Non-Profit Toolkit

Commentary

A non-profit corporation is created by filing articles of incorporation with the secretary of state in accordance with the Texas Non-Profit Corporation Act (TNPCA), articles 1396-3.02 and 1396-3.03. “Non-profit corporation” means a corporation no part of the income of which is distributable to members, directors, or officers (TNPCA, article 1396-1.02A(3)).

Two copies of the signed articles of incorporation should be submitted to the secretary of state for filing. The filing fee for a non-profit corporation is $25.00.

If the articles conform to law, the secretary of state will stamp the documents “filed”, issue a certificate of incorporation and return the certificate and a stamped copy of the articles to the remitter, if a duplicate copy of the document was provided for such purpose. The certificate of incorporation is conclusive evidence of corporate existence.

Tax Exemption

Not all non-profit corporations are entitled to exemption from state or federal taxes. The secretary of state, however, does not make such determinations.

You should consult the Internal Revenue Service (IRS) prior to filing the articles to determine what provisions must be included in the articles for the corporation to be exempt from federal taxes. IRS Publication 557, titled “How to Apply for Recognition of Exemption for an Organization,” describes the rules and procedures for non-profit organizations requesting exemption. The publication can be obtained from either the IRS or the Government Printing Office.

A non-profit corporation may be exempt from the payment of state franchise taxes if its purposes fall within one of the exemptions listed in the Texas Tax Code, Chapter 171, Subchapter B. Questions on exemption procedures should be addressed to:

Comptroller of Public Accounts
Tax Assistance
Exempt Organizations Section
Austin, Texas 78774-0100
(512) 463-4600 or (800) 252-1381
TDD: (800) 248-4099 or (512) 463-4621

Articles of Incorporation for a Non-Profit Corporation

The secretary of state has promulgated a form designed to meet the minimal filing requirements of the relevant statutory provisions; use of this form is permissive. This form may not meet the particular requirements of a specific transaction. The form and the information provided is not intended to provide legal or business advice and is not a substitute for the services of an attorney or tax specialist. If you have concerns or legal questions regarding a specific transaction, you should consult a private attorney.

Forms promulgated by the secretary of state are available for viewing or printing in Word and Adobe Acrobat format. Documents should be typed, in order to ensure legibility.

Guidelines for the Preparation and Filing of Articles of Incorporation for a Non-Profit Corporation

1. Corporate Name

a. The TNPCA, article 1396-2.04, provides that the name of a non-profit corporation cannot be the same as, deceptively similar to, or similar to that of an existing domestic corporation (profit or non-profit), foreign corporation authorized to transact business in Texas (profit or non-profit), a name reservation, or name registration. The Texas Business Corporation Act, Texas Limited Liability Company Act, and the Texas Revised Limited Partnership Act each provide that the names of limited liability companies, corporations and limited partnerships cannot be the same, deceptively similar or similar.

b. A corporate name may be similar if a letter consenting to use of a similar name is obtained from the entity deemed to have the similar name. The letter of consent must be an unrestricted authorization for use of the name. The letter should be signed by a corporate officer, a limited liability company manager or member, or a general partner of a limited partnership and sent to the secretary of state with the articles of incorporation.

c. Please note that a letter of consent is an option with similar names only. If a name is the same as, or deceptively similar to, that of an existing entity, the name will not be filed under any circumstances.

d. Unlike a business corporation, it is not necessary for a non-profit corporation to use one of the corporate endings (Corporation, Company, or Incorporated).

e. The secretary of state determines whether a proposed corporate name is available in accordance with the rules on entity namesadopted and filed under the Administrative Procedure Act.

f. A corporate name may not include any word or phrase that implies a purpose not included in the articles of incorporation.

Examples:

(1) Words appearing in a name that might imply an unlawful purpose are “accounting,” “auditing,” or “auditors,” which imply the practice of accountancy in violation of TEX. REV. CIV. STAT. ANN. article 41a-1. The same applies to words or phrases that might imply the practice of law (e.g., legal clinic), medicine, or the like.

(2) A corporate name shall not include the word “lottery.” (TNPCA, art. 2.04A(3)).

(3) Under the provisions of the Texas Miscellaneous Corporation Laws Act, article 1302-3.01, a corporation may not use any of the following words or any abbreviation of such word or words or words of the same or similar meanings in its corporate name without written approval of a Congressionally recognized Veterans organization: “Veteran,” “Legion,” “Foreign,” “Spanish,” “Disabled,” “War,” and “World War.”

