Michigan borders four of the Great Lakes and was the innovator that brought the five-day workweek, the automobile, and the assembly line to the world. As a leader in innovation, Michigan’s pro-business environment makes it an attractive choice to start an LLC. The state offers a 6% corporate tax, a 4.25% flat personal income tax, and a 6% sales tax, with no additional local taxes.
Michigan’s low cost of living, connection to the global supply chain, and diverse business resources make it an attractive option. An LLC offers liability protection and is a simple business entity that’s easy to start in Michigan. Read on for how to start an LLC in Michigan.
What Is a Michigan LLC?
A limited liability company or LLC is a legal business entity. An LLC in Michigan combines the limited liability typically associated with corporations with the pass-through taxation of a sole proprietorship or partnership. A Michigan LLC is an LLC based in Michigan or doing business in the state. All Michigan LLCs must file their articles of organization with the Michigan Secretary of State.
What to Consider Before Forming an LLC in Michigan?
Before forming an LLC in Michigan, you will want to decide on the type of business, create a business plan, conduct market and customer research, and decide why you want to choose an LLC as your business entity.
An LLC is one of the most flexible legal entities offering liability protection and simplified administration. You get pass-through taxation, which means you can file LLC profits on your individual income tax return, saving you time and costs.
8 Steps to Start an LLC in Michigan
If you’re ready to start an LLC in Michigan, there are eight steps, from choosing a business name to registering and getting licenses. Here’s what you need to know:
Step 1: Decide on a Business Name
A business name is important to interface with the public. You’ll want to choose a name that encapsulates the business offerings and stands out. You will want a unique business name that must be distinguishable from existing business entities in the state. The name must include an LLC or some variation like “limited liability company.”
Businesses will need to check possible names and web domains as part of the name selection process. A Google search of the intended name will show you what websites exist with that name or similar names. Consider also whether you want to use a DBA fictitious name as the LLC name in case your desired web name isn’t available.
Next, you can check with the Michigan Secretary of State’s database to ensure your chosen business name isn’t already taken. Finally, you can search in the US patent and trademark office to ensure the name you want to use isn’t trademarked.
Step 2: Choose a Registered Agent
A registered agent is an individual or business entity designated to receive and accept legal documents on behalf of the business. The Michigan registered agent must have a physical address in the state and be available during normal business hours to accept service of process if the business is sued.
You can be your own registered agent as long as you have an office in Michigan and are available during regular business hours. A Michigan resident agent can be a Michigan resident, a Michigan corporation, a foreign corporation doing business in Michigan, or a Michigan or foreign LLC operating in Michigan.
Step 3: Prepare and File LLC Articles of Organization
The articles of organization is a legal document that provides the necessary information about the LLC, such as its name, address, purpose, and the names of its members or managers.
By filing the articles of organization with the Secretary of State, the Michigan LLC becomes a legally recognized entity, separate from its owners. This protects the owners, as their personal assets are generally separate from the company’s debts and liabilities. You can download the Michigan articles of organization form here.
Step 4: Draft an LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the rights, responsibilities, and operating procedures of the members of an LLC. It serves as a contract between the members and governs the internal affairs of the company, including the distribution of profits and losses, management structure, decision-making process, and dispute resolution.
Even if you’re creating a single-member LLC, an operating agreement is useful to outline the company’s vision, mission, distribution of profits, and procedures for decision-making. You can also outline roles and responsibilities, meeting schedules and requirements, buyouts, and buy-sell rules.
What’s Next After Filing an LLC in Michigan?
After filing a Michigan LLC, you’ll need to keep the LLC active and compliant. This includes setting up the business to function with an EIN and business bank account and getting any necessary licenses or registration. Here are the next steps:
Step 5: Apply for EIN
You must comply with the state’s tax laws and obtain the employer identification number (EIN) needed to hire employees and open a business bank account. Each LLC or business entity needs its own EIN.
You can apply for an EIN using IRS form SS-4. You can also apply online or mail the application to the IRS. If you have already applied for an EIN but lost it, there are a number of ways to recover it, including directly with the IRS.
Step 6: Open a Business Bank Account
After you’ve established the business and applied for an EIN, you’ll need to open a business bank account. It’s important to keep your business bank account separate from your personal bank account.
