How to Start a Nonprofit in Michigan

1. Name Your Organization

   Your organization’s name establishes its brand and is also important for incorporating with the state. The legal name of your nonprofit corporation may not conflict with any other organization registered in the state. Make sure the name is available and meets state requirements.

   Name Search:	Michigan Department of Licensing and Regulatory Affairs (LARA) - Bureau of Corporations, Securities & Commercial Licensing - Corporations Division Name search
   Suffix:	Not required.  162 MCL §450.2212

2. Recruit Incorporators and Initial Directors

   The incorporator is the person who signs the Articles of Incorporation for your nonprofit. You will need at least one, but can have more than one. Directors make up the governing body of your nonprofit corporation and are stakeholders in your organization’s purpose and success. You’ll want to identify three, unrelated individuals to meet IRS requirements. You will also want to be aware of any age or residency requirements.

   Michigan director requirements:

   Number: minimum 3 Qualifications: A corporation organized for purposes described in section 501(c)(3) of the internal revenue code of 1986 may include 1 or more directors on its board who are 16 or 17 years of age as long as that number does not exceed 1/2 the total number of directors required for a quorum for the transaction of business. No residency requirement. No membership requirement. Term: next annual meeting and until successor elected and qualified Quorum: majority Committee: minimum 1 director

   Michigan officer requirements:

   A president, a secretary, and a treasurer are required. Two or more offices may be held by the same individual. This person may sign instruments in only one capacity when the signatures of two officers are required.

3. Appoint a Registered Agent

   A registered agent is responsible for receiving legal notices on behalf of your organization. The appointed registered agent must be physically located in the state and maintain an office that is open during regular business hours. As a nationwide registered agent, our service is designed to receive your legal documents and provide secure access to those documents through your online account. Our local Michigan registered agent office is located in Okemos, MI. We offer registered agent service independently or as part of our nonprofit formation packages.

4. Prepare and File Articles of Incorporation

   Your nonprofit’s articles of incorporation officially mark the creation of your organization. They document where and when the organization was formed and capture other information necessary to verify its existence. While requirements for language vary from state-to-state, there are some basic provisions that the IRS will look for when you apply for 501(c)(3) exemption. It is important to customize the articles for your organization and make sure you meet the state and IRS requirements. Meeting these requirements from the start will help avoid having to make amendments later or risk getting your 501(c)(3) application rejected. Some states will also require you to publish your articles of incorporation, so be mindful of any deadlines and publishing instructions.

   Agency:	Michigan Department of Licensing and Regulatory Affairs (LARA) - Bureau of Corporations, Securities & Commercial Licensing - Corporations Division
   Form:	Articles of Incorporation - Nonprofit
   Instructions:	Michigan Nonprofit Corporation Filing Information
   Filing Method:	Mail or in person. MICH-ELF filers may file by fax or e-mail.
   Agency Fee:	$20 + optional $50-1,000 expedite service
   Turnaround:	~5-7 business days with returned documents in ~4 weeks. ~24 hours for $50. Same day for $100. 2 hours for $500. 1 hour for $1,000. See Expedited Service Request
   Law:	Michigan Compiled Laws (MCL) - Chapter 450: Corporations - Act 162 of 1982: Nonprofit Corporations Act
   Notes:	Submit one original of this document. Upon filing, the document will be added to the records of the Corporations Bureau. The original will be returned to your registered office address, unless you specify otherwise. Veteran-owned nonprofits can apply to have the incorporation fee waived by following the instructions on this page.

5. File Initial Report

   After filing articles of incorporation, you must file an initial report.

   Not required

   
   
   

6. Obtain an Employer Identification Number (EIN)

   This unique, nine-digit number is assigned by the IRS to identify your nonprofit. All types of nonprofits will apply for an EIN, not only those that hire employees. You will use your EIN to open a bank account, apply for 501(c)(3) status, and submit 990 returns to the IRS.

   Agency:	Internal Revenue Service (IRS)
   Form:	IRS Form SS-4
   Filing Method:	Mail, phone, fax, or online.
   IRS fee:	$0
   Turnaround:	Immediately online or by phone. 4 business days by fax. 4-5 weeks by mail.
   Notes:	The IRS website is only available during certain hours. Print your EIN before closing your session. For additional guidance, see IRS Pub 1635: Understanding Your EIN.

7. Store Nonprofit Records

   As you launch your nonprofit, you will receive a number of official documents. Organizing these documents in one place will save you headaches down the road. You will soon have numerous items to keep in your records including your EIN letter, bylaws, meeting minutes, 501(c)(3) determination letter, and more.

