North Carolina Corporation

North Carolina is a state with very high growth prospects for small and medium enterprises (SMEs). You can form a corporation in North Carolina with ease as the state offers just the right business environment and support in terms of resources and incentives. The state recorded a real Gross Domestic Product (GDP) of $533.09 billion with the annual percent change of the real GDP at 7 percent. The state also offers several programs tailored for startups and businesses that are considered to be some of the top benefits of incorporating in North Carolina.

What is a North Carolina Corporation?

A corporation or a traditional C Corporation is also known as a business corporation and a for-profit corporation. It is a type of legal entity that is separate and distinct from the owners. A corporation normally possesses the same responsibilities and rights as those of individuals and hence, it is also known as a legal person. You can register a corporation in North Carolina with the office of the Secretary of State. The various types of corporations that you can form in the state are:

• Business Corporations (C-Corp)
• Business Corporation (S-Corp)
• Foreign Corporations
• Nonprofit Corporations
• Professional Corporations

What are the benefits of incorporating in North Carolina?

Entrepreneurs prefer to incorporate in North Carolina as this type of business structure has several advantages over other entity structures. Some of the advantages are:

• Limited liability – A limited liability company is considered to be a type of legal structure where-in the personal assets of owners and investors are off-limits when it comes to the debt obligations of the company. This is one of the top benefits of incorporating in North Carolina as it helps with minimizing the economic loss to individual assets that have been invested in the corporation.
• Stock Options – Once you form a corporation in North Carolina, you will be able to offer stock options. This creates shareholders and such individuals will be able to receive dividends from company stock.
• Access to investment – When it comes to the benefits of incorporating in North Carolina, you can rest assured that this type of entity structure is lucrative to investors. Unlike an S Corporation, a C Corporation can have an unlimited number of investors. A corporation can get pooled capital from investors through investment companies, venture capitalists, or even personal investors.

Starting a North Carolina Corporation

North Carolina is home to one of the fastest-growing startup ecosystems in the nation. There are several key factors for this growth including strong infrastructure, business-friendly tax rates, and access to accelerators as well as incubators. So if you want to start a business and are wondering how to form a corporation in NC then there are several important processes to focus on.

1. Name Your North Carolina Corporation

If you are planning to register a corporation in North Carolina then one of the first steps towards this is to identify a name for your company. The business name is one of the most important aspects as it will help customers to associate the product or service with the said name. A company name creates the first impression with your future customers. There are certain state naming guidelines that a corporation has to follow like using words like “corporation”, “incorporated”, or abbreviations like “corp.”, or “inc.”

2. Appoint North Carolina registered agent

If you are wondering how to form a corporation in NC then you should know that the new business formation process in the state will vary according to the entity structure. This process will involve filing incorporation documents, name reservation, obtaining licenses and all the while maintaining compliance with all NC state laws. The incorporation process may seem complex and this is where a reputable North Carolina registered agent like IncParadise can assist you.

3. File Articles of Incorporation with the North Carolina Secretary of State

Once you have reserved your business name, the next step would be to follow the process to form a corporation in North Carolina. You will be required to prepare and submit the Articles of Incorporation (Form B-01) pursuant to NC Gen Stat § 55-2-02 (2020). You can register an NC Corporation online or the articles can be mailed to the office of the Secretary of State. There will be a filing fee of $125.

Are you thinking of starting a North Carolina Corporation?

4. Prepare Bylaws for Your North Carolina Corporation

One of the key requirements for any new corporation is the corporate bylaws. They are also known as company bylaws and are guidelines that highlight the way you will structure and operate your company. Bylaws are a mandatory requirement in most US states although you are not required to submit them to the office of the Secretary of State. The requirement of bylaws is governed by NC Gen Stat § 55-2-06 (2020).

• Corporate information
• Board of directors
• Officers appointed by the directors
• Shareholder information
• Issuance of stock to shareholders
• Rights and responsibilities
• Corporate Meetings
• Conflicts of interest
• Committees
• Indemnification
• Amendment to the Bylaws

5. Appoint initial directors & hold an organizational meeting

If you’ve decided to register a corporation in North Carolina then it would benefit you to know that an integral part of the incorporating process is appointing initial directors. They are considered to be the first directors who would be named in the articles of incorporation. They can be appointed through an organizational meeting or individuals appointed by initial owners or shareholders of the said corporation. The board of initial directors will help you in making decisions relevant to several areas of the company like issuance of shares, strategic growth, and adoption of bylaws among others.

