How to Start a Nonprofit in California: Incorporation to Tax Exemption

Robert E. Williams, Attorney at Law · Updated October 4, 2026 · 6 min read

Churches, ministries, community groups and charitable causes often begin with a few committed people and a shared vision. To accept tax-deductible donations, apply for grants, open bank accounts and protect volunteers from personal liability, most of these groups eventually form a nonprofit corporation and obtain tax-exempt status.

In California this involves three separate agencies: the Secretary of State, the Internal Revenue Service and the Franchise Tax Board, plus registration with the Attorney General's Registry of Charities and Fundraisers. This guide walks through each step in order.

Step 1: Clarify Your Purpose and Structure

Before filing anything, write down what the organization will do, whom it will serve and how it will be funded. Then choose the right type of California nonprofit corporation:

• Public benefit corporation: for charitable or public purposes, such as education, relief of poverty or community service. Most 501(c)(3) charities use this form.
• Religious corporation: for churches and organizations operated primarily for religious purposes. Religious corporations have somewhat different governance rules and some exemptions from reporting requirements.
• Mutual benefit corporation: for organizations that serve their members, such as clubs and trade associations. These are usually not 501(c)(3) charities.

Consider also whether you need a separate organization at all. A small project may be able to operate under an existing charity through fiscal sponsorship while it tests its idea.

Step 2: Choose a Name and File Articles of Incorporation

Pick a name that is not already in use by another California entity, and check that it does not infringe a trademark. Then file Articles of Incorporation with the California Secretary of State. The Secretary of State provides forms for each type of nonprofit corporation (for example, Form ARTS-PB-501(c)(3) for a public benefit corporation seeking 501(c)(3) status). The articles must include specific language required by the IRS: a statement that the corporation is organized exclusively for exempt purposes and a clause dedicating its assets to charitable purposes if it ever dissolves. Check the Secretary of State's current fee schedule before filing; the filing fee is modest.

Step 3: Adopt Bylaws and Hold the First Board Meeting

Bylaws are the organization's internal rulebook. They cover the number and terms of directors, how officers are chosen, meeting and voting procedures, conflicts of interest, and whether the corporation has voting members. At its first meeting, the board typically adopts the bylaws, elects officers (California requires a president or chair, a secretary and a chief financial officer), authorizes a bank account and approves the tax-exemption applications.

A rule unique to California public benefit corporations: no more than 49% of the directors may be "interested persons," meaning people compensated by the corporation for services in the past 12 months and certain of their relatives (Corporations Code section 5227). The IRS also looks favorably on an independent board of at least three unrelated people.

Step 4: Obtain an EIN and File the Statement of Information

Apply for an Employer Identification Number (EIN) from the IRS, which is free and can be done online. Within 90 days after filing the articles, the corporation must file an initial Statement of Information (Form SI-100) with the Secretary of State listing its officers and addresses. After that, the statement is filed every two years.

Step 5: Apply for Federal 501(c)(3) Status

To be recognized as a tax-exempt charity, most organizations file Form 1023 electronically with the IRS. The user fee is currently $600. Smaller organizations that project annual gross receipts of $50,000 or less and have total assets of $250,000 or less may be eligible for the shorter Form 1023-EZ, with a $275 fee. The IRS requires the application to be filed within 27 months after formation for exemption to be retroactive to the date of incorporation.

Churches are treated as tax-exempt without filing Form 1023, although many choose to apply anyway so that donors and grantmakers have a determination letter they can rely on.

Step 6: Apply for California Tax Exemption

Federal exemption does not automatically exempt an organization from California franchise and income tax. Organizations apply to the Franchise Tax Board using Form 3500, or, if they already have an IRS determination letter, the simpler Form 3500A submission. Until exempt status is granted, the organization may be subject to the state's minimum franchise tax.

Charities that own real property and want a property tax exemption must also apply separately for the welfare exemption through the State Board of Equalization and the county assessor.

Step 7: Register With the Attorney General

California public benefit corporations and other charities holding assets for charitable purposes must register with the Attorney General's Registry of Charities and Fundraisers within 30 days after first receiving property, using Form CT-1 with a small registration fee (Government Code section 12585). Religious corporations and certain other organizations are exempt from registration. Registration is followed by annual reporting, explained in our California nonprofit annual compliance checklist.

Step 8: Set Up Good Habits From the Start

• Adopt key policies: conflict of interest, whistleblower, document retention and, if relevant, gift acceptance policies.
• Keep minutes of every board meeting and important decisions.
• Separate finances: never mix organization money with personal funds.
• Acknowledge donations: donors need a written acknowledgment for gifts of $250 or more to claim a deduction.
• Check local requirements, such as a city business license or permits, and employment rules if you will hire staff.
• Consider insurance, including general liability and directors and officers coverage.

Common Mistakes

• Filing articles without the IRS-required purpose and dissolution language.
• Waiting more than 27 months to apply for federal exemption.
• Assuming IRS approval means the organization is also exempt in California.
• Forgetting the Statement of Information and Attorney General registration, which can lead to penalties or suspension.
• Letting one founder control everything without an independent board.

Is a Nonprofit the Right Vehicle?

Forming a nonprofit creates ongoing obligations: annual filings, governance and public accountability. For a family that simply wants to give, a donor-advised fund or a gift through an existing charity may be easier. See planned giving tools for alternatives. For a church, ministry or community organization with a long-term mission, incorporation provides credibility, liability protection and access to tax-deductible support.

Conclusion

Starting a nonprofit in California is a sequence of manageable steps: define the purpose, file articles with the Secretary of State, adopt bylaws and seat a board, obtain an EIN, file the Statement of Information, apply for federal and California tax exemption, and register with the Attorney General. Doing each step correctly at the beginning saves time and expense later and gives donors confidence that their gifts are well stewarded.

Related Articles

• Annual Filing and Governance Checklist for California Nonprofits
• Charitable Remainder Trusts and Other Planned Giving Tools
• Lifetime Gifts to Family: Annual Exclusion and Gift Tax Rules for 2026

This article provides general information about California and federal law as of October 4, 2026. It is not legal advice and does not create an attorney–client relationship.