   
   
   

   A great way to maintain necessary documentation is Records Manager, our software for storing records securely, tracking directors and officers, and getting notified of meetings.

8. Establish Initial Governing Documents and Policies

   Your bylaws are the governing document for your nonprofit. They serve as your organization’s operating manual and should be consistent with your articles of incorporation and the law. When your Board of Directors meets for the first time, you’ll review and ratify the bylaws and they will be a roadmap for governance from there.

   At the same time, you’ll also want to create and adopt a conflict of interest policy. A conflict of interest is when someone in a key position in your nonprofit has competing interests and is making choices that could benefit themselves to the harm of the organization. Personal interests should be set aside and organizational interests prioritized. If a conflict of interest does arise, it should be disclosed immediately.

   Your application to the IRS for 501(c)(3) exemption will require that both the bylaws and the conflict of interest policy are approved and adopted. Once they’ve been adopted, safely store them in your Nonprofit Records Kit.

9. Hold Organizational Meeting of the Board of Directors

   The initial organizational meeting of your Board of Directors will be incredibly productive. At this meeting you will approve the bylaws, adopt the conflict of interest policy, elect directors, appoint officers, and approve resolutions such as opening the organization’s bank account. Important decisions are being made so be sure to record them in the meeting minutes.

10. Get Michigan State Tax Identification Numbers/Accounts

    Register with the Department of Treasury for Sales Tax, Use Tax, Income Tax Withholding, Corporate Income Tax, Flow Through Withholding, Unemployment Insurance Tax.

    Submit to:	Michigan Department of Treasury http://www.michigan.gov/treasury
    Form:	Form 518: Registration for Business Taxes
    Filing Method:	Mail, fax, or online
    Fee:	$0
    Turnaround:	6+ weeks
    Notes:	Mail your application at least six weeks but not more than six months, before you intend to start your business to allow your registration to be processed. The treasury will forward your application to Unemployment Insurance Agency (UIA).

11. Apply for 501(c)

    Applying for 501(c) tax exemption can feel like the most daunting step in bringing your nonprofit dream into reality, but obtaining tax exemption comes with many benefits. You will be able to apply for grants and grow your fundraising success in addition to being exempt from IRS income tax. 501(c) is the chapter of the Internal Revenue Code that regulates nonprofit organizations. Like others, you may be most familiar with 501(c)(3) nonprofits, including charities and foundations. 501(c)(3) nonprofits apply using Form 1023 or Form 1023-EZ. Review the criteria for each application and make sure you meet the eligibility requirements set out by the IRS. Other types of nonprofits, including 501(c)(4)s and 501(c)(6)s, apply using Form 1024. After reviewing and approving your application, the IRS will return a Determination Letter officially recognizing your exemption.

    Completing the federal application for tax exemption is significantly easier with the assistance and support of a professional. Find someone with the expertise to ensure the correct application is being used and is completed accurately. A well-prepared application takes time, over 100 hours by IRS estimates, so put yourself on the path to success by finding a specialist to walk alongside you in the journey - from start to tax-exempt finish!

    Agency:	Internal Revenue Service (IRS)
    Form:	IRS Form 1023, IRS Form 1023-EZ, or IRS Form 1024
    Instructions:	IRS Instructions for Form 1023, IRS Instructions for Form 1023-EZ, or IRS Instructions for Form 1024.  Also see guidance IRS Pub 557: Tax-Exempt Status for Your Organization.
    Filing Method:	Mail
    Agency Fee:	$275 for organizations filing Form 1023-EZ and $600 for organizations filing Form 1023.
    Turnaround:	1023-EZ average: <1 month. 1023 average: 3-6 months.

    

    Tax-Exempt in 2 Weeks!

    Download the case study of how our client, Reform It Now, obtained 501(c)(3) tax exemption in only two weeks using the new IRS Form 1023-EZ!

    From filing the 1023EZ on August 1st to receipt of the determination letter on August 14th is, in my humble opinion, simply breathtaking and I dare say, ONLY Harbor Compliance could have achieved that.

    

    Dr. Bob A.Reform It Now, Inc.

12. Apply for State Tax Exemption(s)

    With your IRS Determination Letter in hand, make sure you familiarize yourself with your state’s requirements for recognizing your nonprofit’s tax-exempt status. This is an area where requirements vary state-by-state. Many states issue their own tax-exempt certificate that can be used for sales and use tax purposes, but it may require application and periodic renewal.