• Distribution of initial shares
• Drafting articles of incorporation
• Election of officers
• Approving corporate bylaws
• Approving the corporate seal
• Voting toward accepting the stock certificates

6. Get an EIN

If you are planning to register a NC Corporation online or offline then there are certain annual requirements that you will need to fulfill. One such requirement is that of filing state, corporate, or business taxes. To file taxes, you will have to apply for and obtain an Employer Identification Number (EIN). This is a unique 9-digit number assigned to trusts, businesses, and nonprofits by the Internal Revenue Service (IRS). It is also known as the Federal Employer Identification Number (FEIN) or Tax Identification Number and is also used for maintaining corporate shields and opening bank accounts.

7. Open a bank account

Now that you have decided to incorporate in North Carolina, it is time to consider the financial side of the business. One of the focal points is transacting, and this is facilitated using a business bank account. This type of bank account is also known as a business checking account and should be kept separate from your personal account. The greatest benefit of a checking account is that it will help with tracking your expenditures as well as your income quite efficiently. A business bank account will also help with improving the overall credit score of the company.

8. Comply with other tax and regulatory requirements

Once you form a corporation in North Carolina you may be required to pay annual taxes to the state. A C Corporation formed in the state is required to file corporate income and franchise tax returns although certain corporations are also exempt from the franchise tax pursuant to G.S. 105-125 and 105-130.11. If your company is selling products to customers in the state then you may have to file Sales and Use Tax. Certain items may be subject to a 7 percent combined general rate while some items may be subject to a miscellaneous rate.

Know more about starting a North Carolina Corporation

You’ve decided to register a corporation in North Carolina but have several unresolved queries. You may have questions concerning the incorporation process, dissolutions, starting costs, and foreign corporations among others. Hence, we have created a special section of “Frequently Asked Questions” for addressing some of the queries that you may have as a new business owner.

How do I form a “C” corporation and an “S” corporation in North Carolina?

There are different types of corporations that you can form in North Carolina like a traditional C Corporation and S Corporation. Let’s try and understand each of these entities.

• C Corporation – If you register a NC Corporation online as a C Corporation then you will be required to file the Articles of Incorporation with the office of the Secretary of State along with a fee of $125 pursuant to NC Gen Stat § 55-2-02 (2020).
• S Corporation – If you are wondering how to form a corporation in NC as an S Corporation then you need to proceed with the registration of a C corporation first. Once you have formed a traditional corporation, and received an EIN, the next step would be to complete and submit Form 2553 to facilitate the S corp., tax election. This form is known as “Election by a Small Business Corporation” an S corp., election is governed by section 1362 of the Internal Revenue Code.

How much does it cost to start a corporation in North Carolina?

If you want to incorporate in North Carolina then the overall cost of starting a corporation will depend on whether it is a domestic or foreign corporation. There are primarily three initial starting costs for any business corporation in the state and they are:

• Business Name – This denotes the cost of reserving a business name.
• Cost of Incorporation – This includes the filing fee for Articles of Incorporation.
• Business Licenses – The third cost is variable and will depend on the business activity, profession, and location of the company. Your company may require single or multiple business licenses and permits.

How do I look up a corporation in North Carolina?

To register a NC Corporation online, you will need to reserve your chosen business name first. You may have chosen a name for your company following the state naming guidelines but it is essential to ensure the name is unique. Another company might be using the same name as the one you have chosen. This is where the name availability search is quite useful. You will be able to search through a detailed state database for businesses.

Do I need a business license for my North Carolina Corporation?

Yes. If you are planning to form a corporation in North Carolina and want to transact in the state then you will need to apply for and obtain proper state licenses and permits. You may be required to apply for county licenses also known as municipal licenses. If you are selling products or services in the state then you will be required to obtain a Sales Tax License also known as a Certificate of Registration.

Can I register a foreign Corporation in North Carolina?

Yes. If you already have an existing business in any other state and want to move your business or expand in North Carolina then you need to apply for foreign qualification. This is a process by which you can register a corporation in North Carolina as a foreign corporation. You will be required to file a Certificate of Authority with the Secretary of State pursuant to NC Gen Stat § 55-15-01 (2020) and NC Gen Stat § 55-15-03 (2020). Whether you register NC Corporation online or through the mail, you will need to submit a certificate of existence or certificate of good standing along with the authority to transact business in the state. The certificate of existence will be issued by your home state or the state where said entity was initially incorporated.

How do I dissolve a corporation in North Carolina?

Once you incorporate in North Carolina, the said entity will come into existence officially. If at any given point in time, you want to close the business then it is possible through the process of dissolution. Dissolution in the state is governed by the 2020 North Carolina General Statutes, Chapter 55 – North Carolina Business Corporation Act, Article 14 – Dissolution. There are three categories of dissolution and they are:

• Dissolution by incorporators or directors
• Administrative Dissolution
• Judicial Dissolution

Ready to Start a North Carolina Corporation?

There are different types of business structures that you can choose to form although the benefits of incorporating in North Carolina are far more as compared to other entity structures. If you are thinking of registering a domestic or foreign entity in the state then IncParadise can assist you with the process of incorporation.

