Understanding how to start a nonprofit in Michigan can be a complex process. But it doesn’t have to be. Start by learning the proper procedures for forming a nonprofit in Michigan and avoid costly mistakes later. In Michigan, it’s important to know and understand both state and federal tax-exemption status. The process for securing tax-exempt status can be complicated and time-consuming. To help navigate the bureaucratic process, we suggest you speak with experts who have experience with setting up nonprofits in Michigan.
As with anything else, it’s best to start with a plan. Your plan should start with research. Research the types of nonprofits and how each is structured. In Michigan, there are three basic nonprofit structures. Once you complete the necessary steps you will apply for a 501(c)(3) application with Michigan.
Unincorporated Nonprofit Association
This structure is similar to a partnership. It will help with taxes but not with liability for your organizers. Starting a nonprofit in Michigan requires a proper organizational structure.
Nonprofit Corporation
A nonprofit corporation will provide limited liability for organizers and help with your tax-exempt status.
Nonprofit LLC
There is a special provision within the Michigan Limited Liability Company Act for low-profit LLC corporations that are charitable or created for educational purposes. The act allows for limited liability protection within the state, but there can sometimes be problems getting federal exemption status. This problem is due to the IRS tax code regarding as it applies to an LLC.
Step 1: Articles of Incorporation
In order to become a nonprofit in Michigan, you must file your Articles of Incorporation. Articles of Incorporation are documents filed with a government body that legally state the corporation’s creation. The information in these documents provides general information about the corporation, such as the name and address of the organization. These documents are filed with the Corporations, Securities, and Commercial Licensing Bureau. Sometimes these documents can be confused with bylaws, but they are not the same thing.
Step 2: Employer Identification Number
Once you’ve researched and decided on the best structure for your organization, the next step is to apply for a Federal Employer Identification Number (EIN). The forms are available from the IRS website and can be completed online or by sending your information through postal mail. It’s important to be certain that all your information is correct, so check everything to be sure there are no errors that can delay the application process. Knowing how to start a nonprofit in Michigan includes hiring employees that can help you achieve your mission. Having an EIN number allows you to hire employees and file taxes as required.
Step 3: Tax-Exempt Status
Apply for federal tax-exempt status through the IRS. This step requires you to file for tax-exempt status under Section 501(c) of the IRS tax code. There is a special form called the Application for Recognition of Exemption. Starting a nonprofit in Michigan will give you tax-exempt status. It can take some time, even months, for this application to be processed, which can give you time to work on the other things you’ll need to start your nonprofit.
Step 4: State, Sales, and Use Taxes
Nonprofits in Michigan are exempt from paying state taxes automatically if they have been granted a federal exemption under Section 501(c)(3) or Section 501(c)(4) since there is no real process for applying for tax-exempt status within the state. This allows nonprofits exemptions from sales and use taxes. To avoid taxes on purchases you must complete a Department of Treasury Michigan Sales and Use Tax Certificate of Exemption.
Step 5: Register With The Attorney General
The next step is to register with the Attorney General of Michigan. If your nonprofit collects donations or has assets, it should be registered with the Michigan Attorney General’s Charitable Trust Section. There are a few forms to fill out which define the different types of exemptions available to your nonprofit. Learning how to start a nonprofit in Michigan will not be difficult if you follow these steps.
Summary
Starting a nonprofit in Michigan can be difficult without proper research and planning. Start by learning about the different types of nonprofit structures. Pick the one that best fits your organization. Once you have a structure, you can apply for an EIN. Most applications and forms can be sent or filled out online or through regular mail.
You will then need to file your Articles of Incorporation with the Corporations, Securities, and Commercial Licensing Bureau. It’s important to note that Articles of Incorporation are not the same as Bylaws.
Next, you will need to file for tax-exempt status under Section 501(c) of the IRS tax code. Be sure to complete all the required forms and always check for errors that may delay the decision process. In Michigan, nonprofits are automatically exempt from paying taxes if they have a federal tax exemption under 501(c)(3) or 501(c)(4) status. You will also fill out a when(c)(3) application with the state of Michigan. To avoid taxes making purchases you must complete a Department of Treasury Michigan Sales and Use Tax Certificate of Exemption. Lastly, you will need to register with the Michigan Attorney General’s office. Knowing how to become a nonprofit in Michigan is not difficult with research and proper planning.
If you need help starting a nonprofit in Michigan get in touch with us at BryteBridge today. We have experts ready to help.
