Nonprofit organizations are not always registered with the Secretary of State. Many, but not all, nonprofit organizations choose to incorporate. A nonprofit corporation is formed by filing a certificate of formation with the secretary of state under the Texas Business Organizations Code (“BOC”). “Nonprofit corporation” means a corporation no part of the income of which is distributable to its members, directors, or officers [BOC, Section 22.001(5)]. A nonprofit corporation may be formed for any lawful purpose or purposes permitted by the BOC. Not all nonprofit corporations are exempt from state or federal taxes.
Section 252.001 of the BOC defines an unincorporated nonprofit association as an unincorporated entity consisting of three or more members joined by mutual consent for a common, nonprofit purpose. All unincorporated nonprofit associations, whether or not such entities are tax-exempt, are subject to the provisions of the Uniform Unincorporated Nonprofit Association Act, Chapter 252 of the BOC. The Act addresses a limited number of key issues relating to unincorporated nonprofit associations; specifically, the authority of the nonprofit association to purchase, hold, and convey property in its own name; the authority to sue and be sued as a separate legal entity; and the contractual and tort liability of association officers and association members. Should you require further information about these provisions or how they might affect your association, you should contact your own attorney.
An unincorporated nonprofit association may, but is not required to, file with the secretary of state a statement designating an agent authorized to receive service of process on behalf of the nonprofit association. The filing of the statement does not represent the formation of the nonprofit association; it simply provides a method for a nonprofit association to receive notice of any lawsuit filed against it.
Neither nonprofit corporations nor unincorporated nonprofit associations are automatically exempt from federal or state taxes. In order to be tax-exempt, a nonprofit organization must meet certain requirements and apply to both the Internal Revenue Service and the Texas Comptroller of Public Accounts.