LLC in North Carolina

There are different business structures you can choose in North Carolina although a limited liability company remains quite popular. You can opt for North Carolina LLC filing online or offline and the paperwork is less in comparison to profit corporations. The state is home to more than nine hundred thousand small businesses and includes 13 Fortune 500 companies. When you file LLC in NC, there are several benefits that can be leveraged from state-governed small business incentive programs to grants and funding programs.

What is a North Carolina LLC?

If you are planning to form a North Carolina LLC then you need to first understand this type of business structure. This is a type of corporate structure, which primarily protects its owners or members from personal responsibility toward the debts or liabilities of the company. It is often considered to be a hybrid entity as it constitutes characteristics of partnership, corporation, and sole proprietorship. If you file an LLC in NC then it will be governed by the state statutes and the said LLC will need to comply with all state requirements. The different types of LLCs that you can form in North Carolina are:

• Single-member LLC
• Multi-member LLC
• Professional limited liability company (PLLC)
• Series LLC
• Foreign limited liability company

Benefits of forming an LLC in North Carolina

A limited liability company is one of the most favored structures, especially among first-time business owners. This is mostly because of the many advantages it has as compared to other entity structures. The advantages of filing a North Carolina LLC application are:

• A Separate legal entity – When a limited liability company is formed, it is considered to be separate from its owners or members. It is separate in terms of responsibilities, rights, and liabilities. When you file LLC in NC then the company will be able to own, buy, as well as use its own personal or real property. The limited-liability company will also be able to make its own guarantees and contracts.
• Limited liability – The biggest advantage of Filing a North Carolina LLC online is limited liability. This is possible because the company and owners are separate. Limited liability refers to the fact that an individual asset of any LLC member cannot be used as collateral or for satisfying the debts and other obligations of the said LLC.
• Perpetual existence – Unless mentioned in NC LLC filing requirements or articles of organization, most limited liability companies enjoy perpetual existence. This simply means that the owner of a said LLC can be changed without triggering the dissolution of the LLC. The retirement or death of a member does not mean that the limited-liability company will cease to exist or operate.

Forming an LLC in North Carolina

North Carolina has one of the top business climates in the Southeastern region of the United States. In a business climate executive survey report, North Carolina has been ranked second successively for five years due to its pro-business environment and robust strategic economic development plan. Although entrepreneurs prefer to form a North Carolina LLC, it is important to key areas that will enable you to set up and operate your LLC with ease.

1. Choose a North Carolina LLC name

One of the foremost aspects to focus on for any new LLC in the state of North Carolina is its business name. A business name is always as important as the company itself. This is because the name of a limited liability company will play a monumental role when it comes to the growth and perception of the company or the brand. The NC LLC filing requirements for a new business constitute naming guidelines governed by the North Carolina General Statutes, Chapters 55D, 57C, and 57D.

2. Choose a North Carolina LLC registered agent

Another important role played in new business formation in the state, is by a North Carolina LLC registered agent. It is necessary to understand the role of a registered agent also known as a resident agent or RA. A company or an individual who has been designated to receive any legal documents or correspondence on behalf of a limited-liability company is known as a registered agent. According to NC Gen Stat § 57D-2-40 (2020) and NC Gen Stat § 55D-30 (2020), to form a North Carolina LLC, you will need to continuously maintain a registered agent in the state.

3. File Article of Organization with the North Carolina Secretary of State

The foremost NC LLC filing requirement is to submit the documents for new business registration. You will need to prepare and then submit the Article of Organization pursuant to NC Gen Stat § 57D-2-21 (2020) along with a filing fee of $125. You are required to provide a listing of company officials (owners or members) in the articles. You can submit the articles to the office of the Secretary of State, Business Registration Division. You can also opt for North Carolina LLC filing online.

Form your new business in North Carolina Today!

4. Prepare a North Carolina LLC operating agreement

One of the popular business entity structures for entrepreneurs and first-time business owners is a limited liability company. Although recordkeeping formalities are minimal for this type of structure, having an operating agreement is necessary. The operating agreement is mentioned in the NC LLC filing requirements and you will not be required to share it with the state as it is considered to be an internal document. There are several reasons why such a document is essential but the most important is that it provides proof of ownership. The agreement will contain the names of all members including those provided in the North Carolina LLC application. Generally, an LLC operating agreement should include information about:

• Transfer of membership interest
• Initial contributions
• Rights and responsibilities of members
• Voting rights as well as decision-making powers
• Allocation of profit, losses, and distributions
• Management and membership structure
• Various rules for holding internal LLC meetings
• Bookkeeping procedures
• Dissolution or buyout

5. Obtain an EIN for your North Carolina LLC

Once you form a North Carolina LLC, you will be required to maintain compliance with all annual requirements of the state. One of the important requirements is filing state, business, or local taxes. To file taxes, you will need to apply for and obtain a tax ID also known as Employer Identification Number (EIN). This is a unique tax ID number that is issued by the Internal Revenue Service (IRS). Normally, a single-member LLC is not required to obtain an EIN unless the company has employees or has to file excise tax returns.

