Establishing a nonprofit is kind of similar to forming a corporation in Michigan. You can easily start a nonprofit in Michigan as a limited liability company, a corporation, or any other type of business structure. Unlike for-profit businesses, nonprofits focus on addressing pressing social issues than profit-oriented businesses.
This article will guide you through the Dos and Don’ts of starting a nonprofit in Michigan. LLCBuddy editors explain all the steps you must follow to form a corporation for your nonprofit organization. It must be noted that this page shared generalized steps to form a nonprofit in Michigan. It is recommended to consult an attorney or hire a professional service.
What is a Nonprofit in Michigan
Nonprofit organizations are legal entities that operate to serve public benefits and address community issues. Unlike for-profit organizations, nonprofits do not aim to generate any profit. The Internal Revenue Service (IRS) generally exempts nonprofit organizations from tax. However, based on the business entity structure, you will receive tax exemptions as a nonprofit.
In Michigan, ensure you have a community issue to address before forming your nonprofit. It can generally be education, religion, charity, social service, or other social issues. Nonprofits do not pay taxes on the money they receive through fundraising programs, donations, or any charitable funding.
Types of Nonprofits in Michigan
The first thing one has to decide is what type of nonprofit structure one wants. There are several types of nonprofits one can start. Here is a list of nonprofit types one can choose from-
- Nonprofit LLC
- Nonprofit Corporation
- Unincorporated Nonprofit
BOI Report Filing
According to the Corporate Transparency Act, every LLC, corporation, and other type of business that is registered with the Michigan SOS or similar authority, must file the BOI report with FinCEN. From January 1, 2024, it is mandatory to file a BOI report for every business entity. In this report, LLCs have to share information about the beneficial owners (having equal or more than 25% share). LLC owners can file BOI reports online or offline.
Businesses in Michigan that are created before January 1, 2024, should file their BOI report by January 1, 2025. Businesses that are created in 2024, must file the BOI report within 90 business days of finishing the formation process. Missing out on filing the BOI report may lead to a monetary penalty of $500/day.
How to Start a Nonprofit in Michigan
Nonprofits are certainly different from for-profit organizations. The main focus of the organization is on social values rather than profit. The process of having a nonprofit in Michigan is similar to forming any corporation in Michigan. However, there are a few additional steps to follow.
Step 1: Develop Your Mission and Vision
Before you get into legal details, you need to define the purpose and goal of your organization clearly; this will go a long way in guiding your decisions as well as making it easy for you to explain your mission statement.
- Pick out what specific cause or issue you want to address;
- Define who you will target or help reach particular goals;
- List down both what people should do within a short period and what they should achieve in the long term perspective;
- Write a captivating mission statement.
Step 2: Name Your Nonprofit in Michigan
Naming a business in Michigan has a handful of regulations. If you start a corporation or an LLC in Michigan, you must follow those regulations to name your nonprofit. The most important rule is to check if the name is available in Michigan to use.
If you’re forming an LLC in Michigan for your nonprofit organization, check out LLC naming guidelines in Michigan. For the corporation regulations, read on how to start a corporation in Michigan. As soon as the name is decided, you can reserve it with the Michigan Secretary of State. You can also file DBA in Michigan before you establish your nonprofit organization. DBA can be filed in three methods, online, by mail, and in person filing.. The DBA filing fee in Michigan is $25 for LLCs and $10 for LPs.
- Online DBA Filing: For online filing, check the Michigan Corporations Online Filing. There, look for the “Assumed Names” section. You will get the registration form.
- Offline DBA Filing: For filing offline, you must send the downloaded PDF form to the Michigan Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau, Corporations Division, P.O. Box 30054, Lansing, MI 48909 or drop it off in person at the 2501 Woodlake Circle, Okemos, MI
- DBA Renew Time in Michigan: five years
Step 3: Appoint Initial Board Members
If you’re forming a corporation for your Michigan nonprofit, it is required to appoint the initial board members. In Michigan, you need at least Three unrelated directors to start the organization. If you don’t choose a minimum of Three directors, it will automatically become a member-managed corporation.
Step 4: Get Michigan Resident Agent
This is a very important step for any business in Michigan. The Resident Agent in Michigan is a person who conducts all types of documentation between the State and your nonprofit organization. The Registered Agent must be from Michigan, above 18 years of age, and must have legal rights to conduct business in the state. Several professional and business formation services offer registered agent services in all the states in the USA. It is better to hire a professional rather than being your own Resident Agent in Michigan.
Step 5: File Articles of Incorporation with Michigan SOS
This is the most important step in forming a nonprofit corporation in Michigan. File your Articles of Incorporation with the Michigan Secretary of State. You can file your nonprofit corporation through three ways, online, by mail and in-person. Submit the details of your nonprofit corporation, like the name of the nonprofit, address, name and address of the registered agent, operation dates, directors’ details, and more information related to your company.
- Online Incorporation: Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything.
- Offline Incorporation: Send the form by mail to Michigan Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau — Corporations Division, P.O. Box 30054, Lansing, MI 48909. Drop it off in person at 2501 Woodlake Circle, Okemos, MI
- Incorporation Fee in Michigan: $60 for filing online, in person, and by mail
Hiring a professional service might be a wise idea here. Having a corporation is much more complex than forming an LLC. We recommend ZenBusiness as they are one of the top business service providers currently. They offer LLC formation at $0 in Michigan.