    To file to obtain exemption from state income tax:

    Not required

    
    
    

    Nonprofits are exempt from Michigan's 6% Michigan Corporate Income Tax (CIT). No filing is needed.

    More information: Michigan Department of Treasury

    To file to obtain Sales and Use Tax Exemption:

    Not required

    
    
    

    Michigan nonprofits are automatically exempt from state sales and use tax. Simply complete and present Form 3372: Michigan Sales and Use Tax Certificate of Exemption to sellers and vendors.

13. Register for Charitable Solicitation (Fundraising)

    This is another area where laws differ from state to state, but most states require any nonprofit soliciting donations to register to do so on an annual basis. This means registering in the state prior to soliciting any resident of that state. Registering in your home state is essential, but you may also need to register other states depending on the scope of your organization.

    Michigan Charitable Solicitation Registration

    Agency:	Michigan Attorney General - Charitable Trust Section
    Law:	Michigan Compiled Laws §400.271 through 400.292
    Foreign Qualification is Prerequisite:	No
    Registered Agent (Special Agency) Required?	Yes

    One-Time Exemption Registration

    More Details

    Exemption Eligible Organizations:	Organizations exempt under both the Charitable Organizations and Solicitations Act (COSA) and the Supervision of Trustees for Charitable Purposes Act (STCPA): An organization that requests contributions only for the relief or benefit of a named individual or family with all fundraising conducted by persons who are unpaid for their service A Michigan educational institution approved by the Michigan Board of Education A veterans organization incorporated under federal law A licensed hospital (Health systems and other affiliates are not exempt even if they include a licensed hospital) A school booster organization operating with the knowledge and approval of an educational institution for the support or promotion of educational, artistic, musical, or athletic programs or events A governmental unit or instrumentality An advocacy or lobbying organization, or an organization associated with an advocacy organization, political party, candidate or committee, that does not have 501(c)(3) status (If the organization's IRS 501(c)(3) determination letter requires it to file a Form 990, 990-EZ, or 990-N, the organization likely does not qualify for this exemption) An organization that will not have 501(c)(3) status and whose principal purpose is not charitable but that solicits from time to time for a charitable purpose (To qualify for this exemption the organization must not have or intend to receive 501(c)(3) status, all fundraising must be performed by members of the organization who are not paid for their services, and all funds must be wholly used for the purposes for which they were solicited) Organizations exempt under COSA: An organization that confines solicitations to drives solely among members, directors and their immediate families, where the general public is not invited to become a member. This includes a private foundation for IRS tax purposes that receives contributions solely from incorporators, directors, stockholders or their families, or from a sponsoring business An organization whose sole source of contributions is a charitable organization registered with this office to solicit contributions A hospital-based foundation or auxiliary that solicits contributions solely for 1 or more licensed hospitals An organization that does not intend to solicit and receive, and does not actually receive, contributions in excess of $25,000 (Excluding grants from government agencies or restricted grants from foundations) during any 12-month period (All fundraising functions must be conducted by persons, whether staff or contractors, who are not paid for their services and the organization must make a financial statement of its activities of its most recent fiscal year available to its members and the public) A nonprofit corporation whose purpose is the owning and operating of facilities for the aged and chronically ill that is under the sole control of a religious or fraternal society An organization at least 50% of whose activities are licensed by the Michigan Department of Health and Human Services to serve children and families Organizations exempt under STCPA: An organization incorporated or organized in a state other than Michigan that will never hold assets in Michigan, including cash, savings accounts, investment accounts, land, building, equipment, etc. An organization that receives operating funds from United Way An amateur theater, band, orchestra, chorale or dance organization
    Form:	Form CTS-03: Request for Exemption
    Filing Method:	Mail or email to ct_email@mi.gov.
    Agency Fee:	$0
    Notes:	Exemptions do not expire as long as the organization continues to qualify under the exemption criteria.