Do you want to obtain an EIN in North Carolina?

6. Check local licenses and permits

Once you form a North Carolina LLC, it is time to make the business operational. A company can transact business in the state only when it has the necessary licenses and permits. There are many kinds of licenses available for you to apply for, and a single LLC might even need more than one license or permit. The business licenses in the state can be categorized as under:

• Sales Tax License – This is a mandatory license for any LLC that is selling a product directly or indirectly to its consumers. Selling should be the primary activity. In such a scenario, after you file an LLC in NC, you will need to register with the Department of Revenue and obtain a Certificate of Registration.
• Occupational Licenses – Many different categories of occupation or profession require a license or permit. The issuing authority for such licenses and permits may also vary.

  Example: If you want to start an Adult Care Home with 2-6 residents then you will need to apply for a business license under Licensure Rules 10A NCAC 13G. The licensing authority will be the NC Department of Health & Human Services. Similarly, if you operate Airport Storage then the license will be issued by the NC Department of Public Safety.

• County Licenses – This is a type of license that is also known as a local or municipal license. Every county or city in North Carolina has different regulations for permits and licensing.

8. Open a North Carolina LLC bank account

One of the most challenging tasks of business operation is to manage finances, this includes all types of transactions. The best way to streamline your transactions, both expenses, and revenue, is by opening a business bank account. It is important to note that certain business structures are legally required to have a checking account like if you form a North Carolina LLC. A business bank account will not only make bookkeeping easier but will also make filing taxes simpler. You will also be able to accept credit card payments and enjoy identity and liability protection.

9. Comply with taxes and other regulations

Once you file LLC in NC, you will be required to fulfill all annual maintenance requirements of the state. There are two important annual requirements and they are:

• Annual Report – After you form a North Carolina LLC, this is one of the most important annual requirements. Each LLC is required to file this online or offline to the North Carolina Secretary of State – Business Registration Division.
• Taxes – An LLC is a pass-through entity and hence taxes have to be filed for the income of the owners. Apart from this, a limited liability company in North Carolina may have to file other state or local taxes such as the sales and use tax.

Know more about starting an LLC in North Carolina!

There is a process for new business registration and there are several rules, regulations, and compliances to be met to ensure that your company remains active and operational in the state. You may have several questions concerning the different aspects of an LLC in NC. For that reason, we have created a special section of “Frequently Asked Questions” for addressing some of these queries.

Is North Carolina a good state to form an LLC?

The state of North Carolina fosters a pro-business environment and has been ranked amongst the top states for startups and small businesses. Some of the reasons why entrepreneurs prefer to form a North Carolina LLC are:

• One of the lowest tax rates in the U.S with a Corporate income tax rate of just 2.5%
• The state has one of the lowest overall business costs
• It has been ranked number 7 in the list of Best Regulatory Environments by Forbes
• The state is home to a world-renowned education system and a high-quality talent pool
• NC provides easy access to both domestic and international markets
• The Information Technology Industry in the state has been growing at a rapid pace

How do I know if my North Carolina LLC name is available?

To start a limited liability company then it is imperative to follow all NC LLC filing requirements including reserving a business name. Once you have chosen a name, you need to conduct a North Carolina LLC search. This is possible by using the online business entity search offered by the website of the Secretary of State.

How much does an LLC cost in North Carolina?

In order to start a limited-liability company in North Carolina, you will have to submit the Article of Organization. There are two types of costs in the state – initial fixed costs and recurring costs. The LLC registration cost is an initial fixed cost and is $125. The cost of a business name reservation is $30. Similarly, there are other recurring costs like those attached to Annual Reports, Business Licenses, and hiring a North Carolina LLC registered agent among others.

Do I need a business license for my North Carolina LLC?

Yes. A business license is required for making your limited-liability company operational. You may incur a penalty if you conduct business without proper licenses or permits.

Can I set up a single-member LLC in North Carolina?

Yes. You can set up a single-member LLC in the state. The single-member LLCs will be treated the same as sole proprietorship firms.

What taxes does an LLC pay in North Carolina?

If you form a North Carolina LLC, you will need to file taxes annually. The type of tax may vary according to the business activity. For example, sales tax is meant for businesses selling products in the state. Apart from this, being a pass-through entity, an LLC is not required to file corporate taxes. Instead, owners are required to file individual income tax returns. If your company has employees then the LLC will also be required to file employer taxes.

Can I register a foreign LLC in North Carolina?