Step 5.1: Write Company Bylaws
As soon as you file the formation documents, it is time for the company bylaws. The directors and board members must decide how the meetings, elections, voting, and other corporate activities will be held. These bylaws must comply with the Michigan state law. It is similar to an LLC operating agreement in Michigan for the LLC owners.
Step 6: Get an EIN in Michigan
The next step is to obtain the EIN in Michigan. The employer identification number (EIN) is required to conduct business in Michigan. You will need to acquire the Michigan EIN from the official IRS website. To obtain the EIN, submit your application to the IRS office either by mail or through their online platform. There is no associated cost for this process.
Step 7: Tax Exemptions for Your Nonprofit
When you start a nonprofit in Michigan, you enjoy tax exemptions. As the nonprofits are not profit-oriented, they get a huge tax exemption from Federal and State authorities.
Federal Tax Exemption
You must submit Form 1023 to the IRS to file for federal tax exemption. This form, titled “Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code,” is required for all nonprofit corporations. Smaller nonprofits have the option to file Form 1023-EZ instead. You will be prompted to provide details about your organization upon obtaining the relevant form. Complete the form with the necessary information and submit it. The filing fees are $600 for Form 1023 and $275 for Form 1023-EZ.
State Tax Exemption
Once you get the Federal Tax Exempt, it is time for State Tax Exempt. In Michigan, you must apply for the tax exemption to the Michigan Department of Treasury. Get the form, fill it up with the correct details, and send it to the office. You may need to pay a fee along with the form and supportive documents to apply for the State Tax Exemption. You need an Exemption Certificate to apply for the state tax exemption. Read Michigan classification of taxes to learn more about the Michigan tax structure.
Can I form an LLC for my Nonprofit in Michigan?
Yes, you can form an LLC in Michigan to run a nonprofit. Establishing an LLC nonprofit in Michigan requires similar documents and paperwork. Except for tax exemption applications that one must file with the state tax and revenue department. LLCs must file Form 1023 with the Michigan Department of Treasury to get the tax exemption.
After You Form a Nonprofit Corporation in Michigan
Once your nonprofit is formed, there are additional steps to complete:
- Get necessary licenses: As soon as your corporation or an LLC for your Nonprofit in Michigan will be established, get necessary licenses and permits. Check with the local authority/government to get the local permits.
- Get Insurance for the Michigan Nonprofit: You must get workers’ compensation and unemployment insurance if you have employees. Based on your nonprofit structure, you might need general liability insurance, property, vehicle, auto insurance, etc.
- Get a Business Bank Account: You must get a business account for all types of business-related transactions in Michigan. You may need different documents based on the bank and place of business. Check with the bank for it.
- File Nonprofit as Charity: This is optional. Your nonprofit is either for charity purposes or any purpose that meets your community’s needs. If your organization is for charity purposes, then you can file your nonprofit as a charity to enjoy tax exemptions.
- Other Business Compliances: You may need additional compliances based on your nonprofit type. Check with your attorney or local authority for more information.
- Evaluating And Improving Performance: To evaluate the performance of your non-profit organization, it is necessary to; establish performance metrics also tied to the mission; and implement continuous improvement strategies.
- Staying Current With Nonprofit Trends And Best Practices: To stay up-to-date on trends and best practices in the non-profit world you should join nonprofit associations plus networks.
Common Challenges And How To Address Them
- Funding Sustainability
For funding sustainability issues you need to focus on diversifying funding sources and developing strong relationships with donors. Also, implementing efficient financial management, exploring earned income opportunities for sustainability, and such should be on focus.
- Volunteer Management
The challenges faced in volunteer management can be resolved by creating clear roles plus expectations for volunteers, and providing adequate training also support. Recognize and appreciate volunteer contributions while implementing volunteer retention strategies such as offering regular appreciation events or awards. Provide trainers’ placement services too.
- Mission Drift
This problem can be solved by several mechanisms such as regular review and reaffirmation of your organizational mission–this will ensure that all activities are aligned with the core purpose. Educate board members and staff about the importance of the mission and make them understand how this works out in practice. Implement a strategic planning process and explain to the board why it is important for their organizations to have a well-defined mission.
- Regulatory Compliance
To remain compliant with the law, you need to: keep track of changing laws and regulations all the time; conduct regular compliance audits; seek professional advice when in doubt; and implement comprehensive record-keeping systems.
Names of Nonprofit Corporations in Michigan
Following are some of the Nonprofit Organizations in Michigan. The contact information of these organizations can be found on Michigan Secretary of State portal.
- Gladwin Charities
- Goodrich Charities
- Grand Blanc Charities
- Grand Haven Charities
- Grand Ledge Charities
- Grand Rapids Charities
- Grandville Charities
- Grayling Charities.
FAQs
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In Conclusion
Starting a Nonprofit corporation in the Michigan takes careful thought, dedication, and detailing. Follow the steps detailed in this guide while addressing common challenges so that your organization can be built on solid ground and make a long-lasting impact on your cause. Remember also that running a nonprofit organization in Michigan is a perpetual learning, adapting, and growing process.
As you continue your journey, you may need professional help. Having a professional or experienced person, or attorneys while you run your nonprofit in Michigan can make the journey much simpler in the long run. Since forming a nonprofit involves tax exemptions, the government takes additional care to verify your background.
Donations, charity, and several community services are the most desirable ways to evade tax. Hence, many people get involved in nonprofit organizations. It is recommended to consult a legal professional, accountants, and service providers like ZenBusiness for the paperwork and formation process. With persistence, passion, and proper management structure everything is possible hence changing positively your community as far as Non-Profit corporations are concerned.