How to form your LLC in Michigan?
Michigan has the 4th lowest cost of living in the country. It is home to almost nine hundred thousand small businesses including limited liability companies. The state is also home to the highest concentration of computer software professionals and engineers. It is considered to have an overall good business climate. Many first-time business owners prefer to form their LLCs in Michigan. This article has been created specifically for new business owners and startups who want to know more about how to start an LLC in Michigan. This article will also provide an insight into the various features of an LLC including laws, regulations, requirements, fees, and resources like LLC names, operating agreements, annual statements, local licenses and permits, and LLC bank accounts among others.
LLC in Michigan
Michigan is one of the few states that is quickly becoming synonymous with innovation and attracting entrepreneurs to form a Michigan LLC. The state provides a variety of incentive programs and access to capital, making it much easier to set up a limited liability company. A new business requires different types of resources and there is no dearth of business resources including free consultations on starting a new business.
What is a Michigan LLC?
A Michigan limited liability company (LLC) is a specific type of business structure. It is also considered to be a favorite structure type among first-time business owners. If you want to file an LLC in Michigan then you can choose to form a single-member LLC like a sole proprietorship, or a multi-member LLC like a partnership. You can even opt for S Corporation tax classification in the future. The IRS defines an LLC as a “pass-through entity” for tax purposes. The business itself is not taxed but the taxes pass through to the members or owners. You can even form a foreign LLC in Michigan although the process will be different compared to a domestic LLC.
Benefits of forming an LLC in Michigan
If you want to form a limited liability company then a Michigan LLC registered agent will be able to help you with the entire new business formation process. They can also assist with the state’s annual maintenance requirements. Most first-time business owners choose to form an LLC due to the many advantages available to this type of structure such as:
- Limited Personal Liability – One of the primary advantages that makes a limited liability company a favorable business structure is the limited personal liability. When you form a Michigan LLC, your business may incur debts. Unlike certain other entity structures, the owner or members of the LLC will be protected from such liabilities that occur due to company debts.
- Favorable Tax Structure – When you file an LLC in Michigan, one of the greatest benefits will be the type of taxation it follows. A limited liability company is known as a “pass-through entity”, which means that the taxes will be passed on to the owners or members. Apart from this, an LLC can also choose to be taxed as an S Corporation.
- The flexibility of Membership – One of the salient advantages of an LLC is membership flexibility. If you are planning to file a Michigan LLC application, then you can rest assured that the core members of your company can include partners, individuals, estates, trusts, or other business entities.
Forming an LLC in Michigan
Michigan is a popular state when it comes to starting a new business. You can file an LLC in Michigan with ease and enjoy several of the structure-related advantages, as well as the benefits offered by the state. To successfully form an LLC and make it operational, there are several key areas that you need to focus on. Let’s take a look at some of the important aspects of starting a new company in Michigan.
1. Choose a Michigan LLC name
If you are planning to form a Michigan LLC then you must first establish a business identity, meaning a business name. The brand name promotes customer retention by creating an influential first impression of the company. So, when you think of a business name, you need to also take into account the various state naming guidelines as governed by the 2020 Michigan Compiled Laws.
One of the most important Michigan LLC filing requirements for selecting a business name is making certain that the chosen name is distinguishable from any other corporations, limited partnerships, or other LLCs in the state. You can do this by conducting a name availability search in the state business name database. You will also need to ensure that the name contains words like “limited liability Company”, “limited company” or abbreviations like L.L.C or LLC.
2. Choose a Michigan LLC registered agent
Once you have performed a Michigan LLC search and reserved a business name, you will be ready to form your new company. The process for an LLC registration varies from one state to another and has several components like fees and compliance with business laws. One such compliance is to hire and maintain a registered agent in the state pursuant to MI Comp L § 450.4207 (2020). The primary role of a Michigan LLC registered agent is to provide the service of process. IncParadise can be your registered agent in any of the 50 states, as we are committed to providing a service of process, as well as other services including new LLC formations, annual statements, and assisting with other annual state maintenance requirements.
3. File LLC Articles of Organization
To form a Michigan LLC, you will be required to prepare and file your Articles of Organization pursuant to MI Comp L § 450.4203 (2020) along with a filing fee of $50. A Michigan LLC registered agent like IncParadise can assist you with the filing process. The Articles can be filed online using the COFS (Corporations Online Filing System). Alternatively, you can also mail them to the Michigan Department of Licensing and Regulatory Affairs Corporations, Securities & Commercial Licensing Bureau, Corporations Division. You will also have the option to expedite the processing, although there will be an additional fee depending on the type of expedited service you choose. Using an incorporation specialist or provider will help you to save time and avoid potential problems and delays.
