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How To Start a Nonprofit in Minnesota

A nonprofit is a small business, and starting one requires the same level of business planning and preparation as a for-profit startup. Several aspects of starting a nonprofit are the same regardless of state. However, forming a nonprofit in Minnesota has some unique forms, fees, legal considerations, and resources.

Minnesota Statutes Chapter 317A governs the formation and operation of nonprofit organizations.

The following step-by-step guide will help you lay the groundwork for a successful nonprofit in Minnesota.

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1. Name Your Nonprofit

Choose a unique name for your nonprofit organization. Minnesota requires that every business have a distinct name, but some exceptions exist. A nonprofit can have a name that is already registered with the State of Minnesota if all of the following are true:

  • Your organization gets consent in writing to use the name that is already registered
  • You have a certified copy of a court order that states you are allowed to use the name
  • You have an affidavit that another business is not using the name

Use this tool on the Secretary of State's website to search for existing business names registered in Minnesota.

2. Choose a Registered Agent

Every Minnesota business must have a registered agent with the Secretary of State. A registered agent is a person or company, registered agent service, responsible for receiving service of process on behalf of your nonprofit.

Any person 18 years or older can be a registered agent for your company. You can even name yourself as the registered agent.

3. Select Board Members and Officers

Your board of directors is the governing body of your organization. They will be responsible for ensuring your nonprofit follows the law and remains true to its purpose.

Minnesota law requires nonprofit boards to have at least three members. These three members must be unrelated and include:

  • President
  • Secretary
  • Treasurer

While three board members are the minimum, consider having at least seven. A larger board allows a broader range of perspectives and ideas. Having an odd number of board members is beneficial in the event of a tied vote.

4. Draft Bylaws and Conflict of Interest Policy

Bylaws are a set of rules in place to govern the organization. You will use these bylaws to make decisions for your nonprofit.

Your bylaws should address some common areas. You may have more details that you wish to add to your nonprofit's bylaws, but consider including the following in your bylaws:

  • The name you registered or reserved with the Minnesota Secretary of State
  • The nonprofit's business address and street address
  • A statement of the nonprofit's purpose
  • The names of the officers and the positions they hold
  • Your nonprofit's removal policy for officers and a statement of how your organization agrees to add new officers if desired
  • Rules about quorum
  • The date of the board of directors annual meeting
  • The procedure for dissolving the nonprofit
  • How to make amendments to the bylaws

A conflict-of-interest policy is a written agreement showing a strategy your board of directors agrees to follow if there is a conflict between the interests of the nonprofit and an individual director.

Your nonprofit must create a conflict-of-interest policy and a set of bylaws before applying for 501 (c)(3) tax-exempt status. Your organization will not be eligible for federal tax exemptions if it does not present a set of bylaws and a conflict-of-interest policy.

5. Have Your First Organizational Meeting of the Board of Directors

You will need to have an initial meeting with the board of directors before your nonprofit files for 501 (c)(3) status.

It is essential to take and record minutes from the meeting because you will need to accomplish several things:

  • Discussing and adopting bylaws and the conflict-of-interest policy
  • Electing the board of directors
  • Establishing the management structure for the nonprofit
  • Adopting various resolutions, including when to open a bank account for your organization

Always keep written records of all meetings, even if they were virtually held.

6. Draft and File Articles of Organization

Minnesota requires every business to file Articles of Organization with the secretary of state. The filing fee is $70 by mail or $90 if expedited and filed in person or online.

Typically, the Articles of Organization include:

  • The organization's name and address
  • Registered agent's name and address
  • Bylaws
  • Conflict-of-interest policy
  • Names and addresses of at least one incorporator

An incorporator is an individual who signs and files the Articles of Incorporation on behalf of the nonprofit. A nonprofit (or any other organization) can officially begin once you file Articles of Incorporation.

7. Get an EIN

An employer identification number (EIN) is a number used by the Internal Revenue Service (IRS) to identify businesses for tax purposes. Each company must have an EIN.

You can apply for an EIN online or by phone, fax, or mail. Applying for an EIN through the IRS is free—do not fall for websites that advertise they will complete an EIN application for a fee.

Minnesota nonprofits do not need a Minnesota Tax Identification Number.

8. Apply for Federal Tax Exemption

Next, apply for federal tax exemptions for your nonprofit. Do this by applying for 501 (c)(3) status with the IRS. 501 (c)(3) status is only available to specific charitable organizations.

You will use the IRS Form 1023-EZ to apply.

Bylaws should specify your organization's purpose. The IRS will only accept your application for federal tax exemptions if you provide a copy of your nonprofit's bylaws.

After you apply, you will receive a determination letter from the IRS stating whether your organization has been approved for federal tax exemption. This can take anywhere between four weeks and six months.

9. Apply for State Tax Exemptions

Minnesota nonprofits are automatically exempt from state income tax if the organization has 501 (c)(3) status. However, your nonprofit must still apply for state sales and property tax exemptions.

You must file Form ST16 to apply for a sales tax exemption. Submit the completed form to the Minnesota Department of Revenue.

Cities and counties handle property tax exemptions. To apply, submit your application to your municipality's assessor. Nonprofits in Minneapolis and Hennepin County can apply for property tax exemption here. Nonprofits in St. Paul and Ramsey County can apply for property tax exemption here.

See Minnesota Statute 272.02 for a full list of properties that may be eligible for property tax exemption.

10. File Annual Reports

Your nonprofit organization must file an Annual Renewal Form with the Minnesota Secretary of State each year. You can file this form in person, by mail, or online. There is no filing fee.

In the annual report, you will update the state about corporate details, including the business name, address, and registered agent's name.

Annual Renewal Forms are due by December 31st of each fiscal year.

11. Charitable Registration Requirements

Every Minnesota nonprofit that plans to engage in charitable solicitation must register with the Secretary of State before it begins fundraising.

You will register as a charity by filing a Charitable Organization Initial Registration Form and paying a $25 filing fee. After that, your organization must continue to register with the Minnesota Attorney General's Office every year.

Resources for MN Nonprofit Business Owners

The Minnesota Council of Nonprofits provides resources and FAQ for starting a nonprofit.

You can find the various Minnesota Nonprofit Corporation forms on the Minnesota Secretary of State website.

Minnesota has nine Small Business Development Center (SBDC) offices and several satellite locations. SBDC professionals can provide guidance on starting and sustaining a small business.

Need Help Forming a Minnesota Nonprofit?

Forming a tax-exempt nonprofit corporation can be a complex process. Filing for tax exemptions, forming your board of directors, and filing articles of incorporation require dedicated time, effort, and strategy.

Consider consulting a business formation attorney in Minnesota for help. An attorney experienced in nonprofit formation can handle much of the paperwork and legal requirements, leaving you more time and energy to focus on your new nonprofit's mission.

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