    Initial Registration

    More Details

    Form:	Form CTS-01: Initial Solicitation Registration Form
    Filing Method:	Mail, email to ct_email@michigan.gov, or online.
    Agency Fee:	$0
    Turnaround:	4-6 weeks
    Notes:	One principal officer or director must sign. Signatures need not be notarized. Verify that the attorney general's office received the registration form by searching for the organization at www.michigan.gov/AGCharitySearch Following review if your initial registration or exemption, the Attorney General may instruct your organization to complete additional forms. Some Michigan counties and municipalities may require charities that solicit in-person to register prior to fundraising.
    Before you Apply:	Domestic Applicants: Check the available exemptions to see if your charity is eligible for exemption from the full registration requirement. Appoint a registered agent to receive legal documents in Michigan. If your charity meets the audit threshold, obtain an audited financial report to submit with your registration application. Look through the list of required attachments and make sure that you have each required document in hand before starting the registration application. Foreign Applicants: Check the available exemptions to see if your charity is eligible for exemption from the full registration requirement. Appoint a registered agent to receive legal documents in Michigan. If your charity meets the audit threshold, obtain an audited financial report to submit with your registration application. Look through the list of required attachments and make sure that you have each required document in hand before starting the registration application. If you will foreign qualify in Michigan, obtain a certificate of good standing from your home state to submit during the foreign qualification process. The certificate cannot be more than 30 days old when filing foreign qualification documents.
    How to Apply:	Domestic Applicants: File entity formation documents with the Michigan Department of Licensing and Regulatory Affairs (LARA) - Bureau of Corporations, Securities & Commercial Licensing - Corporations Division. Submit an Initial Solicitation Registration Form and all required attachments to the Michigan Attorney General - Charitable Trust Section. Foreign Applicants: Determine whether or not your charity will need to foreign qualify based on your activity in Michigan. If not required, skip to number 3. File foreign qualification documents with the Michigan Department of Licensing and Regulatory Affairs (LARA) - Bureau of Corporations, Securities & Commercial Licensing - Corporations Division. Submit an Initial Solicitation Registration Form and all required attachments to the Michigan Attorney General - Charitable Trust Section.
    Required Attachments:	IRS form 990 Audited financials (if applicable) Articles of incorporation Bylaws IRS determination letter List of officers and directors Professional fundraising contracts

    Registration Renewal

    More Details

    Form:	Form CTS-02: Renewal Solicitation Registration Form
    Filing Method:	Mail, email to ct_email@michigan.gov, or online.
    Agency Fee:	$0
    Due:	Annually within 7 months after the close of your nonprofit's fiscal year. So if your fiscal calendar ends December 31, then the renewal is due by July 31. There is no official start to the renewal period, so renewals may be submitted as soon as financials become available for the most recently completed fiscal year.
    Due Date Extension:	Due dates can be extended for 5 months beyond the original due date by emailing ct_email@michigan.gov with an explanation of your request for extension. A copy of IRS form 8868 must be included when requesting an extension.
    Required Attachments:	IRS form 990 Audited accrual basis financials (if applicable) List of officers and directors Professional fundraising contracts Only if amended: IRS determination letter, articles of incorporation, and bylaws

    Change of Fiscal Year

    More Details

    Form:	Form CTS-02: Renewal Solicitation Registration Form
    Agency Fee:	$0
    Notes:	Fiscal year can be changed during the standard renewal process.

    Cancellation

    More Details

    Agency Fee:	$0
    Notes:	To close out your registration, submit a letter indicating the organization will no longer accept contributions from Michigan sources (including via internet). The process may be different for organizations that hold assets in Michigan.

    To fundraise nationally or online, please see our Fundraising Compliance Guide. Our services manage your initial, renewal, and exemption filings in every state.

14. Obtain Other Business Licenses & Permits

    Running your nonprofit corporation legally also means securing all applicable licenses and permits. The range of local, state, and federal requirements is wide. Access resources like the Small Business Administration Business License & Permit look-up tool and search by your business type and locality.

    Nonprofits who wish to conduct bingo, raffles, and other charitable games must obtain a license.

    Submit to:	Michigan Lottery Charitable Gaming http://www.michigan.gov/cg/
    Form:	Qualification Information Form
    Filing Method:	Mail
    Fee:	varies
    Turnaround:	~8 weeks
    Law:	Michigan Charitable Gaming

You’ve made it! You turned your passion into a legitimate nonprofit corporation exempt under IRS 501(c) and are benefiting your community. That solid foundation on which you built your organization requires ongoing maintenance. Investing in maintaining compliance with all of the government agencies is an ongoing responsibility and commitment needed to ensure your vision continues long into the future. Check out our compliance guide to learn more!

Once you have registered your nonprofit per the steps listed above, you will need to maintain compliance with all of the government agencies. Staying current with the IRS and state requirements is an ongoing responsibility. Continue reading our Michigan nonprofit compliance guide to learn more!

Continue reading "Michigan Nonprofit Compliance"

Welcome to Our Community

We're committed to publishing free informational resources such as this how-to guide. Our resources have been shared by important industry organizations including: