Do I Need To Incorporate or File With the IRS To Accept Donations?

First, it's helpful to understand that Texas law provides for unincorporated nonprofit associations. Texas law concerning unincorporated nonprofit associations is codified as chapter 252 of the Texas Business Organizations Code (BOC). A "nonprofit association" is defined as an unincorporated organization, other than one created by a trust, consisting of three or more members joined by mutual consent for a common, nonprofit purpose. Under Chapter 252, an unincorporated nonprofit association is treated for certain issues as a separate legal entity as opposed to an aggregate of individuals.

Second, with respect to the issue of incorporating, it's always a good idea if your financial resources permit you to incorporate. Incorporation has many benefits not the least of which is a well-defined management structure, body of governing law and limited liability.

Finally, with respect to soliciting and accepting donations, you don't necessarily need to file for tax-exempt status with the IRS, but it may still be a good idea to do so. Churches and organizations (other than private foundations) with annual gross receipts normally $5,000 or less are not required to file Form 1023 to obtain recognition of tax exemption for donors contributions to them to be tax deductible. Many still do because many donors and foundations want to see their name on the IRS list for registered charities listed here:

In order to appear on this list, you must formally apply for, and receive approval for, tax-exempt status as a nonprofit. While this will require some time to complete, require professional fees and a minimum $400.00 fee to the IRS, being formally recognized as non-profit will enhance your credibility make it easier for you to raise money.