(4) The words “Bank,” “Banking,” and the like, may not be used in a context which implies the purpose to exercise the powers of a bank. (Texas Finance Code, section 31.005). Further, the Texas Department of Banking must pre-approve use of the term “banc” as a word or part of a word. The Department of Banking can advise you on use of “bank” or “banc” and their derivatives.

(5) The word “Trust” may not be used without the prior approval of the Texas Department of Banking. (Texas Trust Company Act, Art. 342a-6.202)

(6) The Texas Education Code prohibits the use of the terms, “college,” “university,” “seminary,” “school of medicine,” “medical school,” “health science center,” “school of law,” “law school,” and “law center.” If a proposed name includes these terms, or terms of similar meaning, whether in English or another language, the entity must obtain the prior approval of the Texas Higher Education Coordinating Board. (Education Code §61.313).

(7) State and federal laws generally preclude the use of the words “Olympic,” “olympiad,” “olympian,” or “olympus” unless authorized by the United States Olympic Committee. Refer to TEX. BUS. & COM. CODE ANN., §16.30, 1 TEX.ADMIN.CODE §79.53, and the Amateur Sports Act, 36 U.S.C. §380 (1978).

2. Non-Profit Status

The articles must state that the corporation is a non-profit corporation. It is not sufficient to indicate that the corporation is organized for non-profit purposes or for the preamble to simply make reference to incorporation under TNPCA.

3. Duration

The duration of the non-profit corporation may be perpetual, a term of years, or a date certain.

4. Purpose

a. The TNPCA, article 1396-2.01, allows a non-profit corporation to be organized for any lawful purposes, which purposes must be fully stated in the articles of incorporation. It is not sufficient to use the general language commonly included in the articles for a business corporation, that is, “any or all lawful purposes.” The secretary of state will accept the statement of purposes suggested by the Internal Revenue Service.

b. Permissible purposes for a non-profit corporation include: charitable, benevolent, religious, eleemosynary, patriotic, civic, missionary, educational, scientific, social, fraternal, athletic, aesthetic, agricultural and horticultural; and the conduct of professional, commercial, industrial or trade associations; and animal husbandry.

c. A non-profit corporation may not be organized for the following purposes: group hospital service, rural credit unions, agricultural and livestock pools, mutual loan corporations, co-operative credit associations, farmers’ co-operative societies, co-operative marketing corporations, rural electric co-operatives, telephone co-operatives, lodges, banks, insurance companies, or water supply corporations formed under Chapter 67 of the Texas Water Code.

d. Doctors of medicine and osteopathy licensed by the Texas State Board of Medical Examiners and podiatrists licensed by the Texas State Board of Podiatric Medical Examiners may form a non-profit corporation that is jointly owned, managed, and controlled by those practitioners to perform a professional service that falls within the scope of the practice of those practitioners and consists of:

(1) carrying out research in the public interest in medical science, medical economics, public health, sociology, or a related field:
(2) supporting medical education in medical schools through grants or scholarships; developing the capabilities of individuals or institutions studying, teaching, or practicing medicine, including podiatric medicine;
(3) delivering health care to the public; or
(4) instructing the public regarding medical science, public health, hygiene, or a related matter. [art. 1396-2.01C].

5. Registered Office/Agent

A non-profit corporation is required to continuously maintain a registered agent and office for the purpose of service of process. The articles of incorporation must include a street or building address of the registered office and the name of the registered agent at that address. The business office of the registered agent must be identical with the registered office. The address of a commercial business which provides “private mail box” services is not sufficient as a registered office address, unless the commercial enterprise is the business of the designated registered agent. A post office box alone is not a sufficient address for the registered office. If the registered office is in a city with a population of less than 5,000, the secretary of state will accept an address other than a street address for the registered office.

6. Directors

a. The articles of incorporation must state the number of initial directors and their names and addresses. Directors need not be residents of the state or members of the corporation unless the articles of incorporation or the bylaws so require.

b. “Board of directors” means the group of persons managing the corporate affairs, irrespective of the name by which the group is designated (TNPCA, article 1396-1.02 A(7)), which may be any name appropriate to the customs, usages, or tenets of the corporation (TNPCA, article 1396-2.14D). If a non-profit corporation uses a designation other than directors, the articles should clearly identify that group as the group vested with management authority.

c. At least three directors are required for a non-profit corporation.

d. City and state are a sufficient address for the directors.

e. A corporation shall be deemed to have vested the management of the affairs of the corporation in its board of directors in the absence of an express provision to the contrary in its articles of incorporation or by-laws (TNPCA, article 1396-2.14C). If the management of the affairs of the corporation will be vested in its members, a statement to that effect must be included in its articles of incorporation (TNPCA, article 1396-3.02A(6) and (9)).

