How much does it cost to form a Michigan LLC or Corporation?

Choose a Michigan LLC or Corporation

To identify the forming cost for a Michigan Corporation or LLC, you will need to choose a structure for your business. In the state of Michigan, a professional corporation and a limited liability company are two of the most popular entity structures among entrepreneurs. Each entity structure has its advantages and disadvantages. Therefore, you will need to choose according to your business objectives. There are several other details to consider while choosing a structure like the annual cost to form a Michigan Corporation or LLC, as these include business or state taxes as well.

Which business entity should I choose for Michigan business?

Michigan is considered to be one of the top states for forming a new business. One of the primary reasons is its business climate, which is extremely conducive for startups. The state has a diverse industry and abundant workforce along with a robust infrastructure. These features along with the cost to form a Michigan LLC or corporation will be decisive factors in choosing a business structure. Let’s look at some of the key characteristics of LLC vs Corporation in Michigan, which will help you determine the right structure for your business.

• Ownership – A Limited Liability Company has members and can be a single-owner or multi-member entity. A corporation has shareholders who are considered to be the owners of the company.
• Private or Public – An LLC is considered to be a privately held entity, while a corporation is a publicly-traded entity.
• Limited Liability Protection – One of the principal reasons for choosing a business structure is liability protection. Liability protection helps business owners avoid any personal liability for company debts.
• State or Business Tax – Taxes are considered to be a component of the annual maintenance cost of Michigan Corporation or LLC and the type and amount of taxes vary depending on the business structure.
• Complexity – Entity structures are never the same and some entities have a complex incorporation or registration process. Some entities require more documentation like operating agreements.

Pros and Cons of forming an LLC or Corporation in Michigan

The overall cost to form a Michigan LLC or a corporation is dependent on several factors, some of which are considered advantages of the structure. You can choose from a wide variety of entity structures, although LLCs and corporations are the most favored types. Hence, it is important to recognize the assets, liabilities, and benefits of an LLC vs Corporation in Michigan, as well as the strengths and weaknesses of different structures.

Pros of an LLC or Corporation

• You can start an LLC with a single member
• The overall Michigan LLC cost per year is lower than some of the other business structure types
• A limited liability company enjoys flow-through or pass-through income taxation
• An LLC or corporation can choose to be taxed as an S Corporation
• A business corporation can issue stock
• Venture capital (VC) firms are more attracted to corporations than to other entity structures
• A Corporation enjoys perpetual life

Cons of an LLC or Corporation

• The cost to form a Michigan Corporation is higher than that of an LLC
• Unlike an LLC or sole proprietorship, a corporation undergoes double taxation
• Depending on the state of formation, LLC members are subjected to self-employment tax
• There is a higher annual maintenance cost for a Michigan Corporation or LLC as compared to certain other entities

Michigan LLC Cost

A limited liability company is one of the most popular forms of business structures as it has several advantages over other structures. You can form a single-member LLC (SLLC) or a multi-member LLC and even apply for S Corporation status. The overall cost to form a Michigan LLC is low in comparison to other states. Let us take a look at the various costs you can incur.

Cost for forming a Michigan LLC

The Michigan LLC cost per year also involves expenses related to the new business registration, including the name reservation. These important expenses are:

• If you are planning to form a Michigan LLC then the first step is to reserve a business name pursuant to the 2020 Michigan Compiled Laws. You will have to file the Application for Reservation of Name along with a fee of $25.
• According to state laws, you will also need to hire and maintain a registered agent for the service of process. The cost or fee would vary depending on the service you have chosen.
• The third and most important cost to form a Michigan LLC is the new business registration fee. You will have to file Articles of Organization along with a filing fee of $50. If you want to expedite the process then there will be an additional fee varying from $50 to $1000 depending on the service chosen.

