What Is the Michigan Business Corporation Act?
The Michigan Business Corporation Act identifies businesses that have formed a corporation or domestic corporation under Michigan law.3 min read
The Michigan Business Corporation Act identifies businesses that have formed a corporation or domestic corporation under Michigan law. The act applies to all corporations, both foreign and domestic that are allowed to do business in Michigan. The act doesn't apply to surety, insurance, savings and loans, banking corporations, or fraternal benefits societies.
What Is the Michigan Nonprofit Corporation Act 162 of 1982?
The Michigan Nonprofit Corporation Act 162 of 1982 was created to consolidate, revise, and classify the statutes related to the regulation and organization of nonprofit businesses. The act specifically made changes to the following areas of nonprofits:
- Defined the rights, duties, immunities, and powers
- Provided the authorization of foreign nonprofits operating within Michigan
- Imposed duties on relevant state departments
- Defined fees
- Defined the penalties for violations of the act
- Repealed other acts and sections of acts
Amendments to the Michigan Nonprofit Corporation Act
One amendment to the Michigan Nonprofit Corporation Act relates to the provisions taken and sections that have added. These amendments permitted nonprofit corporations to carry out actions that were currently only available to profit corporations. Some of these provisions are listed below:
- § 303B - Convertible shares
- § 303D - Redeemable Shares
- § 341A - Share Dividends
- § 344 - Acquisition of Own Shares by Corporation
- § 406 - Chairperson of Shareholder/Member Meeting
- §§ 421-423 - Proxies
- § 488 - Shareholder Agreements
- §§ 491-496 - Derivative Proceedings
- §§ 564A-571 - Indemnification
Advantages of a Corporation
Some advantages to forming a corporation include limiting an owner's responsibility for the financial obligations of the business. In a general partnership or sole proprietorship, the business is considered to be an extension of the owner. This includes all of the owner's personal assets such as homes, bank accounts, and cars. These personal items may be used to compensate for any outstanding business debts. However, in a corporation, the business entity is separate from the owner and only corporate assets may be used towards any financial obligations of the business.
How to Form a Michigan Corporation
File Articles of Incorporation: The first step in forming a Michigan corporation is to file the Articles of Incorporation with the state's Corporations, Securities and Commercial Licensing Bureau of the Michigan Department of Licensing and Regulatory Affairs (MDLRA). The Articles of Incorporation will include the following information:
- Corporate purpose
- Name of the business
- Addresses and names of incorporators
- Stock structure
- Name of registered agent
- Address of the registered agent
- Duration of the business, if not perpetual
Issue stock: Corporations doing business in Michigan may have various types of stock, referred to as series or classes. Each class of stock will have its own advantages and disadvantages. For example, preferred stock usually doesn't have any voting rights associated with it. The stock structure, included in the Articles of Incorporation should include the following details:
- The total amount and number of shares of stock that have been authorized
- Each class of stock should also have the total amount and number of shares clearly stated
- The Articles of Incorporation should identify the rights, preferences, and limitations of each class of stock
If a class of stock ever becomes divided into a series, the Articles of Incorporation should state the authority that the directors have in dividing classes into a series and should state the preferences, limitations, number of shares, and relative rights of the series.
Select a business name: Make sure that the corporate name that you'd like to use is unique and available by searching the online database of the MDLRA. Stock certificates are issued to the stockholder of the corporation. The stock certificate will state the following:
- The name of the individual that was issued the stock
- That the corporation was legally created under Michigan state law
- The number and class of share
- The designation of the series of stock
A business name can be reversed for six months by filing an application with the MDLRA. A corporate name must include the words "incorporated," "corporation," "limited," "company," or an abbreviation of "co.," "inc.," or "corp."
Specify incorporators: Any individual that files and signs the Articles of Incorporation is considered an incorporator.
Specify directors: The board of directors will create the corporate policy and will manage the operations of the business. Directors acquire a fiduciary responsibility to the business and its stockholders. In other words, directors must place the interests of the business in front of their own personal interests.
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