Yes. You can register and operate a foreign LLC in the state. You will need to obtain a Certificate of Authority pursuant to NC Gen Stat § 57D-7-01 (2020) in order to transact in the state. This process is known as the “Foreign LLC Qualification” and without it; you will not be allowed to conduct business in the state.

How do I dissolve my North Carolina LLC?

After you file an LLC in NC, there can be several reasons for dissolving the company. According to state laws, NC Gen Stat § 57D-6-01 (2020), you will be required to file Articles of Dissolution with the Secretary of State. There is a fee of $30 for dissolution.

Ready to form a North Carolina LLC?

A Limited Liability Company is one of the most popular structures, especially for first-time business owners or entrepreneurs. This type of business structure has its own advantages including limited liability and tax benefits. If you want to file a North Carolina LLC application then IncParadise can assist you with the process of registration.

Entrepreneur’s guide to forming a business in North Carolina

If you have an idea and want to transform it into a business then North Carolina is the right destination for you. There are several advantages and state benefits available for first-time entrepreneurs. You can register a business in North Carolina in some of the key industries that are considered to be future-focused right from aerospace and transportation to biotechnology and information technology. The state also boasts a diverse and highly skilled workforce.

Why do companies prefer to register their business in North Carolina?

North Carolina is one of the few states that have consistently attracted new businesses, entrepreneurs, and diverse talent. The brightest minds in the state along with technologically enabled industrial sectors have been striving hard towards providing innovative solutions that address some of the greatest challenges faced by new and existing companies. If you start a business in North Carolina, the business climate will play a crucial role in helping you start, develop, and grow your company. Let’s look at what makes this state popular amongst business owners.

• Low business costs – One of the benefits you will enjoy when you register NC business online is the low business costs. This is due to the lower overall cost associated with construction, utilities, business taxes, labor, and logistics. A study by Forbes ranked North Carolina #2 in lowest business costs and is ranked #5 for competitive utility rates.
• Tax-Friendly Environment – One of the reasons why entrepreneurs prefer to start a business in North Carolina is its tax-friendly environment. The corporate income tax rate in the state is 2.5 percent, which is lower than the rate in Florida (5.5%), Georgia (5.8%), South Carolina (5%), and Virginia (6%). The state also offers a wide variety of tax incentive programs including sales and use tax exemption, as well as payroll tax incentives programs.

Steps to start a business in North Carolina

The state of North Carolina has one of the best legal & regulatory climates apart from a top-tier workforce and extensive infrastructure. A top North Carolina registered agent like IncParadise can help you form a new business in the state but there are several other areas that you need to focus on prior to launching your company. Let’s take a look at some of the key areas that will ensure that you are able to achieve business objectives.

1. Prepare a North Carolina Business Plan

Every business is different and hence their business plan should focus on the specific activities of the said entity. Normally, a business plan is prepared before you register a business in North Carolina. The plan should ideally be extremely detailed and take into account everything from business objectives to company milestones, financial objectives, marketing plans, and other key areas of management and operations. A good plan will also reveal how sustainable your idea truly is from a short-term and long-term point of view.

• Executive summary
• Company description
• Analysis of the Industry
• Competitor analysis
• Description of Product and services
• Management structure
• Operating Plan
• Company Milestones
• Sales and Marketing Plan
• Financial plan and projection

2. Attend Entrepreneurial Training or Development Programs in North Carolina

Systematic entrepreneurship training along with development programs facilitate active as well as passive learning. If you are a first-time entrepreneur planning to start a business in North Carolina then this type of training will help you to identify avenues of economic growth and development and also leverage such avenues. Entrepreneurship training in the state aims at equipping participants or small business owners with the required skills and relevant knowledge.

3. Choose a Business Structure for Your North Carolina Business

There are several important decisions to be made before you register a business in North Carolina. One such decision is that of choosing the right entity structure. The structure plays a key role as the chosen structure will affect the legal liability of a company, its taxation, its ability to get funds, as well as the management, and the overall operations. Whether you choose to incorporate in North Carolina or form an LLC or a sole proprietorship, each structure has a different tax treatment and comes with its own limitations and benefits. The registration or new business formation processes would also be different. The type of business entities you can choose in North Carolina are:

• Limited Liability Company (LLC)
• Corporation (C-Corporation)
• S Corporation
• Sole Proprietorship
• General Partnership

4. Naming Your North Carolina Business

The name of a business is the identity of that very entity. Hence, it is considered one of the most important elements of branding or marketing strategies. The name of a company is connected to everything associated with the entity from its products and services to its credibility and customer services. The single most necessary requirement to start a business in North Carolina is naming your business. You will not be able to register NC business online or offline without a name. Different states have different criteria when it comes to choosing a company name. Similarly, North Carolina has its own naming guidelines and process. Let’s take a look at how to name your entity in NC.

