Starting a nonprofit organization offers a fulfilling way to positively impact the community. Whether you’re driven by a passion for social justice, environmental sustainability, or community development, establishing a nonprofit can be both rewarding and transformative.
Anyone considering whether to launch a nonprofit needs to understand the key steps to put the plan into motion, such as learning how to raise money, recruiting a board of directors, and filing important regulatory documents. For those living in the “Great Lakes State,” here’s a step-by-step guide on how to start a nonprofit in Michigan.
What is a Nonprofit?
Unlike for-profit businesses, the primary goal of a nonprofit organization is to fulfill a mission or purpose that benefits the community, society, or a specific cause. Nonprofits typically support causes like health care, social services, environmental conservation, arts and culture, and more. The Internal Revenue Code designates the different types of NPOs. The most common non-profits include:
- Section 501(c)(3)
- Section 501(c)(4)
- Section 501(c)(5)
- Section 501(c)(6)
- Section 501(c)(7)
- Section 501(c)(k)
Nonprofit status can be revoked by the Internal Revenue Service if the organization fails to maintain certain standards particular to each IRC code.
How to Start a Nonprofit in Michigan
1. Name Your Organization
Your path toward starting a nonprofit begins with choosing a name for your organization. Legally, whatever name you choose cannot be the same or too similar to the name of another organization already on file with the state.
You can search through Michigan’s Department of Licensing and Regulatory Affairs (LARA) website to see if your preferred name is available. You can also reserve a name for six months by filling out an Application for Reservation of Name with the site. The filing fee is $10.
The nonprofit’s name also needs to strike an emotional chord with potential donors, volunteers, and other stakeholders. Here are some words of advice for naming your organization:
- Choose a name that reflects the mission of your organization. For example, if your nonprofit is engaged in environmental activism, consider using “green” as part of your name.
- Use a verb rather than a noun when naming your organization so people can quickly understand what your nonprofit does.
- Consider creating a unique acronym to make your organization more memorable.
2. Recruit a Board of Directors
Your next step is to recruit a board of directors. The board is responsible for managing the nonprofit’s operations. When choosing board members, you’ll want to find people who share a commitment to the cause, but have varied skill sets that combine to make a well-rounded board. Each nonprofit board position plays a different role in the organization, so consider who would be most appropriate for each position.
Michigan rules state that your nonprofit organization must have at least three directors. You must also have an agent for service of process. This person will accept legal papers on behalf of the organization. The agent must have a physical street address in Michigan. Smaller nonprofits typically name a board member or officer as the initial agent.
3. File Articles of Incorporation
Once you establish a board of directors, file articles of incorporation with the Secretary of State. These documents describe when and where your organization was formed and its fundamental structure. They also allow you to begin legally operating your nonprofit.
The articles of incorporation also qualify you for Section 501, a U.S. tax code that makes your nonprofit exempt from paying federal income taxes, and allow you to apply for grants and loans from government agencies such as the United States Small Business Administration and the Federal Emergency Management Agency (FEMA).
You can download the articles of incorporation document here and file it with LARA by mail or in-person. The state filing fee is $20.
4. Obtain Employer Identification Number
An Employer Identification Number (EIN) is a unique, nine-digit number provided by the IRS to identify your organization. It helps businesses comply with employment tax requirements, open a bank account, and apply for 501(c)(3) status.
Obtain an EIN by filling out form SS-4 on the IRS website. Applicants should receive an IRS determination letter within a week.
5. Establish Governing Documents and Policies
At your board of directors’ first meeting, they’ll need to define the nonprofit’s governing policies, bylaws, volunteer guidelines, and procedures for conflict resolution. These policies will then be documented in your organization’s manual.
6. Apply for Michigan Tax Exemptions
With everything else in order, you can progress to the final step and apply for 501(c)(3) tax exemption status. The IRS offers three forms to obtain an official nonprofit distinction: Form 1023, Form 1023-EZ, and Form 1024. Read IRS guidelines to determine which form best suits your organization.
Michigan doesn’t require an additional application for state tax exemption. Organizations that received a federal income tax exemption from the IRS under sections 501(c)(3) and 501(c)(4) or organizations that had previously received an exemption letter from the Michigan Department of Treasury are also entitled to sales tax exemption.
OnBoard Powers Effective Boards
Running a nonprofit requires a seamless working relationship among board members and a high level of organization to keep documentation in order. OnBoard’s board management software comes equipped with key features to help nonprofit organizations enhance governance, such as:
- Real-time meeting analytics and progress tracking
- A secure messaging system
- Zoom and Microsoft Teams integration
- Detailed diversity reporting
- 24/7 customer support
- Security provided by Microsoft Azure
Download our free Board Meeting Minutes Template to discover how OnBoard simplifies the recording process, allowing users to easily track tasks, motions, and attendance.
Frequently Asked Questions (FAQ)
How Much Does it Cost to Start a Nonprofit in Michigan?
Aside from the filing fees for a nonprofit name ($10 )and articles of incorporation ($20), you do not have to pay any upfront fees to start a nonprofit in Michigan.
How Many Directors Are Required for a Nonprofit in Michigan?
At least three directors who are not related to each other must be on the board to meet Michigan nonprofit standards.
About The Author
- Gina Guy is an implementation consultant who specializes in working with nonprofit organizations get the most from their board meetings. She loves helping customers ease their workloads through their use of OnBoard. A Purdue University graduate, Gina enjoys refinishing furniture, running, kayaking, and traveling in her spare time. She lives in Monticello, Indiana, with her husband.
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