Considering starting a nonprofit in Michigan? The most effective startup founders and boards follow these steps to establish their nonprofits.
Many of us feel a social responsibility to promote or facilitate foundational values like education, charity, and scientific research in society. And starting a nonprofit offers an excellent way to do this. However, creating a nonprofit organization requires many steps, including learning how to raise money for a nonprofit and recruiting a board of directors. Follow this step-by-step guide to learn how to start a nonprofit in Michigan.
1. Name Your Organization
The first step toward starting a nonprofit in Michigan is choosing a name. You should choose something that will resonate with potential donors, volunteers, and other stakeholders. It’s also important to consider what kind of message you want to convey through your organization. For example, if you want to promote environmental awareness, you might want to use the word “green” as part of your organization’s name.
Here are a few more proven best practices for naming your organization:
- Choose a name that reflects the mission of your organization.
- Use a verb rather than a noun when naming your organization. This makes it easier for people to understand what your organization does.
- Consider using a unique acronym to help people remember your organization’s purpose.
Requirements for choosing a nonprofit name in Michigan can be found in the Nonprofit Corporation Act. For more information, including how to register your name and ensure it’s unique, consult the State of Michigan’s Guide to Choosing a Business Name.
2. Recruit a Board of Directors
Your next task after naming the organization is to recruit a board of directors. The board is responsible for managing the operations of the nonprofit. Look for individuals with experience running nonprofits.
You may also want to reach out to local business owners and professionals in your field of interest to see if they know anyone who could serve on your board. Here are a few more considerations to make when choosing a board of directors:
- Familiarize yourself with various nonprofit board positions to identify which ones are appropriate for your organization.
- Look for members with varying skills to create a well-rounded board.
- Ensure you choose members based on their commitment to serve.
3. File Articles of Incorporation
After you’ve recruited a board of directors, you need to file articles of incorporation with the Secretary of State. If you’re wondering, a nonprofit article of incorporation is a legal document describing your organization’s basic structure. Once you have filed your articles of incorporation, you can begin operating legally.
The articles of incorporation will also help you qualify for Section 501, a U.S. tax code that exempts your nonprofit from paying federal income taxes. In addition, filing articles of incorporation will allow you to apply for grants and loans from government agencies like the United States Small Business Administration and the Federal Emergency Management Agency.
Here’s a quick outline of how to file articles of incorporation in Michigan:
- Download the required form.
- File the articles of incorporation with the Michigan Department of Licensing and Regulatory Affairs Corporations, Securities & Commercial Licensing Bureau by mail, or in person.
- Prepare a state filing fee of $20.
4. Obtain Employer Identification Number
An Employer Identification Number (EIN) is a unique, nine-digit number assigned by the IRS to identify your organization. It helps businesses comply with employment tax requirements, apply for 501(c)(3) status, and open a bank account.
To obtain an EIN:
- Visit the IRS website and fill out the form SS-4. You’ll be asked to provide information such as your name, address, phone number, and email address.
- After submitting this information, you’ll receive an IRS determination letter within a week.
5. Establish Governing Documents and Policies
Your nonprofit’s governing documents and policies are meant to serve as your organization’s manual. When your board of directors convenes for the first time, it will need to establish these policies, which include bylaws, volunteer guidelines, and conflict resolution procedures.
6. Apply for Michigan Tax Exemption(s)
The last step is applying for 501(c)(3) status. This is the most important part, because without it, your nonprofit won’t be able to accept donations, issue tax receipts, or participate in certain public benefits programs.
To obtain federal tax-exempt status, your nonprofit corporation must meet IRS requirements. You can use one of the three IRS forms to obtain the tax exemption status: Form 1023, Form 1023-EZ, and Form 1024. Check IRS guidelines to determine which of these forms you should fill out to achieve tax-exempt status.
The Michigan Department of Treasury does not require an application for state tax exemption. Organizations granted exemption from federal income tax under the Internal Revenue Code section 501(c)(3) or 501(c)(4) or organizations that had previously received an exemption letter from the Michigan Department of Treasury are entitled to sales and use tax exemption.
Understanding the Board of Directors' Role in a Nonprofit
Appointing a board of directors early allows you to work closely with board members and ensure they fit into your nonprofit culture. A nonprofit board of directors is responsible for the following crucial responsibilities:
- Set the nonprofit’s strategic direction
- Oversee day-to-day operations
- Manage fundraising efforts
- Monitor financial performance
- Represent the nonprofit in legal proceedings
- Serve as liaisons with government agencies
Getting Started with OnBoard
OnBoard is a nonprofit board management software solution to help nonprofits manage their operations as seamlessly as possible. The platform ensures nonprofit meetings become more productive by supporting real-time collaboration, managing minutes, and automating administrative tasks. Our solution also thrives on its ease of use, allowing you to focus on running your nonprofit.
Want to learn what board management software can do for your organization? Start with our free board meeting agenda template.
Frequently Asked Questions
How Many Board Members are Required for a Nonprofit in Michigan?
The state of Michigan requires nonprofits to have at least three directors who are not related to each other.
How Much Does it Cost to Start a 501(c)(3) in Michigan?
Aside from filing fees ($20 for articles of incorporation), there are no upfront costs associated with establishing a nonprofit in Michigan.
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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