7. Incorporators

a. The articles should state the name and street or post office address of each incorporator. Only one incorporator is necessary for a non-profit corporation, but each incorporator listed must sign the articles.

b. Any existing religious society, charitable, benevolent, literary, or social association, or church may incorporate with the consent of a majority of its members, who shall authorize the incorporators to sign the articles of incorporation.

c. Incorporators must be natural persons 18 years or older.

d. There are no residency requirements for incorporators.

e. The function of an incorporator is to sign the articles of incorporation and deliver the documents to the secretary of state.

Optional Provisions

1. If the corporation will not have members, the articles of incorporation must include a statement to that effect.

2. If the management of the affairs of the corporation is to be vested in its members, the articles must include a statement to that effect.

3. If the corporation is to be authorized on its dissolution to distribute its assets other than to one or more organizations which are exempt under Section 501(c)(3) of the Internal Revenue Code, a statement describing the manner of distribution of the corporation’s assets must be included.

Execution Requirements and Fee

1. The articles should be signed by ALL the incorporators.

2. The TNPCA, article 1396-9.03A, provides that if a person signs a document which the person knows is false in any material respect with the intent that the document be delivered to the secretary of state to be filed on behalf of a corporation, the person has committed an offense. The offense is a Class A misdemeanor.

3. Two copies of the articles should be submitted to the secretary of state.

4. There is a $25.00 filing fee for all non-profit corporations.

Common Errors Causing Rejection of a Proposed Filing

Most errors made in submitting articles of incorporation are procedural rather than substantive. Common errors include: failure to properly execute the documents; failure to state that the corporation is a non-profit corporation; or the designation of less than three directors.

Articles of Amendment for a Non-Profit Corporation

Pursuant to article 1396-4.03 of the TNPCA, articles of amendment may be filed to add, delete, or alter provisions of the articles of incorporation. A corporation may amend its articles of incorporation in as many respects as may be desired and as often as may be desired as long as the articles of incorporation as amended contain provisions that are lawful under the TNPCA. For example, it is not possible to file articles of amendment to change a non-profit corporation to a profit corporation. The secretary of state also will not accept an amendment which changes the incorporators, since the incorporators are the persons who signed the original articles of incorporation. If extensive amendments are proposed, the corporation may wish to consider filing restated articles of incorporation pursuant to article 1396-4.06.

Amendments are adopted in the following manner:

If the corporation has members with voting rights, the board of directors adopts a resolution setting forth the proposed amendments. The resolution is submitted to a vote at a meeting of the members. The proposed amendment is adopted upon receiving the vote of two-thirds of the votes which members present, in person or by proxy, were entitled to cast.

If the corporation has no members or no members with voting rights, the amendment is adopted by a majority vote of the board of directors.

Unless the articles of incorporation provide otherwise, article 1396-4.02A(4) of the TNPCA permits the board of directors of a corporation with members having voting rights to adopt the following amendments to the articles of incorporation without membership approval:

1. an amendment to extend the duration of the corporation if it was incorporated when a limited duration was required by law;

2. an amendment to delete the names and addresses of the initial directors;

3. an amendment to delete the name and address of the initial registered agent or registered office, if a statement of change is on file with the secretary of state; or

4. an amendment to change the name of the corporation by substituting the word “corporation,” “incorporated,” “company,” “limited,” or the abbreviation “corp.,” “inc.,” “co.,” “ltd.,” for a similar word or abbreviation in the name, or by adding, deleting, or changing a geographical attribution to the name.

Although the secretary of state has not promulgated forms for articles of amendment, the following form is offered as a guide to preparation of articles of amendment. The form is drafted to meet the minimum statutory filing requirements; no such sample form can meet the particular requirements of a specific transaction.

Articles of Amendment

Pursuant to the provisions of article 1396-4.03 of the Texas Non-Profit Corporation Act, the undersigned corporation adopts the following articles of amendment:

1. The name of the corporation is _________________________________________________

 

2. The following amendment to the articles of incorporation was adopted on ________________________

 

Article_______ is amended (or added) to read as follows:

(Insert text of amended provision as you would like it to read.)

 

3. The amendment was adopted in the following manner:

 

[IF THERE ARE MEMBERS HAVING VOTING RIGHTS USE ONE OF THE FOLLOWING STATEMENTS.]

