Starting Your Non-profit
There are a few things you may want to consider when starting your non-profit in Michigan. How you prepare your mission statement and the information you include in it will help you answer questions from future lenders, board members and employees.
Creating a Mission Statement
Create your mission statement by outlining what you want your non-profit to do and by explaining its purpose. Answer these basic questions: who, what, where, when, why, and how? Lay out your company's objectives, activities, and resources, and explain how and where it will obtain funding.
501(c)(3) and Other Types of Non-Profits
There are different types of nonprofits in Michigan. A 501(c)(3) nonprofit is exempt from federal taxation under the Internal Revenue Code. These are usually organizations that operate for charitable, religious, scientific, and other similar reasons. They may include both public charities and private foundations.
There are also other types of Michigan nonprofits that may not qualify for tax exemption. Social welfare organizations, business leagues, and social and recreational clubs may also qualify for nonprofit status in Idaho.
Considerations for Starting a Non-profit
When creating your Michigan nonprofit, consider the potential advantages and disadvantages:
Advantages:
- Michigan not for profits are exempt from Michigan income tax.
- Non-profit corporations may provide their shareholders, directors, and officers with protection from liability.
- Some Michigan nonprofits have advantages in fundraising, especially 501(c)(3) non-profits.
- A non-profit corporation can outlive its original organizers, unlike partnerships and associations.
- Grants from some federal and state government organizations may require non-profit status.
- Not for profit organizations may be exempt from property taxes on all or part of their real property.
Disadvantages:
- Although non-profits are good for managing large numbers of members, they are not a good choice if you want to maintain personal control of your organization.
- Non-profits require more time and money to create and maintain than sole proprietorships or partnerships.
Requirements and Mandatory Forms for Creating a Non-profit
- In order to start and run a nonprofit in Michigan, you must submit Articles of Incorporation to the State Department of Labor and Economic Growth, Bureau of Commercial Services, Corporation Division.
- If your corporation is a 501(c)(3) nonprofit, submit Form 1023, Application for Recognition of Exemption to the Internal Revenue Service. Exemption from Michigan state business tax is automatic for nonprofits that have obtained 501(c)(3) from the Internal Revenue Service.
- Nonprofits are also automatically exempt from sales tax in Michigan.
- Charities that either solicit or receive charitable contributions in Michigan must register with the Department of the Attorney General's Charitable Trust Division. Volunteer organizations that receive less than $25,000 annually are exempt from this requirement.
How to Retain Your Non-profit Status
After forming your not for profit organization, you must adhere to specific guidelines so you can retain your nonprofit status.
- On or before October 1, nonprofit corporations must file an Annual Report with the Corporation Division.
- A nonprofit corporation should maintain complete books and records of accounts, as well as minutes of corporate meetings, at its registered office.
- The Charitable Solicitation License must be renewed 30 days prior to expiration date.
What it Costs to Form a Michigan Non-profit
The current fees for filing various documents in Michigan are:
- Articles of Incorporation - $20
- Annual Report - $20
Accountability and Ethics
Board members should avoid conflicts of interest. They must disqualify themselves from decisions if a conflict is present.
Nonprofits should respect the intent of their donors in areas such as anonymity and the use of gifts. Written agreements can help avoid disputes about how gifts will be used.
Nonprofits operate for public purposes with public support. Information regarding the nonprofit's mission activities and finances should be made available to the public.
Applying for Grants & Loans
Grants and loans from federal, state, and private sources are a major source of funding for Idaho non-profits. A not for profit corporation is responsible for complying with grant requirements and keeping appropriate records. It is important for non-profits to keep money received from grants separate and apart from the non-profit's general fund. A good reputation in administering grant monies helps non-profits obtain more funding from these sources.
Michigan Non-profit Resources
Michigan Nonprofit Association: The MNA website provides helpful information regarding starting and operating nonprofits, along with news of advocacy efforts on behalf of Michigan nonprofits.
Staying Legal for Michigan Nonprofits: This helpful website by MNA focuses on starting and maintaining nonprofit status.
Michigan Department of Labor and Economic Growth: Get official details about regulations, requirements, and further information on beginning and maintaining and nonprofit corporations in Michigan.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
