Whether you are in the Upper Peninsula (UP) or down in Detroit or Ann Arbor, home is where the hand is. As a Michigander, you care deeply about the people of your state. Your goal to start a nonprofit will make a huge difference in your community. The process to start a nonprofit can get…
Whether you are in the Upper Peninsula (UP) or down in Detroit or Ann Arbor, home is where the hand is. As a Michigander, you care deeply about the people of your state. Your goal to start a nonprofit will make a huge difference in your community.
The process to start a nonprofit can get confusing at times, so we have written these ten steps to help you along the way. If you are just thinking about getting started or have stopped because you are overwhelmed, we hope this article clarifies any questions you have.
Naming your organization is the first step to starting a nonprofit in Michigan. You will need to search for the name’s availability with the Department of Licensing and Regulatory Affairs.
If your name is available, you can reserve your corporation’s name for six months by filling out Form CSCL/CD-540 and sending it by mail with a non-refundable $10 fee. Or you can fill it out online.
The next step in forming a nonprofit, and possibly the most important, is choosing who will reside on your Board of Directors. Board directors and officers will choose the direction of the organization and be the final decision-makers regarding your organization’s budgets, policies, activities, hiring and firing, and fundraising. Below is a list of some of the responsibilities of your nonprofit board directors:
The state of Michigan and the IRS require nonprofits to have a minimum of three directors. On the other hand, it is recommended that nonprofits have anywhere between three to twenty-five board members, depending on size and scope. Of these members, the IRS allows one or more directors to be 16 or 17 years old, but this number cannot exceed the number of directors required for a quorum. Michigan has no residency or membership requirements for directors of a nonprofit.
Additional state director regulations include the following:
The state of Michigan also requires nonprofits boards to include a President, Secretary, and Treasurer. Two or more of these offices may be held by the same person, but they can only sign official documents as one of these officer positions.
A registered agent is required in every state when starting a nonprofit. Registered agents are responsible for sending and receiving legal notices for your organization. The registered agent can be an individual or company, but they must be in the state of Michigan and have regular office hours. Your Registered Agent should keep all records of accounts and board meeting minutes at its office.
The state of Michigan requires nonprofits to have an Incorporator. This individual is listed in your Articles of Incorporation and is responsible for setting up the business in the state. The Incorporator must also appoint the initial Board of directors for your organization and approve your organization’s bylaws if written before electing the Board. After directors are chosen, the Incorporator has no other responsibilities.
Incorporators must be 18 years old but do not have to be either a US citizen or Michigan resident. There is also no requirement for this individual to be a shareholder unless your nonprofit’s bylaws include this requirement.
The official beginning of your organization is when you file your Articles of Incorporation with the Secretary of State. When filing, your Incorporator will need the following:
Michigan is one of the few states that allows nonprofits to issue stock. If your nonprofit will issue stocks, you must list the number of shares on your Articles of Incorporation. Nonprofit stocks are not the same as for-profit corporate stocks. While for-profit stocks give shareholders dividend-paying shares, nonprofit stocks give the founder of the organization some control. Stocks are usually only used to set up control among a group of founding members.
If you choose not to offer stocks, you must list and describe the value of your real estate property and personal property. Real estate property includes all land and buildings your organization owns. Personal property consists of any cash, equipment, and fixtures. You will need to include a description and dollar amount for these items. If your organization has no real estate or personal property, your Incorporator can write “none.”
Once finished, your Incorporator must sign and file the Articles of Incorporation along with a $20 fee by mail to the Michigan Department of Licensing and Regulatory Affairs or online. Veteran-owned nonprofits can apply to have the incorporation fee waived.
You can expect your document to be filed or rejected within 5-7 business days, and you will receive a returned form by mail within four weeks. Prior to receiving the documents, you can find the results of your filing online here. You do have the option to expedite the return of your Certificate of Authority for an extra fee ranging from $50 to $1,000.
While you are waiting for your Certificate of Authority from the state of Michigan, you can move on to apply for an Employer Identification Number (EIN) with the IRS. The EIN is a unique nine-digit number assigned to every business in the US.
You will need this number to open a bank account, register for 501(c)3 tax-exempt status, and submit 990 returns at the end of your fiscal year.
You can apply for your EIN online, by phone, or fill out Form SS-4 and send it by fax or mail. There is no fee for this application. You will receive your EIN online right away. Phone and fax applications will take four business days, and mailed applications will take four to five weeks.
Once you have received your EIN and Certificate of Authority from the state of Michigan, it is time to develop your nonprofit bylaws. Bylaws are rules for your organization to follow and include the following:
If you need help creating your organization’s bylaws, read our blog on nonprofit bylaws made easy.