The amendment was adopted at a meeting of members held on_____________ , at which a quorum was present, and the amendment received at least two-thirds of the votes which members present or represented by proxy were entitled to cast.

OR

The amendment was adopted by consent in writing by all members entitled to vote with respect thereto.

 

[IF THE CORPORATION HAS NO MEMBERS OR NO MEMBERS WITH VOTING RIGHTS, INSERT THE FOLLOWING STATEMENT.]

 

The amendment was adopted at a meeting of the board of directors held on __________________ , and received the vote of a majority of the directors in office, there being no members having voting rights in respect thereof.

___________________________________________
(Name of Corporation)

By________________________________________
(An Authorized Officer)

Execution and Filing

The articles of amendment should be signed by an authorized officer of the corporation. Two copies of the articles should be submitted to the secretary of state. If the document conforms to law, the secretary of state will file the document, note the date of filing, and return a file stamped copy along with a certificate of amendment, if a duplicate copy of the document was provided for such purposes.

Fee

The filing fee for articles of amendment for a non-profit corporation is $25.00.

Restate Articles of Incorporation for a Non-Profit Corporation

A non-profit corporation which has made numerous amendments to its articles of incorporation or wishes to supersede the articles of incorporation may adopt restated articles pursuant to article 1396-4.06 of the TNPCA. Upon issuance of a restated certificate of incorporation, the original articles of incorporation and all amendments are superseded, and the restated articles are deemed the articles of incorporation of the corporation. The restated articles may take either of two forms:

1. a compilation of all previous amendments; or
2. a compilation of all previous amendments with further amendments included in the restated articles.

Restated articles are adopted by following the procedure to amend articles of incorporation. Article 1396-4.06A of the TNPCA, permits the board of directors of a corporation with members having voting rights to adopt restated articles without membership approval if the restated articles make no further amendments to the articles of incorporation. Although the secretary of state has not promulgated forms for restated articles, the following forms are offered as guides to the preparation of restated articles.

Non-Profit Corporation Restated Articles Without Amendment

RESTATED ARTICLES OF INCORPORATION

ARTICLE ONE

The name of the corporation is ________________________. The corporation hereby adopts restated articles of incorporation which accurately copy the articles of incorporation and all amendments thereto that are in effect to date and such restated articles of incorporation contain no change in any provision thereof.

ARTICLE TWO

The restated articles of incorporation were adopted in the following manner:

[IF MEMBERSHIP APPROVAL IS REQUIRED BY THE ARTICLES OF INCORPORATION OR IF MEMBERS HAVING VOTING RIGHTS VOTE ON THE ADOPTION OF THE RESTATED ARTICLES, USE EITHER ALTERNATIVE A OR B SET FORTH BELOW.]

Alternative A:

the restated articles were adopted at a meeting of the members held on ___________, at which a quorum was present, and the restated articles received at least two-thirds of the votes which members present or represented by proxy were entitled to cast.

Alternative B:

The restated articles were adopted by consent in writing by all members entitled to vote with respect thereto.

[IF THE CORPORATION HAS NO MEMBERS, OR NO MEMBERS HAVING VOTING RIGHTS, OR IF MEMBERSHIP APPROVAL IS NOT REQUIRED UNDER THE PROVISIONS OF ARTICLE 1396-4.06A, INSERT ALTERNATIVE C SET FORTH BELOW.]

Alternative C:

The restated articles were adopted at a meeting of the board of directors held on _____________, and received the vote of a majority of the directors in office, member approval not being required under the Act or there being no members having voting rights in respect thereof.

ARTICLE THREE

The articles of incorporation and all amendments and supplements thereto are hereby superseded by the following restated articles of incorporation which accurately copy the entire text thereof:

[Insert the entire text of the restated articles of incorporation.]

Dated this _____day of ____________________.

________________________________
An Authorized Officer of the Corporation

Instructions on the Preparation of Restated Articles Without Amendment

The restated articles of incorporation may substitute the number and the names and addresses of the persons currently serving as members of the board of directors in lieu of similar information concerning the initial board of directors. A non-profit corporation must have a minimum of three directors. The name and address of each incorporator may be omitted. Restated articles of incorporation for a corporation that is managed by its members pursuant to article 2.14C of the TNPCA must contain a statement to that effect (TNPCA, article 1396-4.06B).

The entire text of the restated articles should be included. It is permissible to attach an exhibit or addendum to the restated articles as a method of setting forth the entire text.

