• California allows organizations to form nonprofit coprporations for any legal "public purpose"California flag image by palmer530 from Fotolia.com
  
  People often confuse nonprofit corporations with tax-exempt organizations. To get tax -exempt status from the (Internal Revenue Service (IRS), an organization has to operate on a not-for-profit basis but not all nonprofits are exempt from taxation. Whether a corporation is for-profit or not-for-profit depends on state law. California Corporation Code uses the terms “nonprofit public benefit corporations” and “nonprofit mutual benefit corporations.” As a California nonprofit, your organization can apply for tax-exempt status to gain recognition, save money, and be eligible for charitable grants. Your members and directors also get liability protection.
  
  

Forming a Nonprofit

• You can form your own nonprofit corporation in California as an individual or as a group, just by filing the Articles of Incorporation with the Secretary of State. Unincorporated organizations can also become nonprofit corporations. You don’t need to have your board of directors before you file, but you will have to recruit directors before the corporation can begin functioning. The nonprofit corporation exists as soon as you’ve filed and does not expire unless you specifically put an expiration date into the founding documents.
  
  

Definition

• A nonprofit corporation can be formed in California “for any public or charitable purposes,” according to the law. That can include libraries, educational and religious organizations, as well as traditional charities. Directors are not allowed to gain any financial benefits from serving on the board and cannot work for the corporation or do business with it, except under limited circumstances. All corporate assets need to be work toward “charitable, religious, or public purposes” and when a nonprofit does dissolve, its assets have to be transferred to people or organizations that are carrying on charitable, religious, or public purposes.
  
  

Naming Rights

• Choosing a name for your nonprofit is the first thing you need to do. California law requires you make sure your name is not “the same as, or deceptively similar to, other corporate names on file with the Secretary of State,” with a few limited exceptions. You can perform a free preliminary check of the availability of a name by mailing a Name Availability Inquiry Letter to the California Secretary of State's office. The downloadable form is available on the Secretary of State’s website. (http://www.sos.ca.gov/business/corp/pdf/naavinquiryform.pdf) Simply checking on a name does not give you any rights to it.
  
  

Accepting donations

• You don’t need to be a tax-exempt to accept donations but as soon as you do, you are required to register with the state Attorney General’s Registry of Charitable Trusts within 30 days. The Initial Registration Form CT-1 asks for information on the organization and its directors, the primary activity of the organization, and a copy of the articles of incorporation and current bylaws. Once you've become a nonprofit corporation, you can start applying for tax exemptions. You’ll have to fill out separate applications from the IRS and the California Franchise Tax Board.