Opening a bank account for your LLC is an important step in managing your company’s finances and separating personal and business expenses. A separate account can facilitate tracking your business transactions, maintaining accurate financial records, and demonstrating the legitimacy of your business to clients, suppliers, and financial institutions. Taking the time to open a business bank account also helps to protect your personal assets and ensures that you comply with legal and tax requirements.
When opening a business bank account, you may want to ask banks about interest rates, monthly fees, and additional fees.
Step 7: Obtain Licenses or Permits
Depending on the nature of your business, you may need to register for specific licenses with the Secretary of State or apply for a local business license in the city or county. Of course, you’ll also need the federal employer identification number (step 5 above) and any additional permits or licenses from the state or local government.
Step: 8: Get Business Insurance
Michigan state law doesn’t require business insurance except for workers’ compensation insurance. However, you might choose other business insurance, including general liability insurance, and protection for various types of risks. Depending on the type of business, additional coverage may be necessary.
Other types of business insurance to consider include:
- Professional liability insurance
- Umbrella insurance
- Directors and officers’ liability insurance
- Liability insurance
- Property insurance
- Commercial vehicle insurance
- Business owner’s policy
- Cyber insurance
4 Types of LLCs to Consider in Michigan
There are several LLC structures you can choose from in Michigan. Here are the main types:
1. Single-member LLC
A single-member limited liability company, as the name implies, is an LLC formed with a single owner or member. If you’re forming an LLC independently, you can create a single-member LLC.
A single-member LLC offers the same legal protection of your personal assets from business liability. A single-member LLC offers simplified administration and management as there is a single owner. With pass-through taxation, you could report LLC income on your individual income tax return.
2. Multi-member LLC
A multi-member LLC is any limited liability company with two or more members. According to the IRS, there’s no limit on the maximum number of members an LLC can have. A multi-member LLC is a great option for business partners or several individuals planning to form a business together. You’ll gain liability protection, a legal business entity, pass-through taxation, and simplified administration.
An L3C is a low-profit limited liability company designed for social outreach and non-profit use. An L3C has the same liability protection and pass-through taxation as a standard LLC. Unlike a 501(c)3 corporation, which must adhere to strict requirements, an L3C is relatively simple to set up and maintain.
A professional limited liability company or PLLC is a company made by a licensed professional legally authorized to provide professional service. In a PLLC, at least one member must be licensed in each professional service.
In the case of a multi-member PLLC, each member must be licensed to provide the company’s services. Professions that must form as a PLLC in Michigan are dentists, osteopathic physicians, surgeons, doctors of divinity, or other clergy and attorneys at law.
Building Your Michigan Business
Forming a Michigan business is a big step that can lead to financial freedom and long-term growth. To build business success requires research, persistence, and a great team to support you. You can rely on doola LLC formation services as part of your team.
With doola, you get a streamlined formation process. For a low fee and fast service, doola guarantees formation in any state, including Minnesota LLC. You get company formation, an EIN, and help to open your business bank account so you can focus on building your business.
Why should I file an LLC in Michigan?
Filing an LLC in Michigan can help you protect your personal assets and separate personal accounts from business accounts. It simplifies administration while adding legitimacy to the business.
How long does it take to get an LLC in Michigan?
If you file online, you can form an LLC in Michigan in two weeks. If you file by mail, it can take up to four weeks. You also have the option to pay an expedited processing fee to get the Michigan LLC faster.
How much does an LLC cost in Michigan?
Filing an LLC in Michigan costs $50. You’ll also need to pay a $25 report fee annually to keep your LLC active.
How is an LLC taxed in Michigan?
In Michigan, LLCs have pass-through taxation by default so members will report income on their individual income tax returns.
Can I change the name of my LLC in Michigan after it’s formed?
Can an LLC in Michigan be taxed as an S-Corporation?
Do I need to have a physical office for my LLC in Michigan?
Yes, you must have a physical office for the Michigan LLC and a Michigan registered agent.
Can I dissolve or close my LLC in Michigan if I no longer need it?
Yes, you may dissolve or close a Michigan LLC as long as one of the four criteria from the Department of Licensing and Regulatory Affairs (LARA) is met. You can submit a completed Certificate of Dissolution form in person or by mail to LARA.