501(c)3 Status
Incorporating Interact as a nonprofit and filing for federal tax exemption status under 501(c)3 was not as daunting or expensive as it first seemed when I started researching the process a month ago. At Interact, we’re focused on building and funding the next generation of ethical technologists, and this post is a part of that effort. Don’t let the process stop you from starting a nonprofit that you believe can help people!
This post outlines how long it took us, how much it costed us, what materials we used, and a step-by-step outline of our process. Please note that we are not providing legal advice and different nonprofits may have different considerations or steps to go through based on their own circumstances.
- Research: 5 hours
- Board of Directors meeting: 2 hours
- Application completion: 30 hours
Filing Fee Costs
- Incorporation and return of certified document: $35
- Form 1023 application: $850
- Initial Registration Form (CT-1): $25
- Statement of Information (S-100): $20
- Articles of Incorporation
- Conflict of Interest Policy
- Action of Sole Incorporator
- First Board of Directors Meeting Minutes
- Director/Officer Electronic Transmission Consent Form
- EIN Number
- Form 1023 with attachment and checklist
- Initial registration form (CT-1) with the California Attorney General’s Registry of Charitable Trusts
- Statement of Information (S-100) with the California Secretary of State
- Form 3500A with the State of California
Our 10-Step Process
- First, we decided on a formal name (Interact ATX), making sure it didn’t already exist in California.
- We drafted and mailed our Articles of Incorporation using the form found on the State of California’s website, along with a $30 check payable to the Secretary of State. We also included a pre-stamped, pre-addressed, unsealed envelope and another check for $5 so they could mail us back a certified copy of our Articles, which was returned in a little over a week. We found it was recommended to have an incredibly broad statement of purpose here and in our bylaws, and to then specify this purpose in Form 1023 (see step 7). Finally, it was handy for us to have a single incorporator because we could then take a number of actions quickly with an Action of Sole Incorporator.
- We drafted the bylaws and conflict of interest policy. For the bylaws, we used this publicly available annotated Word template, removing the specific purpose section in Article 3. For the conflict of interest policy, we found this publicly available annotated Word template, though we ended up using a simpler policy provided by our attorney representation at Adler & Colvin.
- We formally appointed Maran Nelson and me to the Board of Directors. We used an Action of Sole Incorporator (here’s a copy with personal information removed) to fix and appoint our board of directors and officers, adopt the bylaws and conflict of interest policy, and set up our office location in San Francisco.
- We called a board meeting to do the following things (taking minutes to record the meeting — here are our minutes, with personal information removed):
(a) Approve the Action of Sole Incorporator, including the adoption of the bylaws and conflict of interest policy;
(b) Approve establishing a bank account;
(c) Implement the Conflict of Interest Policy and get signatures from every officer and director;
(d) Approve transmissions by electronic written consent (i.e. email) for each director and officer — here’s a copy of the form we used;
(e) Approve applying for a federal Employer Identification Number (EIN);
(f) Approve applying for federal and state tax-exempt status;
(g) Adopt a fiscal year (such as a year ending December 31 or June 30) — because we incorporated in July 2016, we chose a fiscal year ending in December to give us plenty of time to organize our accounts and file taxes.
6. We applied for an EIN number using this free and quick service from the Internal Revenue Service (IRS).
7. We drafted and filed Form 1023 with the IRS, sending in a packet that included our bylaws, conflict of interest policy, articles of incorporation, and check for $850 made payable to the U.S. Department of the Treasury (we made sure to follow instructions on the Form 1023 checklist exactly, including checking off each box). For us, the most time-intensive part of this whole process was drafting the narrative (Part IV of Form 1023) of who we are, what our specific purpose was, and how we fit into 501(c)3 guidelines. We mailed in our initial registration form (step 8) and our Statement of Information (step 9) on the same day as Form 1023.
8. We filed the initial registration form with the California Attorney General’s Registry of Charitable Trusts. We included our bylaws, articles of incorporation, Form 1023 with its attachment, and a check for $25 made payable to the Department of Justice. As of 2016, the mailing address was California Attorney General’s Office, Registry of Charitable Trusts, P.O. Box 903447, Sacramento, CA, 94203–4470.
9. We filed the Statement of Information with the California Secretary of State, including a check for $20 made payable to the Secretary of State. Instructions for delivery were at the bottom of the first page of the document.
10. [UPDATE] We heard back from the IRS in less than 3 months (typically takes 3–6 months) with a letter of determination, and we then filed Form 3500A with the State of California.
And that’s it! Interact ATX is officially a federally-recognized nonprofit under 501(c)3. 🎉
Maran Nelson and I recently incorporated Interact ATX (joininteract.com) in California as a nonprofit and applied for federal tax exemption status under 501(c)3. We wanted to share our process for our friends in the San Francisco Bay Area and others in California to benefit. Reach out to us on Twitter if you’re interested in learning more about Interact!
We worked with a San Francisco-based nonprofit law firm, Adler & Colvin, to look over our Form 1023, as well as get guidance on the Action of Sole Incorporator, the initial Board of Directors meeting and minutes, the conflict of interest policy, and the director/officer electronic transmission consent form. We’re working with a Bay Area nonprofit accounting firm, Crosby & Kaneda, to do our tax filings.