Business & Nonprofit Formation

A business entity is a limited liability company, a corporation, or other type of legal “person” formed for a business purpose, such as a low-profit limited liability company (an L3C).

From a practical standpoint, setting up a business entity allows your limit your own liability for the debts owed by the business, so that your personal assets stay safe if the business ever fails. It also makes it easier to manage owner relationships in a mutli-owner business by defining the various owners’ rights and responsibilities, as well as clearly marking the boundaries between each owner’s personal property and the business’s property.

More abstractly, you can think of it as a representation of your business as a thing that is separate from you as an individual owner or group of owners, and a way to separate your own assets and liabilities from the assets and liabilities of your business.

Without a business entity that offers limited liability, the assets of an owner are up for grabs to satisfy the debts of a business. That means if your business owes money, you owe money.

For instance, if an employee of your business hits a pedestrian while making a delivery, when the injured pedestrian sues your business they are suing you, and all of your personal assets are available to satisfy the judgment.

If you have limited liability because you set up a business entity and followed the guidelines for maintaining its limited liability protection, then the pedestrian can still sue your business, but only the business’s assets will be available to satisfy the judgment – your personal assets remain unreachable.

Additionally, having an entity set up simply makes a lot of other things considerably easier, like accepting investment or selling your business when you’re ready to retire. Having a business entity setup will allow you to be much more flexible when going through those transitions.

Yes, provided it is an entity type available in Michigan. For most businesses, an LLC/L3C or corporation will be appropriate, but if yours is one of the niche use cases for another entity type, we can assist you with that as well. As part of our service, we will help you determine which entity type is right for your business.

Note that some types of entities simply do not exist in Michigan, such as a benefit corporation. We may be able to assist you with setting up a benefit corporation, depending on the particular state where you would like to set one up. If you are interested in setting up a benefit corporation in particular, we recommend scheduling a consultation to discuss your options in further detail.

Turnaround times vary, but typically an LLC we form for you will be available within 5 business days, though processing times vary. Single-owner businesses are usually completely setup in less than 10 business days. Mutli-owner businesses may take longer because there are frequently adjustments between drafts of governing documents and because there is simply more documents to draft.

No, a sole proprietorship is not an entity type – it is the business of a single individual who has not set up an entity. Operating as a sole proprietorship is rarely if ever a good idea because a sole proprietor has no limited liability for their business’s debts.

In short, yes, and that’s part of our entity formation service when appropriate.

The long answer is that C Corps and S Corps are tax elections, not entity types. You can have an LLC that is an S Corp or C Corp, a partnership that is a C Corp or an S Corp, or a corporation that is an S Corp or a C Corp. The LLC, the corporation, the partnership in the previous sentence – those are the entities that you set up, and then, if your particular circumstances allow it and the tax consequences make sense, you can choose to be taxed under the C Corp or S Corp taxation rules.

Multiple owner businesses are almost always significantly more complicated than single owner businesses. It is crucial that the agreements between the owners are thorough and spell out each owner’s rights and responsibilities. Failure to do so can lead to extremely expensive disputes and destroyed relationships.

A nonprofit is an organization that lacks ownership and does not pass its assets or profits to private individuals. Individuals and the organization’s leadership can earn money in exchange for their services, but they do not reap the profits of the nonprofits work.

The vast majority of nonprofits operate as tax-exempt organizations. There are many different kinds of tax-exempt status, but the most common is 501(c)(3) charities. Not all nonprofits are 501(c)(3)s, though, including many that you are probably familiar with. The Sierra Club, for instance, is a 501(c)(4).

While there are many types of tax exempt nonprofits, 501(c)(3)s are unique in that they can receive charitable grants and donations which are tax deductible to the donor. This is obviously a significant benefit for organizations that plan to rely on grant funding.

Fees start at $895, which includes filing fees. That is for the simplest organization. More complex organizations can be significantly more expensive to set up.

If you want to fund a charitable mission but don’t want to go through the hassle of setting up your own nonprofit and applying for 501(c)(3) status, you may want to consider fiscal sponsorship. A fiscal sponsor is a 501(c)(3) that lends its 501(c)(3) status to other charitable projects in exchange for a percentage of the money raised.

Origami Legal believes that fiscal sponsorship is a great alternative to setting up a nonprofit when it’s an option.

For organizations that qualify to use the simplest application available, the entire process typically takes 2-4 months. For other organizations that cannot use the simplest application, typical time is anywhere from a few months to a year.

We can’t guarantee an application for a particular tax exempt status will be successful. However, we will use our experience and expertise to tell you if we believe your application for tax exempt status is unlikely to be successful based on the information you provide.