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4. Prepare a Michigan LLC operating agreement
To form a Michigan LLC and operate it successfully, you will need to understand what an operating agreement is. An operating agreement is a legal document that enables you to customize the terms of your Michigan LLC according to the specific requirements of its members. The document also provides an outline of financial and functional decision-making including, setting forth a path that the LLC can follow. The document helps bring more clarity to the overall management and operations of the company. However, the operating agreement is not one of the Michigan LLC filing requirements. Keep in mind, that according to MI Comp L § 450.4215 (2020), an LLC operating agreement with just 1 member is not unenforceable.
5. Obtain an EIN for your Michigan LLC
Once you have filed the Michigan LLC application, you will be required to maintain state annual requirements. One of the most important annual requirements is filing your state business taxes. To file these taxes, you will need to have a tax ID. A limited liability company will need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This number will vary depending on its membership structure such as a single-member or multiple-member company.
6. File annual statement
After you have completed your Michigan LLC filing online and have formed your company, you will be required to maintain state annual compliances. Of those compliances, one of the foremost important is filing your annual report, also known as the annual statement. Filing this statement or report will guarantee that the business will remain in good standing with the secretary of state. The Michigan LLC annual report has to be filed by the 15th of February each year with an exception for limited-liability companies formed after September 30th. This is one of the most important Michigan LLC filing requirements. It can be mailed, submitted in person, or filed online. It has to be filed with the Michigan Department of Licensing and Regulatory Affairs (LARA) – Bureau of Corporations, Securities & Commercial Licensing – Corporations Division.
Example: If you filed the Articles of Organization on August 10, 2022, then the LLC annual statement will be due before February 15, 2023. If your LLC Articles were filed on December 10, 2022, then the filing can be done before February 15, 2024, in which case you can technically skip one year. The fee for filing the annual statement is $25 and there can be penalties involved for late or no filing.
7. Check local licenses and permits
Filing to maintain your business license is another one of the most essential Michigan LLC filing requirements. Registering your business will not automatically make the company operational, you will still need to apply for the proper licenses and permits. The licenses needed may vary depending on the business activity and the location of the entity. Most states typically have three types of business licenses which include: state licenses, local licenses and permits, and federal licenses. You can apply for licenses and permits after you have filed a Michigan LLC application. The business licenses can be categorized as under:
- Industry-based – Unlike some of the other states, Michigan does not offer a general business license. However, it does have an industry-based licensing system. For example, if you were to form a Michigan LLC in the health industry, then the licensing would be governed by the Michigan Public Health Code and issued by the Licensing and Regulatory Affairs (LARA). Similarly, if you were to engage in insurance production, then the appropriate licenses will be issued by the Department of Insurance and Financial Services.
- City/County Licenses – Local licenses are the second type of business license that the state has to offer. The location of the business will determine the types of licenses, fees, and renewals that the business will have to adhere to. The Michigan LLC filing requirements for licenses and permits in cities and counties governed by the local codes.
Example: If you are planning to set up a new business in the City of Pontiac, MI then you will need to file the Application for Business License with the City Hall. The license fee would vary depending on the type of activity the business conducts. Some entities may require bonds similar to the way junk dealers require a bond of $1,000.
- Occupational license – The Licensing and Regulatory Affairs (LARA) is responsible for issuing professional or occupational licenses. This type of license also depends on the business activity such as architecture, engineering, collection agencies, and personnel agencies among others.
Michigan business licensing requirements, regulations, and applications may seem like a complex process for first-time business owners. A top Michigan LLC registered agent like IncParadise can provide meaningful assistance through the “Business License Research Report” service. It’s a detailed report containing a list of filing instructions, supporting document requirements, and fees for all business licenses and permits in this state.
8. Open a Michigan LLC bank account
Keeping track of your personal and business finances is of the utmost importance. It is the major focal point of any new business. This is why applying for a business bank account can be beneficial to new business owners. You can open a business account before or after submitting a Michigan LLC application. A major advantage to opening a business checking account is that it automates bookkeeping while establishing a credit history for the LLC. Having all business income and expense transactions go through the dedicated business bank account will also make your state or LLC tax preparation easier.
