10 Compliance Tips for Texas Nonprofits
Running a nonprofit in Texas involves more than just a passion for a cause; it requires a keen understanding of the legal landscape to ensure compliance and sustain success. This blog post delves into ten essential compliance tips for Texas nonprofits, guiding you through the legal intricacies to safeguard your organization's mission and operations.
1. Understand State and Federal Laws
The Foundation of Compliance
Begin by familiarizing yourself with both Texas state laws and federal regulations that govern nonprofit operations. This includes the Texas Nonprofit Corporation Act and IRS guidelines for 501(c)(3) organizations.
Regular Updates
Laws change, so it's vital to stay updated on legal developments that might affect your nonprofit's compliance status.
2. File the Articles of Incorporation
Legal Identity
Register your nonprofit by filing Certificate of Formation with the Texas Secretary of State. This legal document officially establishes your nonprofit and outlines its purpose and operational structure.
Filing Requirements
Ensure all necessary information is included, such as the nonprofit's name, registered agent, and board members.
3. Obtain Federal Tax-Exempt Status
IRS Application
Apply for tax-exempt status under section 501(c)(3) of the Internal Revenue Code. This involves submitting Form 1023 or 1023-EZ to the IRS.
Ongoing Obligations
Maintain your tax-exempt status by adhering to IRS regulations, including limitations on political activities and required public disclosures.
4. Comply with State Tax Exemptions
State-Level Exemptions
Beyond federal tax exemption, apply for exemptions from Texas state taxes, including sales, franchise, and property taxes.
Application Process
This may involve submitting specific forms or documentation to the Texas Comptroller’s Office and local county offices.
5. Adhere to Charitable Solicitation Laws
Fundraising Compliance
Understand and comply with Texas laws regarding charitable solicitations. This may (but normally will not) include registering with the state before engaging in fundraising activities.
Transparency and Accountability
Provide clear and honest information about your nonprofit and its mission when soliciting donations.
6. Implement Financial Controls
Budget and Audit
Establish strong financial controls, including a detailed budget and, if necessary, an annual audit process.
Preventing Fraud
Implement checks and balances to prevent mismanagement or fraud within your organization.
7. Draft and Maintain Bylaws
Organizational Roadmap
Bylaws are crucial for outlining your nonprofit's governance structure, decision-making processes, and membership rules.
Regular Reviews
Review and update your bylaws regularly to ensure they remain aligned with your organization's goals and legal requirements.
8. Conduct Regular Board Meetings
Governance and Oversight
Hold regular board meetings to ensure effective oversight, strategic planning, and compliance with both your bylaws and legal obligations.
Documentation
Keep detailed minutes of these meetings as part of your official records.
9. Manage Records Effectively
Essential Documentation
Maintain comprehensive records, including financial statements, meeting minutes, tax filings, and donation records.
Accessibility
Ensure these documents are accessible for legal, tax, or audit purposes.
10. Seek Legal and Professional Assistance
Expert Guidance
Don't hesitate to seek advice from legal professionals, especially in areas like employment law, tax compliance, or when drafting contracts.
Continuous Learning
Attend workshops, seminars, and training sessions to stay informed about nonprofit governance and compliance.
Navigating the legalities of running a nonprofit in Texas can be challenging, but with the right approach and resources, it's entirely manageable. By following these ten compliance tips, you can focus more on your mission and less on legal complexities.
For more detailed guidance tailored to your specific nonprofit needs, consider consulting with our dedicated team at the Crosier Law Firm.