Non-Profit Corporation Restated Articles with Amendment

RESTATED ARTICLES OF INCORPORATION

ARTICLE ONE

The name of the corporation is _____________________. The corporation hereby adopts restated articles of incorporation which accurately copy the articles of incorporation and all amendments thereto that are in effect to date and as further amended by such restated articles of incorporation as hereinafter set forth and which contain no other change in any provision thereof.

ARTICLE TWO

The articles of incorporation of the corporation are amended by the restated articles of incorporation as follows:

[Insert a description of the changes which are being made to the articles of incorporation.]

ARTICLE THREE

Each such amendment made by the restated articles of incorporation has been effected in conformity with the provisions of the Texas Non-Profit Corporation Act and such restated articles of incorporation and each such amendment made by the restated articles were adopted on _____________________ in the following manner:

[IF THERE ARE MEMBERS HAVING VOTING RIGHTS, USE EITHER ALTERNATIVE A OR B SET FORTH BELOW.]

Alternative A:

The restated articles and the amendments made by such restated articles were adopted at a meeting of the members held on ___________, at which a quorum was present, and the restated articles and the amendments made by such restated articles received at least two-thirds of the votes which members present or represented by proxy were entitled to cast.

Alternative B:

The restated articles and the amendments made by such restated articles were adopted by consent in writing by all members entitled to vote with respect thereto.

[IF THE CORPORATION HAS NO MEMBERS OR NO MEMBERS WITH VOTING RIGHTS, INSERT ALTERNATIVE C SET FORTH BELOW.]

Alternative C:

The restated articles and the amendments made by such restated articles were adopted at a meeting of the board of directors held on ______________, and received the vote of a majority of the directors in office, there being no members having voting rights in respect thereof.

ARTICLE FOUR

The articles of incorporation and all amendments thereto are hereby superseded by the following restated articles of incorporation which accurately copy the entire text thereof including any previous amendments and as amended as set forth above:

[Insert the entire text of the articles of incorporation as they have been amended to read.]

Dated this _____day of ____________________.

________________________________ An Authorized Officer of the Corporation

Instructions on the Preparation of Restated Articles of With Amendment

The restated articles of incorporation may substitute the number and the names and addresses of the persons currently serving as members of the board of directors in lieu of similar information concerning the initial board of directors. A non-profit corporation must have a minimum of three directors. The name and address of each incorporator may be omitted. The statements concerning amendments should include an identification by description or reference to the article number of the provisions being amended. It is not necessary to state the text of the amended provisions separately from the entire text of the amended and restated articles of incorporation.

The entire text of the restated articles should be included. It is permissible to attach an exhibit or addendum to the restated articles as a method of setting forth the entire text.

Execution and Filing

The restated articles of incorporation should be signed by an officer of the corporation. Two copies of the restated articles should be delivered to the secretary of state. If the document conforms to law, the secretary of state will file the document, note the date of filing, and return a file stamped copy along with a certificate of restated articles, if a duplicate copy of the document was provided for such purpose.

Fee

The filing fee for restated articles of a non-profit corporation is $50.00.

Articles of Dissolution for a Non-Profit Corportation

A corporation may wind up its affairs and dissolve by resolution of the board of directors and a two-thirds vote of the members having voting rights. If there are no members or no members having voting rights, the dissolution is to be authorized by a majority vote of the directors. Upon adoption of such a resolution, the corporation should cease to conduct its affairs except as may be necessary to wind up.

Articles of dissolution are to be signed by an officer of the corporation and two copies submitted to the secretary of state along with the $5.00 filing fee. There is no requirement that a tax certificate be obtained from the comptroller of public accounts prior to the filing of the articles.

The articles must include the following:

1. the name of the corporation;
2. a statement setting forth the date of the meeting of the members at which the resolution to dissolve was adopted and that such resolution received a two-thirds vote of the members, or that the resolution was adopted by a consent in writing signed by all members entitled to vote;
3. if there are no members or no members having voting rights, a statement that the corporation has no members or no members having voting rights, and that the resolution to dissolve was adopted by a majority of the board of directors setting forth the date of the meeting at which the resolution to dissolve was adopted;
4. a statement that all debts, obligations and liabilities of the corporation have been paid and discharged or that adequate provision has been made therefor; or, if the property and assets were insufficient to satisfy all debts and obligations that the property and assets have been applied as far as they would go to satisfy the debts and obligations of the corporation; and
5. a statement that there are no suits pending against the corporation or that adequate provision has been made for the satisfaction of any judgment which may be rendered against the corporation.