You must create and approve your bylaws before applying for tax-exempt status with the IRS. The Attorney General will also expect to see your bylaws when you register for charitable solicitation.
Aside from making a difference in the world, a major benefit of being a nonprofit is that you do not have to pay taxes. For your organization to gain that benefit, you will have to follow a few steps.
As a nonprofit, you will either fill out Form 1023 or Form 1023-EZ to obtain tax-exempt status with the IRS. To file Form 1023-EZ you must answer “no” to all the questions asked on the eligibility worksheet. Form 1023-EZ has a $275 fee.
If you answered “yes” to any of the eligibility worksheet questions, you would need to fill out Form 1023 and pay the $600 fee.
All nonprofits in the state of Michigan are exempt from its 6% Corporate Income Tax (CIT). No additional filing is needed for this exemption. Nonprofits are also automatically exempt from state sales and use tax. To use this exemption, your nonprofit will need to fill out Form 3372: Michigan Sales and Use Tax Certificate of Exemption and present it to sellers and vendors when purchasing items for your nonprofit.
Michigan does not issue statewide business licenses, but cities and counties may require it. Your nonprofit must check with your City Clerk’s office for local ordinances and permit requirements.
It is also recommended that you contact the office of Michigan Licensing and Regulatory Affairs.
Before soliciting donations or holding assets in the state of Michigan, your organization must register with the Attorney Generals’ office by filling out Form CTS-01. Only charitable organizations filing for the first time to solicit in Michigan must fill out this form.
Once filed, your solicitation form will expire seven months after your first fiscal year ends. A renewal form is due 30 days before the expiration date. There is no fee to solicit funds in Michigan. You can submit this form online, by email to , or by mailing it to the Attorney General Department. You can verify that the Attorney General received your filing here.
Some organizations are exempt from registering for charitable fundraising. To find out if your nonprofit is exempt, fill out Form CTS-03 online.
Finally, you have finished all government paperwork, and you are ready to solicit funds for your organization. The next step is to start your nonprofit bank account. For this account, you must have the following:
Your bank may need additional requirements, including a resolution authorizing you to open the account. Call the bank ahead of time to save yourself the trouble of another trip.
After your first fiscal year, your organization is required to fill out additional paperwork to remain in good standing with the IRS and the state of Michigan.
All nonprofit organizations must file an annual report with the state. This annual report updates any changes to your nonprofit’s board officers or directors, registered office, and other pertinent information.
Your organization must file CSCL/CD-2000 and pay the $20 fee on or before Oct 1st each year. A preprinted annual report will be mailed to your registered office three months before the due date. You can return this form by mail or in person. You can also file online.
An Annual Report has the added benefit of illustrating the successes and needs of your organization. This annual report will be a helpful tool when applying for grants or soliciting funds from major donors.
Your organization must also file Form 990, 990EZ, 990-N, 990PF, or 990-T with the IRS by the 15th of the 5th month following the end of your fiscal year. There is no fee for this filing.
To determine which form your organization must file, and for further instructions, visit here.
Your organization’s solicitation registration expires seven months after the end of your fiscal year. Form CTS-02, the Renewal Solicitation Form, is due 30 days before that expiration. You can file for an extension of up to five months if necessary. There is no fee to solicit funds in Michigan.
You can file form CTS-02 online, by email, fax, or mail. Once finished, you can verify that the state received your registration here.
As you can see, starting a nonprofit is not complicated, even if it can be time-consuming. By following the steps we have laid out for you, your organization should be up and running in no time. If you need additional help to start your nonprofit, visit our article on starting a nonprofit organization. We also have resources for starting nonprofits in various states, such as Georgia, Texas, California, and Florida.
Don’t forget to visit our nonprofit-blog for more nonprofit tips and resources. Good luck and happy fundraising!
The cost of starting a nonprofit may be less than you expect. Naming your organization requires a $10 fee. When filing your Articles of Incorporation, you will pay a $20 fee. You can pay additional fees to expedite the return of this form.
After that, the IRS requires a fee of either $275 or $600 to file for 501(c)3 tax-exempt status. There are no additional fees required at the state or federal level.
The time it takes to start a nonprofit in Michigan will depend on how you file your government forms. The time for the return of these forms can range from immediately to up to four weeks. Here is a breakdown of all the documents needed and how long they will take to finalize:
The state of Michigan does not require a business license, but your local city or county ordinance may require a license. You will need to contact your local offices for that information.
Founders cannot profit or benefit from an organization’s net earnings but can receive money in other ways. Nonprofit stocks entitle the founder to some control of the organization but do not include dividend rights or a share in profits.
Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.
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Kristine Ensor