• The first step is to follow the naming guidelines as specified by the state of North Carolina. The naming guidelines will vary according to the entity structure.

  Example: If you choose to incorporate in North Carolina then the name should contain words like “corporation”, “incorporated”, “limited”, or abbreviations like “corp.”, “inc.”, or “ltd.”

• The North Carolina General Statutes also state that a business name should be unique and distinguishable. You can check with the Register of Deeds office in the county where you are planning to form your entity. You can also conduct a business name availability check.
• If your chosen name is available then you will need to reserve the name. You can do this using the form known as the Application to Reserve a Business Entity Name. The form needs to be duly filled and submitted to the Department of the Secretary of State along with a fee of $30. The name can be reserved for 120 days.

5. Choose Your Location for North Carolina Business

One of the details of a new company that is the key to business operations is the location of your business. You need to identify the right location before you register a business in North Carolina. While choosing a location, you need to consider several factors such as proximity to trade routes, logistics infrastructure, customer base or targeted audience, accessibility, market conditions, competition, and the availability of a skilled workforce. Different cities or counties in the state are home to specific industries or industrial sectors and that may prove advantageous.

For example: If you start a small business in NC and if the primary business activity is e-commerce or an online store then the city to choose is Raleigh. The city is currently ranked No. 1 for online businesses due to access to high-speed internet service as well as an environment influenced by technology and research.

• Raleigh
• Charlotte
• Winston-Salem
• Greensboro
• Catawba County
• Pineville
• Morrisville
• Conover
• Reidsville
• Hendersonville

6. Register Your North Carolina Business

If you want to start a business in North Carolina then there are certain state-governed processes that must be followed. You have to meet all state requirements and those governed by the 2020 North Carolina General Statutes for businesses. Once you have chosen a structure and reserved a business name, the next step is to apply for registration with the North Carolina Secretary of State.

Example: If you want to incorporate in North Carolina then you will have to submit the Articles of Incorporation pursuant to NC Gen Stat § 55-2-02 (2020). There will be a filing fee of $125 and it has to be submitted with the Business Registration Division, North Carolina SOS. Similarly, if you want to form an LLC then you will be required to file a Articles of Organization pursuant to NC Gen Stat § 57D-2-21 (2020). The filing fee will be the same as that of a business corporation.

Do you want to form a new business in North Carolina?

7. Get Your EIN

Every state in the USA has some form of business tax that every new and existing company has to file. Although North Carolina has a tax-friendly environment, there are some taxes applicable in the state. In order to file taxes, an entity will need a tax ID known as the Employer Identification Number (EIN). The EIN is a unique tax ID number that is issued by the Internal Revenue Service (IRS).

8. Open a Business Bank Account for your North Carolina Business

Operating a company, irrespective of the structure and the business activity, is always a challenging task. When it comes to maintaining a financial record of all transactions, it becomes an even more difficult task. This is why it is always recommended to open a business bank account. This account is different from personal banking in many ways as it provides several features associated with operating a company. Some of the features include digital invoicing, automated bookkeeping, 24/7 online or mobile banking, integration of payment gateways, higher card security, and lines of credit among others.

• Your bank account will help you to track business income as well as expenses
• It will enable client or vendor payments with ease
• Enable streamlining of all financial records and tax information of your company
• A business account creates a professional image and increases credibility
• Helps in providing clear financial records for auditing purposes

9. Obtain License and Permits

The importance of a business license lies in the fact that it allows your company to operate in a specific location within a city or county. The need to apply for licenses or permits arises after you register a business in North Carolina. Different states in the USA have different business license requirements, regulations, and structures. In North Carolina, there are no generic business licenses and some businesses may require a single license while others may need multiple permits or licenses. Let’s take a look at the business licensing requirements in the state after you register NC business online.

• North Carolina Certificate of Registration – This is also known as the Sales Tax License. If you start a business in North Carolina where selling products directly or indirectly to consumers is the primary activity, then you will need to register with the Department of Revenue. This license will be applicable even if you are selling online or have an e-commerce store.
• Regulatory and Occupational License – The second most important form of licensing is the state-issued, regulatory and occupational licenses or permits. There are 950 categories of licenses and encompasses various occupations right from accredited reinsurers to wine shops, transporters, recreational therapists, Business Enterprises Program Operators, CPA firms, and food establishments among others. The issuing authority will vary according to the license being applied for. If you start a small business in NC like a food establishment then the licenses and permits will be issued by the NC Department of Health & Human Services.
• Municipal or County License – This is a type of local license that will be determined by the city or county your company is based in. If you register a business in North Carolina and the company is operating out of Raleigh then you will need to apply for necessary permits from the City Council. You will also need to obtain the required approval from the Zoning staff.