The secretary of state has promulgated a form for filing articles of dissolution of a non-profit corporation; use of the form is permissive.

Upon the issuance of a certificate of dissolution by the secretary of state, the existence of the corporation ceases.

Merger of Non-Profit Corporations

Articles 5.01 – 5.07 of the TNPCA provide that any two or more domestic non-profit corporations may merge or consolidate with each other or with one or more foreign non-profit corporations. Under these provisions, Texas non-profit corporations may not merge or consolidate with entities other than non-profit corporations.

Corporations planning to merge or consolidate must adopt a plan as provided in article 5.01 or article 5.02 of the TNPCA. The plan must be adopted by a resolution of the board of directors and submitted to a vote of the members having voting rights. If there are no members having voting rights, the plan can be adopted by a majority of the directors. The plan, if required to be voted on by the members, must be approved by a two-thirds vote.

Following approval by the members, articles of merger or of consolidation involving only domestic corporations are to be signed on behalf of each corporation by an officer and submitted to the secretary of state for filing.

The articles must include:

1. the plan of merger or consolidation;
2. a statement setting forth the date of the meeting of members at which the plan was adopted; that a quorum was present at such meeting; and that the plan received at least a two-thirds vote. In the alternative, a statement may be included that the plan of merger was adopted by a consent in writing signed by all members entitled to vote.

The articles of merger or consolidation may set forth a time (within 90 days subsequent to the date of filing) at which the merger or consolidation shall be effective. If the articles of merger or consolidation do not specify a delayed effective date as provided by article 1396-10.07 of the TNPCA, the merger or consolidation will be effective upon the issuance of a certificate of merger or consolidation. Please refer to article 1396-10.07 of the TNPCA and the subsection entitled “Delayed Effective Date” in Chapter I of this Guide for further information.

Mergers or consolidations involving foreign non-profit corporations have slightly different requirements than those involving only domestic non-profit corporations. Article 5.07, TNPCA, should be consulted to determine these requirements.

Two copies of the articles of merger or articles of consolidation are to be delivered to the secretary of state along with the $50.00 filing fee. There is no requirement that a tax certificate be obtained from the comptroller of public accounts prior to the filing of the merger.

Conversion to a Non-Profit Corporation

The Texas Non-Profit Corporation Act does not provide for the creation of a non-profit corporation by means of a plan of conversion, nor does the act provide for the conversion of a Texas non-profit corporation into another type of entity. Nevertheless, the Attorney General has held that conversion is not inconsistent with the TNPCA and therefore a domestic business corporation can convert to a domestic non-profit corporation. Op. Tex. Att’y Gen. No. JC-0015(1999). Because the TNPCA does not contemplate creation of a non-profit corporation by conversion, the transaction would take a slightly different form when a domestic non-profit corporation is the converted entity. Unlike other types of conversions, the non-profit corporation would first be created and then the converting entity would be converted into the existing corporation. Although Texas non-profit corporations may be the converted entity in a conversion transaction, they may not convert to another type of entity.

Certificate of Authority for a Non-Profit Corportation

A foreign corporation conducting its affairs in Texas is required to obtain a certificate of authority pursuant to the TNPCA, article 1396-8.01. Foreign corporations include those corporations organized in other states and countries.

Whether certain activities constitute “conducting affairs” in Texas is often difficult to answer. The TNPCA, article 1396-8.01B, lists activities that do not constitute conducting affairs in this State. While there are not many cases interpreting the exceptions in the TNPCA, there are numerous cases interpreting the exceptions in the Texas Business Corporation Act which parallel those in the TNPCA. The secretary of state does not have the authority to issue formal opinions on whether a corporation is conducting its affairs in this State and needs to obtain a certificate of authority.

A foreign corporation which is conducting affairs in Texas without a certificate of authority is not permitted to maintain any action, suit or proceeding in any court in this state until it has obtained the certificate of authority. The TNPCA does not provide for the monetary penalties provided in the Business Corporation Act.

