Starting a Nonprofit in Michigan
Starting a Nonprofit organization in Michigan is governed by the Nonprofit Corporation Act 162 of 1982. (Here after called as Act)
Eligibility for Starting a NPO in Michigan
1) The Application must be put up by one or more incorporators.
2) The Organization must have a place in Michigan to be designated as the ‘registered office’. This may or may not be the same as the principal place of business of the Nonprofit organization.
3) The organization must be represented by a ‘resident agent’ who resides or stays at the ‘registered office’ to receive demands and notices to be served on behalf of the NPO.
4) The Nonprofit organization must have 3 or more directors.
5) The Nonprofit organization must appoint at least three officers, namely – president, secretary and treasurer.
Steps Involved in Starting a Nonprofit organization in Michigan
Step 1) Choosing a Name for the NPO: The Michigan Laws do not require the use of corporate designators like ‘corp.’, ‘Co.’ etc when naming a Nonprofit organization. The Act however places the following restrictions on naming a Nonprofit organization-
a) The Name should not be indicative of a purpose that is different from the actual purpose of the organization.
b) The name should be distinguishable from the name of existing business entities operating in Michigan.
c) The term ‘foundation’ can only be used if the organization is expected to receive and administer funds in the memory of persons or for preservation of objects of historical or natural interest.
Click here to know about other factors to be kept in mind when naming a Nonprofit organization.
Step 2) Drafting the Articles of Incorporation –
As per the Michigan General Law, the Articles of Incorporation must consist of the following clauses –
(a) The corporate name of the proposed Non profit organization. The name should meets the requirements mentioned above.
(b) The purpose or the purposes for which the proposed Non profit Organization is being set up. Unlike some other stares, which allow for writing general purposes like “undertaking any lawful activity”, the Michigan Laws require writing the exact purpose or purposes for which the organization is being set up. In addition if the NPO has education purposes it shall comply with all requirements of sections 450.170 – 177 of the Michigan Compiled Laws.
(c) Valid street address, and the mailing address (if different from street address) of the Non profit Organization’s initial registered office.
(d) The name of the initial resident agent who would be available at the registered address as provided above.
(e) The names and addresses of all the incorporators of the NPO.
(f) The duration for which the Non profit Organization is being set up is to be mentioned if the duration is for a limited time. If the duration is perpetual, this clause may or may not be included.
(g) A statement specifying that the NPO is being organized on a non stock basis.
(h) A statement that the proposed Non profit Organization is organized either on a membership basis or on a directorship basis.If the Organization will have membership provisions, then a brief explanation of the classes of members, the powers, duties and eligibility criteria for each class of membership may also be added.
Additional Clauses required to be Inserted if the organization wishes to seek IRS tax exemption –
If the Organization wishes to seek tax exemption under section 501(c)(3), it must additionally include –
a) A Purpose clause – already discussed above.
b) A dissolution clause – explaining the method to be adopted to distribute the assets , if the nonprofit organization is dissolved in future.
c) A clause specifying the exact IRS code (say 501(c)(3) ) under which the tax exemption would be sought.
d) A clause that specifically prohibits the organization or its members from undertaking any activity that is prohibited by IRS for organizations seeking tax exempt recognition.
Click here to download a sample Article of Incorporation for a Michigan Nonprofit organization.
Step 3 )Executing the Articles of Incorporation – If there are 3 or more incorporators of a proposed NPO, the incorporators may, by suitable resolution or by written instrument, designate any 1 of the incorporators to execute the articles of incorporation. The copy of such resolution should be made a part of and filed with the articles of incorporation.
Step 4) Filing the Documents – The Articles of incorporation duly executed is to mailed or hand delivered to the
MICHIGAN DEPARTMENT OF ENERGY, LABOR & ECONOMIC GROWTH
BUREAU OF COMMERCIAL SERVICES
P. O. Box 30054
Lansing, Michigan 48909
Time required – It takes around 1-2 weeks to complete the regular filing exercise for starting a nonprofit organization in Michigan. Expedited processing can take as less as 1 business day which requires a payment of Expedited service fee.
Birth of the Nonprofit organization – After the Articles of Incorporation are successfully filed, the Nonprofit organization comes into formal legal existence. The organization is assigned a six-digit file number which it is supposed to quote in all its future correspondence with the SOS.
Conclusion- The process of filing for incorporation is a great learning experience to start and run a Nonprofit organization.
If however you decide to outsource this , there are several same-day “commercial resident agents ” who will assists you with incorporation in return for a fee. (You can search for them on the net).
Even if you decide to use the services of the professional ‘commercial registered agents’, you should ideally draft your own articles and bylaws because these two documents will eventually govern how your nonprofit functions on a day to day basis.