10. Register for Taxes

Each state in the USA has its own taxation laws governing all businesses. If you start a business in North Carolina then the taxes applicable will vary according to entity structure and business activity. The different forms of taxes that your company may have to file are corporate income tax, privilege license tax, sales & use tax, franchise tax, and state withholding taxes.

11. Obtain Business Insurance

Business insurance is an important component of running any company successfully. The right form of insurance will help you in covering any costs associated with liability claims and property damage. There are different types of insurance available for businesses such as:

• Business owner’s policy (BOP) for small businesses
• Commercial property insurance
• Professional liability insurance policy
• General Liability Insurance (GLI)
• Business Income Insurance
• Workers’ Compensation Insurance

12. Annual and Ongoing Requirements

Once you start a business in North Carolina or begin operating in the state, it is important to ensure the said company fulfills all state compliances. This is also known as annual maintenance and helps with keeping the company active and current in the records of the North Carolina Secretary of State. Some of the important annual requirements include:

• The filing of an annual report is pursuant to the North Carolina General Statutes. There is a specific due date for each form of entity and this report has to be filed within the specified date
• Filing of tax returns like corporate tax or sales & use tax
• Paying off any payments, penalties, or fees due within sixty days

Some Important Quick Resources for North Carolina Business

Once you have devised a strong business plan, it is time to register a business in North Carolina. There are several details that will need your attention and several processes to undergo to operate the company successfully and for the maintenance of the new business. This is where proper information will provide much-needed guidance. There are various government and private agencies that can provide the necessary information and resources. Let us look at some of the important resources required to register a NC business online.

North Carolina Secretary of State

The office of the North Carolina Secretary of State (SOS) is responsible for overseeing chartering corporations, land records, and administering various commercial regulations. The office also provides valuable resources in areas related to new business formation, submission of annual reports, checking name availability, foreign businesses, and information on programs created for small businesses. You can also download forms to start a business in North Carolina.

• North Carolina Secretary of State
  2 S Salisbury St,
  Raleigh, NC 27601, USA
  Phone: 919-814-5400
  Email: corpinfo@sosnc.gov
  Website – https://www.sosnc.gov

North Carolina Taxation Department

The taxation department in North Carolina is known as the North Carolina Department of Revenue (NCDOR). This department is primarily responsible for administering the collection of different forms of tax in the state like state income tax, sales tax, gasoline tax, inheritance tax, and beverage tax. You will find information and other resources regarding all types of primary and other taxes applicable in the state. This is helpful especially if you are planning to incorporate in North Carolina.

• North Carolina Taxation Department
  Department of Revenue
  4701 Atlantic Avenue,
  Suite 118 Raleigh, NC 27604
  Phone: 919-707-0880
  Fax: 919-850-2954
  Website – https://www.ncdor.gov/

North Carolina Labor and Employment Departments

The North Carolina Department of Labor is also known as (NCDOL) and its primary objective is to foster a business and a labor environment that is healthy, safe, fair, and promotes a productive North Carolina. If you register a business in North Carolina then it is important to understand the state labor laws and regulations. This information is available with NCDOL. You will find information on Occupational Safety and Health, Consultation Programs, OSHA standards, and NCDOL online library among others

• North Carolina Labor and Employment Departments
  North Carolina Department of Labor (NCDOL)
  4 W Edenton Street
  Raleigh, N.C. 27603
  Phone: 1-800-625-2267
  Website – https://www.labor.nc.gov/

North Carolina Department of Commerce

The North Carolina Department of Commerce aims to improve the overall economic well-being of the state and its people. The department works closely with small businesses as well as local, regional, and national organizations to propel community, economic, and workforce development in the state. You can find valuable resources including information on a variety of state grants and performance-based incentive programs created for a small businesses in NC. You will also find information on key industries in the state, business information & reports, and training resources for businesses among others.

• North Carolina Department of Commerce
  301 North Wilmington Street
  Raleigh, North Carolina 27601-1058
  Phone: 919-814-4600
  Email – info@commerce.nc.gov
  Website – https://www.commerce.nc.gov/

North Carolina Industrial Commission

The North Carolina Industrial Commission focuses primarily on the fair and effective administration of the Tort Claims Act and the Workers’ Compensation Act in this state. As a business employing a workforce, the information and resources available on Workers’ Compensation Insurance will be quite helpful.

• North Carolina Industrial Commission
  430 N. Salisbury Street,
  Raleigh, NC 27603
  Phone: 919-807-2501
  Fax: 919-715-0282
  Email – infospec@ic.nc.gov
  Website – https://www.ic.nc.gov/

Why choose Michigan for your business?

Every state in the USA provides various benefits to different kinds of businesses. The state of Michigan is one of the fastest-growing technology states that boasts of a pro-business climate. The state offers several business incentive programs including tax credit programs. If you transfer a business to Michigan then you will also be able to leverage the strong infrastructure as well as a wide variety of small business resources that will make moving LLC to Michigan or a corporation easier, more efficient, and inexpensive. Let’s look at some of the top benefits of relocating to this state.