Annual maintenance cost for a Michigan LLC

Once you have registered your limited-liability company in Michigan; it is important to ensure that you meet all state requirements including the annual maintenance of the business. This will involve Michigan LLC cost per year for keeping your business active as well as operational. The costs involved are as under:

• Annual Report – One of the important annual requirements for an LLC is filing the annual report, which is known as the annual statement in Michigan. The fee for filing the annual statement is $25 and is considered an important cost to form a Michigan LLC. There is a specific date for submitting your annual statement and failure to submit can lead to penalties and even dissolution.
• Taxes – A Michigan limited liability company is considered a “Pass-through Entity” therefore, the LLC will not be required to file any taxes. Instead, the members will have to file taxes for their share of the profits. There are other taxes that your company may also have to file, such as the Michigan Business Tax (MBT) This tax is also considered a part of the Michigan LLC cost per year.
• Business Licenses – Another important annual maintenance cost is the Michigan LLC business licenses. If you don’t have the proper licenses or permits then you will not be allowed to operate your business. Business licenses in Michigan can vary depending on the industry or business activity and the county or city where the LLC is located. You may also need occupational licenses.

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Michigan Corporation Cost

A corporation or professional corporation is one of the most popular legal business structures due to its flexibility and many advantages. The cost to form a Michigan Corporation may vary from one state to another and may also have multiple components. If you are planning to incorporate in Michigan then there are two expenses to be mindful of, they are the initial costs and the annual costs. These costs can be a one-time expense, as well as recurring. Let’s examine the various cost components for a better understanding.

Cost of forming Corporation in Michigan

The cost for forming a Michigan Corporation is dependent on several factors like the business name and the number of shares or stock. It is important to note that the incorporation process and cost for domestic and foreign entities would be different. The important fees related to forming a corporation in this state are:

• One of the first vital fees for forming a Michigan Corporation is the name reservation. You will need to check the availability of the name, and then reserve it. You will need to file an Application for Reservation of Name with the Corporations Division along with a fee of $10.
• According to the Michigan Compiled Laws, MI Comp L § 450.1241 (2020) you will need to hire and maintain a registered agent for service of process. The cost or fee would vary depending on the service you have chosen.
• The most important cost to form Michigan Corporation is the incorporation fees. You will have to file Articles of Incorporation with the Michigan Division of Licensing and Regulatory Affairs (LARA). The incorporation fee will vary depending on the number of authorized shares issued e.g., if your company issues 60,001-1,000,000 shares then the fee would be $100. If you want to expedite the process then there will be an additional fee ranging from $50 to $1000 depending on the service chosen.

Annual maintenance cost for Michigan Corporation

Apart from the initial cost to form a Michigan Corporation, there are a variety of expenses associated with the annual maintenance of the corporation. The annual requirements are mostly recurring costs. The costs involved are as follows:

• Annual Report – The most important annual maintenance cost of a Michigan Corporation is the filing of the company annual report. This is also known as the annual statement. The fee for filing an annual statement is $60. This report has to be submitted annually by May 15 of each year. If you fail to submit this report then it can lead to penalties.
• Taxes – Once you form a business entity in Michigan, your company will be obligated to file annual taxes. This is considered to be a recurring cost in forming a Michigan Corporation. The most important tax for a corporation is the Michigan Corporate Income Tax (CIT), which has a flat rate of 6%. There are other state taxes that may also be applicable.
• Business Licenses – Once you incorporate in Michigan, you will have to apply for and maintain business licenses and permits. These licenses help towards making a company operational. Michigan licensing depends on business activity or industry, occupation, and the city or county where a business is located. The costs of licensing vary according to these factors.

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Need any Assistance in Forming Your Michigan LLC or Corporation

Whether you are thinking of forming an LLC or want to incorporate in Michigan, there are several procedures involved. There is a cost connected to each process including the annual maintenance. The cost to form a Michigan LLC or corporation will vary depending on the business entity and will be different for domestic and foreign entities. We, at IncParadise can provide valuable assistance by handling your new business formation or incorporation requirements while ensuring your company is compliant with all state laws.