Tax Exemption for Foreign Corporations

Not all foreign non-profit corporations are entitled to exemption from state taxes. The secretary of state, however, does not make such determinations. A non-profit corporation may be exempt from the payment of state franchise tax if its purposes fall within one of the exemptions listed in the Texas Tax Code, Chapter 171, Subchapter B. Questions on exemption procedures should be addressed to:

Comptroller of Public Accounts
Tax Assistance
Exempt Organizations Section
Austin, Texas 78774-0100
(512) 463-4600 or (800) 252-1381
TDD: (800) 248-4099 or (512) 463-4621

Filing Requirements

To obtain a certificate of authority, a corporation must submit the following documents and fees:

1. two copies of the application for certificate of authority (TNPCA, articles 1396-8.04 and 8.05);
2. a certificate from the state of incorporation evidencing the corporate existence (TNPCA, article 1396-8.06), which must be dated within 90 days prior to filing of the application (If the certificate is in a language other than English, a translation of the certificate, under oath of the translator, must be attached to the certificate); and
3. a statutory filing fee of $25.00 (TNPCA, article 1396-9.03A(6)).

Guidelines for the Preparation and Filing of Applications for Certificate of Authority

The secretary of state has promulgated a form which can be used for making an application for certificate of authority; use of the form is permissive. If drafting your own application, the following information is required:

1. Corporate Name

a. The TNPCA, article 1396-8.03, provides that the name of a non-profit corporation cannot be the same as, or deceptively similar to, or similar to, that of an existing domestic or foreign corporation, profit or non-profit, or any name reservation or name registration. The Texas Business Corporation Act, Texas Limited Liability Company Act, and the Texas Revised Limited Partnership Act each provide that the names of limited liability companies, corporations and limited partnerships cannot be the same, deceptively similar or similar.
b. The corporation name may be similar if a letter consenting to use of a similar name is obtained from the entity deemed to have the similar name. The letter of consent should be an unrestricted authorization for use of the name. The letter should be signed by a corporate officer, a limited liability company manager or member, or a general partner of a limited partnership, and sent to the secretary of state with the application for certificate of authority.
c. Please note that a letter of consent is an option with similar names only. If a name is the same as, or deceptively similar to, that of an existing entity, the name will not be filed under any circumstances.
d. The same entity name rules apply to foreign corporations, as well as domestic corporations, profit and non-profit.
e. The name of a non-profit corporation is not required to contain one of the words of incorporation or an abbreviation thereof.

2. Assumed Name

a. If a corporate name is not available or consent cannot be obtained, the foreign corporation must qualify and do business under an assumed name that meets the requirements for corporate names. The application should state the assumed name under which the corporation shall qualify and conduct its affairs.
b. If the corporation qualifies under an assumed name, an assumed name certificate in accordance with Chapter 36 of the Texas Business & Commerce Code should be filed with the secretary of state and with the county clerk. (Refer to Chapter XIV of this Guide for further information on assumed names.)

3. Statement of Non-Profit Status

The application for certificate of authority must contain a statement that the corporation is a non-profit corporation.

4. Jurisdiction of Incorporation

The application must include the name of the state, country, province or territory in which the corporation was formed.

5. Date of Incorporation and Duration

The date of incorporation and the duration should be stated on the application. The period of duration should be the duration as stated in the corporation’s articles of incorporation.

6. Principal Office

The application should state the street address of the corporation’s principal office in the state or country of incorporation. If the corporation is incorporated in Delaware, for example, the address shown must be in Delaware even though the corporation’s principal place of business may be located elsewhere.

7. Registered Office/Agent

A street or building address must be listed for the registered office. The registered agent may be either an individual or a corporation authorized to transact business or to conduct its affairs in Texas. The corporation securing the certificate of authority may not serve as its own registered agent. The function of a registered agent is to accept process and official notices which may be served on the corporation and notify the corporation of such acceptance.

8. Purposes

The purpose or purposes which the corporation proposes to pursue in the conduct of its affairs in Texas should be stated.

9. Directors/Officers

The names and addresses of the directors and officers of the corporation should be listed on the application for certificate of authority. In addition, the office held by each person listed as an officer should be included.

10. Members

A statement of whether or not the corporation has members must be included.

11. Certificate Evidencing Existence

The application should be accompanied by a copy of a certificate evidencing corporate existence. The certificate should be issued by the official responsible for the creation of corporations in the jurisdiction of incorporation. The certificate may be titled a certificate of existence, good standing, status, etc. The title is not important as long as the certificate evidences that the corporation securing the certificate of authority is a validly existing corporation. Certified copies are generally not acceptable.

The certificate must be dated within 90 days prior to filing the application for certificate of authority by the secretary of state. If the certificate is in a language other than English, translation of the certificate under oath of the translator must be attached.

Eexecution and Filing

The application for certificate of authority must be signed by an officer of the corporation. Two copies of the application should be submitted for filing. If the document conforms to law, the secretary of state will file the document and mark the date of filing on both copies of the application. A stamped copy will be returned to the corporation with a certificate of authority, if a duplicate copy of the document was provided for such purpose.