9. Comply with taxes and other regulations
Once you file an LLC in Michigan, you will be required to comply with annual state maintenance requirements. Similar to the Michigan annual statement, filing your state or business taxes is equally important. The most common tax applicable to most entities is the Michigan Business Tax (MBT). Apart from this, there are several other kinds of taxes including sales & use tax, withholding tax, and other miscellaneous taxes and fees. The type of entity structure you choose will determine the kind of state taxes you will need to file. Therefore, LLC taxes may be different from corporation or partnership taxes.
Know more about starting an LLC in Michigan!
If you are thinking of submitting a Michigan LLC filing online then there are several details you must be vigilant about. These details will help you to thoroughly understand the new business registration process and provide insight into the LLC state formation requirements and regulations. For this reason, we have created a special section of Frequently Asked Questions for addressing some of these queries.
Is Michigan a good state to form an LLC?
The state of Michigan is gaining popularity for its pro-business climate. It has now become home to several Fortune 500 companies, large corporations, and even work-from home-startups. Some of the salient highlights of the state are:
- There is no dearth of highly skilled talent in the state.
- Michigan is a globally connected location and ranks third in terms of foreign direct investment (FDI).
- It boasts of a culture of innovation and a low cost of living.
- Michigan has a rapidly growing economy with a 1.8 percent increase over the last five years.
- In terms of revenue and growth, it is home to several top industries such as advanced manufacturing and scientific and technical services.
- The state offers several business incentive programs including Michigan Business Development Program (MBDP) and the Jobs Ready Michigan program.
How do I know if my Michigan LLC name is available?
Once you have identified or chosen a business name in compliance with the state naming guidelines, you need to conduct a Michigan LLC search. This is a name availability search in the corporation’s database. You can conduct a name search using the entity name, individual name, and even identification number.
How much does an LLC cost in Michigan?
If you want to start a limited liability company in Michigan then you will be required to submit Articles of Organization. The initial cost to file a Michigan LLC application is $50. If you want to expedite the process then the fee would vary according to the expedited service chosen. For example, the fee for a 24-hour service is $50, while the one-hour service is $1,000. Apart from the initial formation cost, there are fees for the name reservation, annual statement submission, application for business licenses and permits, and hiring a Michigan LLC registered agent among others.
Do I need a business license for my Michigan LLC?
Yes. A business license is required to make your LLC operational. You may suffer a penalty if you conduct business without proper licenses or permits.
Can I set up a single-member LLC in Michigan?
Yes. You can set up a single-member LLC in Michigan and most documentation will remain the same. You will need to reserve a business name, file the articles of organization, and apply for appropriate licenses.
What taxes does an LLC pay in Michigan?
When you form a Michigan LLC, you may be required to file a variety of annual taxes including federal and state taxes. Since a limited liability company is a flow-through entity, federal taxes apply to the owner or members. Apart from this, an LLC will also be required to file various state taxes like Michigan Business Tax (MBT) and Sales and Use Taxes.
Can I register a foreign LLC in Michigan?
Yes. You can register and operate a foreign LLC in Michigan. You will need to file a Certificate of Authority pursuant to MI Comp L § 450.5001 (2020). The application has to be filed with the Michigan Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau, Corporations Division.
How do I dissolve my Michigan LLC?
Once you file an LLC in Michigan, you may have reasons for dissolving the company. According to state laws, MI Comp L § 450.4804 (2020), you will be required to file a Certificate of Dissolution along with a non-refundable fee of $10. You can file it online using the COFS (Corporations Online Filing System) as well as by mail.
Can I form Series LLC in Michigan?
A series LLC is considered to be a complex entity structure where an “umbrella” or “parent” LLC exists and one or more of the series LLCs are established under the parent. Currently, Michigan does not allow a series LLC option.
Ready to form a Michigan LLC?
One of the most popular structures in the USA is a Limited Liability Company. Choosing to form an LLC will offer you several benefits and advantages including tax benefits. You can form a single-member or multi-member LLC in any state by filing online or through the mail. If you want to form a Michigan LLC, then IncParadise can assist you with the process of registration for your new business in the state.
IncParadise is a highly reputable Michigan LLC registered agent and we have helped with the registration of more than 10,000 businesses. We also offer a wide variety of additional services like foreign qualification, EIN assistance, and certificate of good standing in Michigan among others.