Starting a Nonprofit in Minnesota
Starting a Nonprofit organization in Minnesota is governed by the Chapter 317 A of the Minnesota Statutes which deals with formation and managing of Non profit corporations in the State.
P.S: For meaning of any term used herein, read Incorporation terminologies.
Scope of the statute – This chapter of the Statute applies to formation of public charitable and private foundations but does not apply to formation of religious corporations,cooperative associations, public cemetery corporations and associations, and private cemeteries.
This chapter is further applicable only to formation of domestic nonprofit corporations. Formation of Foreign Nonprofit corporations are governed by Chapter 303 of the Minnesota statutes.
Eligibility for Starting a Nonprofit organization in Minnesota
1) The Application to incorporate a Nonprofit organization must be moved by one or more incorporator, who must be a adult and a natural person. Unlike many other states, business entities cannot be the incorporators in Minnesota.
2) The organization must have a valid street address of Minnesota as its registered address. This may or may not be the same as the ‘principal place of its business’.
3) The Nonprofit organization must be represented by a ‘resident agent’ who should generally be available at the registered address, to receive notices or demands on behalf of the Nonprofit organization.
4) Minimum number of Directors required for forming a Nonprofit organization in Minnesota is 3. While no age limit specified for individual directors, but the majority of directors must be adults.
There are some additional requirements for religious corporations. Refer chapter 317 A of the statute, if forming a religious corporation.
Steps to Start a Nonprofit organization in Minnesota
Step1) Deciding a Name for the Nonprofit organization: Unlike many other states, the name of a Minnesota Nonprofit need not contain words like “corporation,” “incorporated,” “company,” “limited,” or an abbreviation of one of these words.
However, the name should be distinguishable from the name of any entity (whether for profit or non profit) registered in Minnesota.
Moreover the name should not express any other motive other than the purpose for which the Nonprofit organization is being formed.
Several other factors to be kept in mind when naming a nonprofit organization can be assessed here.
Step 2) Drafting the Articles of Incorporation– As per the Minnesota statutes, the articles of Incorporation of a Nonprofit organization must include the following clauses –
(1) the corporate name of the Nonprofit organization that meets the requirements mentioned above
(2) the address of the registered office of the corporation and the name of its registered agent who is available at the above address.
(3) the name and addresses of all the incorporators of the proposed nonprofit organization
(4) a statement specifying that the Nonprofit organization is formed under the provisions of chapter 317 A of the Minnesota statutes.
Other clauses that can be included in the Articles of Incorporation but not in bylaws
(1) The purpose clause – The articles may include the purposes for which the organization is being instituted. If purpose is not mentioned in the Articles, it is the organization is construed to have general purpose of undertaking ‘any lawful activity’.
(2) A clause mentioning who would have the power to adopt, amend, or repeal the bylaws. If this is not mentioned in the articles, this power vests with the board.
(3) A clause describing whether the Nonprofit organization will have provision for membership, and if yes, the classes of membership, the eligibility, duties and powers of each class of members. If this clause is not mentioned, the organization is presumed to have a single class of membership.
(4) A clause specifying the voting procedures for directors. If nothing is mentioned then cumulative voting is prohibited for directors of the Nonprofit organization.
(5) If the Article does not specify otherwise, a action taken without a meeting must be signed by all the directors.
Clauses Mandatory and desired for obtaining IRS 501(c)(3) tax recognition
An organization wishing to obtain IRS 501(c)(3) tax recognition must consider including the following causes in its articles –
a) The Purpose clause – already discussed above.
b) The Dissolution clause- a clause mentioning the method that would be applied for distribution of assets, in case it is decided in future to dissolve the organization.
c) A clause which clearly specifies that the organization would seek tax exempt recognition under section 501(c)(3) of the IRS code.
d) A clause which prohibits the organization and its members from undertaking any activity that may be prohibited by IRS for organizations seeking tax exempt status.
Additionally, the Article may include any other clause that is consistent with the laws and the management feels is relevant to regulation and management of the Nonprofit organization.
Click here to download a sample Article of Incorporation for Minnesota.
Please note that this is the bare minimum sample provided by the Secretary of state office and is provided only for guidance. Please be sure to add clauses for IRS tax exempt recognition and any other clause that you may wish to add.
Filing fee payable – The fee payable for incorporating a Nonprofit organization in Minnesota is USD70.00 and is payable through check or other means favoring MN Secretary of States.
Step 3) Executing the Articles of Incorporation and filing for incorporation
The above Article of incorporation must be signed by all the incorporators and delivered along with the requisite filing fee check, in person or mailed across to:
Minnesota Secretary of State – Business Services
Retirement Systems of Minnesota Building
60 Empire Drive, Suite 100 St Paul, MN 55103
(Staffed 8:00 – 4:00, Monday – Friday, excluding holidays)
Birth of Nonprofit organization – The Nonprofit organization comes into formal legal existence in the state of Minnesota, upon successful filing of the Articles of Incorporation.
Time required – It takes around 3-5 days from the date of receipt of duly completed Articles with the office of the Secretary of State, to complete the filing process.
Post incorporation formalities
Post incorporation, the Initial board members are supposed to convene a meeting to adopt the bylaws of the organization.
The Minnesota statutes prescribe several guidelines for drafting the organization’s bylaws. Some salient points to be kept in min when drafting the bylaws are –
a) Director’s quorum – Majority of directors in office, unless a percentage is specified which should not be less than 1/3rd of number in office
b) Member’s quorum is automatically taken as 10% of total voting membership, if not specified in the bylaws.
c) Director’s term of office – as specified in the articles or bylaws though not exceeding 10 years.
d) Officer’s – The Nonprofit organization may appoint as many number of officers and may designate them in any possible manner, however as per statutes, a Nonprofit organization must appoint at least a president and a treasurer. Two positions can be held by one person – and if that be the case, the officer can also sign in two capacities on the same document.
Conclusion- The process of filing for incorporation of a Nonprofit organization is a good learning experience for anyone planning to start and run a Nonprofit organization, as it takes one through the basic legal framework governing Nonprofit organizations.
If however you decide to outsource the incorporation procedure, there are several “professional service providers ” who will assists you with incorporation in return for a fee. (You can search for them on the net).
However, even if you decide to use the services of these service providers, you should ideally draw the articles and bylaws on your own, because these two documents will eventually govern how your nonprofit functions on a day to day basis.