How to Start a Nonprofit in California

Step 1: Name Your California Nonprofit

Choosing a name for your organization is the first and most important step in starting your nonprofit corporation. Be sure to choose a name that complies with California naming requirements and is easily searchable by potential members and donors.

To learn more, read our How to Name a Nonprofit in California guide.

1. Follow the naming guidelines:

• The name you pick for your organization must not include:
  • Words related to the United States Olympic Committee such as: 'Olympic', 'Olympiad', or 'Citis Altius Fortius'.
  • Terms associated with financial institutions such as 'Bank', 'band and trust', or 'trust company'
  • Any words or terms that could be considered grossly offensive
• The name should not be deceptively similar to another business operating in the state of California unless consent and approval is obtained.
• The name should not mislead the public in any way.

Read the Secretary of State's official guidelines for the complete rules on naming a California-based organization.

2. Is the name available in California? Make sure the name you want isn't already taken by doing a name search on the State of California website.

3. Is the URL available? We recommend that you check to see if your business name is available as a web domain. Even if you don't plan to make a business website today, you may want to buy the URL in order to prevent others from acquiring it.

Step 2: Choose a Registered Agent in California

Your nonprofit is required to nominate a California registered agent for your organization.

What is a Registered Agent? A registered agent is an individual or business entity responsible for receiving important legal documents on behalf of your business. Think of your registered agent as your business' point of contact with the state.

Who can be a Registered Agent? A registered agent must be a resident of California or a corporation, such as a registered agent service, authorized to transact business in California. You may elect an individual within the company including yourself.

Need help choosing a registered agent? Check out our complete guide on How to Choose a Registered Agent for your California Nonprofit.

Step 3: Select your Directors & Officers

The directors of an organization come together to form a board of directors. This board of directors is responsible for overseeing the operations of the nonprofit. 

The president, secretary, and other members of nonprofit who have individual responsibilities and authorities are known as officers. 

The organization structure of your nonprofit in California MUST include:

1. At least 3 directors not related to each other
2. A president
3. A secretary
4. A treasurer or chief financial officer

NOTE: The president may not also hold the office of secretary or treasurer.

To learn more about electing a California nonprofit board of directors, read our full guide.

Step 4: Adopt Bylaws & Conflict of Interest Policy

To be eligible to apply for 501(c)(3) status, your nonprofit is required to have the following two documents:

1. Bylaws 
2. Conflict of interest policy.

What are Bylaws? Bylaws are the rules outlining the operating procedures of the nonprofit.

What is a Conflict of Interest Policy? A Conflict of Interest Policy is the collection of rules put in place to ensure that any decisions made by the board of directors or the officers benefits the nonprofit and not individual members. 

NOTE: The bylaws and conflict of interest policy must be adopted by the nonprofit during its first organizational meeting where the directors and officers are officially appointed.

Step 5: File the California Articles of Incorporation

To register your nonprofit, you will need to file the Articles of Incorporation with the State of California. 

To ensure that your nonprofit is eligible to apply for 501(c)(3) status, in the Articles of Incorporation you must explicitly state the following:

1. Purpose:

In order to qualify for 501(c)(3) status, the organization’s purpose must explicitly be limited to one or more of the following:

Charitable, Religious, Scientific, Educational, Literary, Fostering national/international amateur sports competition, Preventing cruelty to animals/children, Testing for public safety

2. Dissolution:

You must explicitly state what the assets of the organization will be used for, and what will happen to the assets if the organization is dissolved. 

To be eligible for 501(c)(3) status, the assets of your organization must only ever be used for purposes approved under section 501(c)(3). 

Section 5 of this sample IRS document provides an example of these provisions required for 501(c)(3) eligibility. 

Step 6: Get an EIN

What is an EIN? An Employer Identification Number (EIN), or Federal Tax Identification Number (FTIN), is used by the federal government to identify a business entity. It is essentially a social security number for the company.

Why do I need an EIN? An EIN is required for the following:

• To open a business bank account for the company
• For Federal and State tax purposes
• To hire employees for the company

How do I get an EIN? An EIN is obtained from the IRS (free of charge) by the business owner after forming the company. This can be done online or by mail. Check out our EIN Lookup guide for more information.

Step 7: Apply for 501(c)(3) Status

Before a nonprofit can apply for 501(c)(3) status it must, 

1. Elect at least 3 directors not related to each other
2. File the Articles of Incorporation with the required provisions (As covered in Step 5)
3. Adopt the bylaws and conflict of interest policy
4. Have an EIN number

Once these four conditions have been met your nonprofit can apply for 501(c)(3) tax-exempt status by filing Form-1023 online. 

If your application is approved, the IRS will send you a determination letter stating that your organization is exempt from federal taxes under section 501(c)(3). 

Business Banking

1. Opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

To open a bank account for your nonprofit corporation you will typically need the following:

1. The EIN for the nonprofit
2. A copy of the nonprofit’s bylaws
3. A copy of the Articles of Incorporation

Read our Best Small Business Banks review to find the right bank for your nonprofit’s needs.

2. Getting a business credit card:

• Helps you separate personal and business expenses.
• Builds your company's credit history, which can be useful to raise capital later on.

Get Insurance

Business insurance helps you manage risks and focus on growing your business.
The most common types of business insurance are:

• General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
• Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers against claims of malpractice and other business errors.
• Workers' Compensation Insurance: A type of insurance that provides coverage for employees’ job-related illnesses, injuries, or deaths.

Build a Business Website

Creating a website is a big step in legitimizing your business. As a nonprofit, your website will be the primary way to share your organization’s mission and story to supporters. Your website should be a great resource for anyone interested in your nonprofit’s upcoming events, goals, and news to help advance your cause.

Some may fear that creating a business website is out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Properly Sign Legal Documents

Improperly signing a document as yourself and not as a representative of the business can leave you open to personal liability.
When signing legal documents on behalf of your nonprofit, you could follow this formula to avoid problems:

1. Formal name of your organization
2. Your signature
3. Your name
4. Your position in the business as its authorized representative

See the image below for an example: