👋🏿🫵🏿👇🏿👇🏿👇🏿⛪ Church leaders, don’t file blindly Your full 501(c)(3) roadmap. Share this now📓✏️

🔹 Step 1: Incorporate in Texas

File your Certificate of Formation (Form 202) with the Texas Secretary of State.

This is where you legally register your church/ministry with the state.

You’ll include your initial registered agent, address, and general purpose.

💵 Cost: $25 + ~2.7% online processing fee (optional $25 expedite if mailing)

Fees might have changed

Step 2: Get Your EIN

Apply free via IRS.gov. Essential before you file with IRS.

Once the state approves your incorporation (usually 3–7 business days), you can apply for your EIN through the IRS (free).

**Can take longer to get your EIN

You need your EIN before filing IRS Form 1023 or opening a bank account.

🔹 Step 3: Adopt Bylaws & Appoint Your Board

Your bylaws are your church’s internal rules: how meetings run, who votes, how leaders are appointed, etc.

Your board must be in place before you file for 501(c)(3) status with the IRS.

This is foundational with no direct fee.

🔹 Step 4: File IRS Form 1023 or 1023‑EZ

Form 1023-EZ:

💲 $275 | 🕓 ~2-4 weeks approval

👉 For small churches/ministries under $50K in expected income (and less than $250K in assets)

Full Form 1023:

💲 $600 | 🕓 ~3-6 months approval

👉 For larger churches or those wanting full documentation for grants or IRS clarity

Fees and times could of change.. always do your due diligence.

This is where you officially request federal tax-exempt status so:

You can receive tax-deductible donations.

You’re recognized as a nonprofit religious organization.

You qualify for grants, discounts, and state tax exemptions.

🕓 When to File: Within 27 months of your Texas incorporation to get retroactive federal tax-exempt status . Waiting risks losing exemption or back-dated donations status.

Fees might have changed

🔹 Step 5: Optional State Tax Exemptions

Once IRS-approved, apply to Texas Comptroller (Form AP-204) for sales & franchise tax exemptions—free, but processing times vary.

Once you receive your IRS Determination Letter approving your 501(c)(3):

1. File Form AP-204 with the Texas Comptroller’s Office to get:

🛍️ Sales tax exemption (no tax on church supplies, events, etc.)

💼 Franchise tax exemption (you likely won’t owe this, but filing makes it official)

2. Attach your IRS Determination Letter to the AP-204.

💵 Cost: $0 — Texas doesn’t charge for this exemption filing

🕓 Timeline: 4–6 weeks for processing (sometimes sooner)

Step 6: Stay in Compliance – Don’t Lose Your 501(c)(3)

After you’re approved, it’s not just “set it and forget it”—you’ve got to maintain it. Here’s what that includes:

📌 1. IRS Form 990 – Annual Return

Most 501(c)(3) orgs are required to file a Form 990 each year.

BUT 👉🏽 churches and church-related organizations are automatically exempt from filing 990s, including:

Churches

Conventions or associations of churches

Integrated auxiliaries of churches (e.g., youth ministries, men/women fellowships under the church)

✅ If you're a church/ministry that meets IRS definition, you do not have to file a 990 annually.

💡 However, if you’re running a non-church nonprofit (like a faith-based school, nonprofit biz, or outreach org), then you likely DO need to file:

Income Level File This Form

Under $50,000 990-N (e-postcard)

$50K – $200K 990-EZ

Over $200K 990

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📌 2. State of Texas – Periodic Report (Form 802)

Due every 4 years for Texas nonprofits

💵 Fee: $5

You’ll get a notice from the Texas Secretary of State

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📌 3. Keep Good Records

Board meeting minutes

Financial records

Donation receipts (for givers)

Annual budgets and activities

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This question I get ASK all the time

If a church is operating as an LLC, never filed for 501(c)(3), and is collecting tithes and offerings through Square, here's what you need to know from both the IRS and legal lens:

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🚨 First of All: A Church Registered as an LLC Is Legally Considered a For-Profit Business

Even if they function like a church, the IRS and state will view them as a business unless they’re incorporated as a nonprofit and/or have 501(c)(3) status.

So here’s how that affects filing taxes and accepting money:

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💰 Using Square for Tithes/Offerings

Square is a third-party payment processor and will issue a Form 1099-K to the church LLC if over $600 in transactions.

The IRS now gets a copy of that 1099-K — and will expect the LLC to report that money as income on a business tax return.

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🧾 How Would They File Taxes in This Case?

If the church is:

A Single-Member LLC (Sole Prop) → Must file Schedule C with their personal tax return (Form 1040)

💥 All tithes/offerings get reported as business income

That person (likely the pastor) will pay self-employment tax on those funds unless expenses are deducted

A Multi-Member LLC → Must file Form 1065 (partnership return)

Again, all income is treated as taxable business income

💡 This creates a tax and legal mess. The IRS doesn’t recognize LLCs as churches, so your tithes and offerings are not protected or exempt.

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😬 Real-Life Risks:

Members’ donations are not tax-deductible

The pastor may be taxed personally on funds meant for the ministry

The LLC is not shielded from audit or misclassification

You could lose grant and building donation eligibility

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✅ What Should You Do?

1. Immediately form a nonprofit corporation (in Texas, that’s only $25)

2. Apply for an EIN (free)

3. Draft bylaws + appoint a board

4. File for 501(c)(3) (Form 1023-EZ = $275 if eligible)

5. Update Square and bank account info to reflect new nonprofit

6. Refile taxes correctly in the following year

💡 Pro Tip:

It’s better to transition now than keep operating improperly — the longer they function like a business while claiming to be a ministry, the harder it is to defend in case of an IRS audit.🚩🚨🚩🚨🚩🚨