Navigating Nonprofit–For‑Profit Partnerships in Northern Michigan
Introduction
Nonprofits in Northern Michigan—whether protecting shorelines, supporting rural youth, or preserving historic downtowns—are increasingly finding value in partnering with for-profit businesses. These collaborations offer expanded reach, new funding streams, and deeper community impact. But without careful planning and legal insight, they can also create risks for both parties.
This guide explores the benefits, legal considerations, case studies, and practical strategies for forming nonprofit–for-profit partnerships. From cause marketing to shared services, Northern Michigan organizations have opportunities to innovate—so long as they do so within the bounds of the law and their mission.
Why Partnerships Matter
Partnerships between nonprofits and businesses often succeed when there is mutual benefit. For-profits may gain public goodwill, community recognition, or tax incentives. Nonprofits, in turn, access funding, marketing tools, and new infrastructure.
Beth Millner Jewelry in Marquette, for example, partnered with several nonprofits to create custom-designed jewelry, raising more than $24,000 for local causes. In Traverse City, Rare Bird BrewPub has hosted events for Up North Pride and other nonprofit campaigns, supporting visibility while drawing patrons into the shared mission. These types of collaborations—sometimes called “cause marketing”—are gaining traction across the region.
Other models go deeper. Venture North, a Community Development Financial Institution (CDFI), leverages grant funding and private investment to support small businesses and nonprofit development throughout the five-county area. In all of these examples, the common theme is alignment—when business and nonprofit missions overlap in a way that strengthens both.
Legal and Tax Implications
Under Michigan law, nonprofits may partner with for-profit entities if such activities further their tax-exempt purpose. The Michigan Nonprofit Corporation Act permits joint efforts, but nonprofit leaders must ensure that control, charitable intent, and financial transparency are preserved. Agreements that provide disproportionate benefit to the business, or divert nonprofit funds from their stated mission, may violate state or IRS rules.
The IRS generally allows nonprofits to earn revenue through business activities, but if the activity is unrelated to the charitable mission, it may be subject to Unrelated Business Income Tax (UBIT). Worse, if the relationship undermines the nonprofit’s public benefit, tax-exempt status itself could be jeopardized.
Michigan’s Attorney General also has enforcement authority. In the past, this office has intervened when charitable assets appeared to be diverted in joint ventures. As a result, any nonprofit–for-profit collaboration should include legal review, board oversight, and documentation that shows a clear link to the nonprofit’s purpose.
Local Examples of Collaborative Success
|
Organization |
Partnership Type |
Purpose & Impact |
|---|---|---|
|
Beth Millner Jewelry |
Cause marketing |
Custom jewelry line raised $24K for local charities in three years |
|
Rare Bird BrewPub |
Event sponsorship |
Co-hosted fundraisers and community engagement events |
|
Venture North CDFI |
Credit & grant collaboration |
Provided business loans supporting over 1,000 jobs in Northern Michigan |
|
NMU & Community Action Agencies |
Service delivery partnership |
Improved broadband and telehealth during COVID across Upper Peninsula |
These partnerships varied in scope, but each had a clearly defined role for both parties, a mission-centered outcome, and structured oversight.
Building the Right Agreement
Every nonprofit–business partnership should be based on a formal agreement. That agreement should define roles, responsibilities, financial terms, and how the project aligns with the nonprofit’s mission. It should also cover liability, branding approvals, data sharing, and procedures for ending the relationship if necessary.
It’s important to avoid ambiguity. For example, if the nonprofit receives revenue from the business, is it a donation, a licensing fee, or a shared commercial venture? Each carries different legal and tax consequences. Similarly, if staff are collaborating across organizations, the contract should clarify supervision and insurance responsibilities.
Thoughtful, lawyer-reviewed contracts not only protect each party but also improve clarity and communication, reducing the chance of disputes.
Oversight and Risk Management
Boards of directors have a legal obligation to ensure that nonprofit partnerships serve the organization’s mission and comply with relevant laws. Before entering a relationship with a for-profit business, the board should assess risks and potential conflicts of interest.
Oversight doesn’t end once the agreement is signed. The nonprofit should monitor financial outcomes, evaluate public perception, and review the partnership regularly. If any board members are connected to the business partner, those ties must be disclosed and managed through a conflict of interest policy.
Nonprofits should also separate partnership funds in their accounting systems to maintain clear financial records. If public funds or grant dollars are involved, extra care should be taken to avoid commingling or improper allocation.
Making Partnerships Work
Successful nonprofit–business partnerships in Northern Michigan have several things in common. First, they’re built on shared values and a mission-aligned purpose. The business sees community investment as more than a marketing tool, and the nonprofit sees the partnership as a means to strengthen—not distract from—its work.
Second, both parties commit to transparency. They agree on metrics for success, public messaging strategies, and a process for resolving disputes. They also communicate openly about expectations, timelines, and costs.
Finally, the best partnerships include a trial period or project phase before entering into a long-term commitment. This allows each side to assess whether the relationship is delivering real results and to adjust terms if needed.
How True North Legal Group Can Help
True North Legal Group offers Northern Michigan nonprofits and small businesses strategic legal guidance for every stage of partnership development. We help identify the right structure for collaboration—whether that’s a simple sponsorship agreement, a shared-services contract, or a legally distinct social enterprise.
Our services include:
- Drafting and negotiating custom partnership agreements
- Advising on unrelated business income and tax-exempt status
- Reviewing and revising governance policies to accommodate partnerships
- Supporting board compliance and oversight
- Resolving partnership disputes through negotiation or legal channels
With deep local knowledge and a commitment to nonprofits, we ensure partnerships are not only compliant—but also sustainable, equitable, and mission-driven.
Conclusion
Nonprofit–for-profit partnerships are transforming how organizations serve their communities in Northern Michigan. When thoughtfully structured, these collaborations can raise funds, increase visibility, and create shared value for everyone involved.
However, they also demand diligence. From IRS rules and state statutes to reputational considerations and board governance, every detail matters. With experienced legal counsel and a clear, values-based approach, nonprofits and businesses can build lasting partnerships that do more than generate revenue—they build community.
If your nonprofit or business is exploring a partnership opportunity, contact True North Legal Group for guidance that balances innovation with legal integrity.