Report of Domestic and Foreign Corporations

The TNPCA, article 1396-9.01, authorizes the secretary of state to require domestic non-profit corporations and foreign non-profit corporations authorized to conduct affairs in this state to file a report setting forth:

  1. the name of the corporation and the state or country in which it is incorporated;
  2. the name of its registered agent and the address of its registered office and, in the case of a foreign corporation, the address of its principal office in the state or country in which it is incorporated; and
  3. the names and addresses of its officers and directors.

The report may be required no more often than every four (4) years and is to be made on forms promulgated by the secretary of state. To the extent possible, the secretary of state will print the information previously reported by the corporation and request the corporation to mark changes to the preprinted data. Changes to the name of the registered agent and to the registered office address may be made by making changes to the information contained in the periodic report. A change to the name of the corporation however cannot be effected through the filing of the periodic report. In order to change the name of the corporation, the corporation must file articles of amendment to the articles of incorporation.

Notice that the report is due will be sent to the registered agent at the registered office address. The report is due thirty (30) days from the date on which the notice is mailed. The failure of the corporation to receive the notice does not relieve the corporation of the requirement to file the periodic report or extend the time within which the required report must be filed.

Corporations Required to Report

The TNPCA, article 1396-10.04G, provides that all corporations organized not for profit under special statutes which do not contain some of the provisions set forth in the TNPCA are subject to those provisions of the TNPCA. In addition, the Texas Miscellaneous Corporation Laws Act, article 1302-1.03, provides that all corporations organized under special statutes shall be subject to the provisions of the TNPCA to the extent that the special statute is not inconsistent with the TNPCA.

Pursuant to these statutory provisions, all corporations organized not for profit, regardless of the statute under which they are formed are subject to the requirement of article 9.01, TNPCA, and will be required to file the report authorized by that article.

Voluntary Submission of a Report

A non-profit corporation may submit for filing by the secretary of state a periodic report when not required to do so by the secretary of state. The voluntary submission of a report however does not relieve the corporation of the need to file the periodic report or extend the time within which the report must be filed when the report is specifically required from the corporation by the secretary of state.

Execution and Fees

The report must be signed by an officer of the corporation. The filing fee is $5.00.

Failure to Comply

Forfeiture of Right to Conduct Affairs

A corporation which fails to file the report within thirty (30) days will forfeit its right to conduct affairs in this state. While forfeited, the corporation may not maintain any action, suit or proceeding in any court of this state. However, the forfeiture does not prevent the corporation from defending any action, suit or proceeding or impair the validity of any contract. While forfeited, the non-profit corporation may not amend its articles of incorporation or certificate of authority until it has been relieved of its forfeiture by filing the report. However, the forfeiture of the corporation’s right to conduct its affairs does not prevent the corporation from filing articles of dissolution, an application for withdrawal or termination.

Any corporation whose right to conduct affairs has been forfeited can be relieved of such forfeiture by filing the required report within 120 days of the date of notice of forfeiture and paying the filing fee plus a late fee of $1.00 for each month or fraction thereof that has elapsed since the report was due but not less that $5.00 nor more than $25.00.

Involuntary Dissolution

Any corporation whose right to conduct affairs has not been revived within 120 days will be involuntarily dissolved or its certificate of authority revoked by administrative action of the secretary of state without judicial ascertainment.

Reinstatement Pursuant to Article 1396-9.02

A corporation which has been involuntarily dissolved or had its certificate of authority revoked for failure to file the required report may reinstate at any time by filing the required report and paying the filing fee of $25.00. In addition, the corporation must pay all other fees, taxes, penalties and interest which were due at the time of dissolution or revocation and which would have accrued during the period that the corporation was dissolved or its certificate of authority revoked.

If the name of the corporation is not available at the time of application for reinstatement, the corporation must file an amendment to its articles of incorporation to change its name or obtain a letter of consent from the entity with the conflicting name if that is a possible alternative. As an alternative to changing its name, a foreign non-profit corporation may file an assumed name certificate in compliance with Chapter 36 of the Texas Business & Commerce Code and conduct its affairs in the state under an assumed name.

Delayed Effective Date

Under article 10.07 of the Texas Non-Profit Corporation Act, non-profit corporations may choose to delay the effectiveness of filing certain documents. Please refer to the subsection entitled “Delayed Effective Date” in Chapter I of this Guide for further information.