Talented workforce

One of the top business benefits in Michigan is the availability of a talented workforce. Each business has a different requirement when it comes to employing talent and hence the talent pool is also quite diverse in the state. The existing talent pool plays a key role in developing the overall business climate as well. According to Nexient, a software company, Michigan has good engineering schools from which startups as well as Fortune 500 companies could recruit. After moving your business to Michigan, you will be able to leverage a workforce that is defined by grit, integrity, as well as a culture of innovation.

Global connectivity

One of the areas that many companies look at while thinking of relocation is global supply chain assets or global connectivity infrastructure. If you transfer a business to Michigan then you can benefit from onshoring and near-shoring solutions, which is an integral part of the state’s FDI Strategy. Today, Michigan is considered to be one of the top global destinations for Foreign Direct Investment (FDI). Foreign trade and global connectivity are possible as Michigan is home to 33 active deep water ports, 18 commercial airports, and 26 freight railroads. This is one of the top business benefits in Michigan. It is considered the strategic connection of distribution and transportation routes and creates a cost-effective supply chain for small businesses and medium enterprises.

Low cost of living

Michigan is affectionately known as the Mitten State and is considered to be one of the top 10 most affordable cities in the nation. Whether you are looking at the cost of living from a business or an individual perspective, it is low in most top-tier cities like Ann Arbor and Lansing. If you are considering moving your business to Michigan, some of the other low-cost cities to consider are Jackson, Okemos, Holland, Midland, and Rochester Hills.

Business incentives and grant programs

One of the most valuable and top business benefits in Michigan is the state business incentive and grant programs. The business incentives vary according to industry and also include tax credits. Apart from loans and other funding sources, the state provides grants under the MI Business Grant Program. When you transfer a business to Michigan, you can benefit from the following incentive and funding programs:

• MEDC Capital Access
• Michigan’s State Trade Expansion Program (MI-STEP)
• Michigan Mobility Funding Platform
• Early Stage Funding Programs
• DTE Small Business Program
• Michigan Business Development Program (MBDP)
• Critical Industry Program (CIP)
• Work Opportunity Tax Credit (WOTC)
• Small Business Alternative Credit
• MBT Certificated Credits
• State Essential Services Assessment (SESA) Exemption

Domesticating Your Company in Michigan

As a business or individual planning to relocate to Michigan, you may have several questions. One of the most commonly asked questions: “Does Michigan allow domestication, and what are the state laws or regulations applicable to proceed?” Domestication refers to changing the domicile of your corporation or LLC from any other state to Michigan. Unfortunately, Michigan business law does not have any provisions for entity domestication but there are other options available like conversion to a domestic entity and applying for foreign qualification.

Steps to Move a Corporation to Michigan

There are several benefits of moving a corporation to Michigan where the state provides just the right combination of infrastructure, resources, and support. This along with state incentive programs for small businesses makes Michigan an attractive option for new entrepreneurs as well as those who want to relocate their existing businesses. The big question is: “How do you transfer a business to Michigan?” The good news is that there are two options available, and we have included them below.

Register as a Foreign Corporation

One of the first options for moving your business to Michigan is to register it as a foreign company. This is a recommended option for those entrepreneurs who want to operate their business in the home state (incorporation state) as well as Michigan. If you are moving a Corporation to Michigan using the process of foreign qualification, as governed by 2022 Michigan Compiled Laws, Chapter 450 – Corporations, Act 284 of 1972 – Business Corporation Act, Chapter 10 Foreign Corporations. The process for foreign qualification is as follows:

• You need to designate a registered agent in Michigan for handling service of process
• Identify a corporate name or an assumed name and register the said name
• Submit a Certificate of Good Standing along with the name registration application
• Apply for a certificate of authority pursuant to MI Comp L § 450.2001 (2022) along with a fee of $60

Do you want to form a foreign corporation in Michigan?

Dissolve a home Corporation and establish a new Corporation in Michigan

The second option for moving a Corporation to Michigan is a lengthy process wherein you have to dissolve the existing company and form a domestic corporation in Michigan. The process of dissolution will be governed by the laws of the home state or the state of incorporation. Let’s look at an example to understand this.

Example: If you have an existing corporation in the state of Florida then you will first need to file the Articles of Dissolution for Florida Profit Corporation. Prior to filing the articles, you will need to obtain approval from either the shareholders of the said company or the corporation’s directors. Some states like Florida have a filing fee for Dissolution while others don’t.

• Appoint a Michigan registered agent to facilitate service of process
• Identify and reserve a corporate name using the Application for Reservation of Name
• File Articles of Incorporation pursuant to MI Comp L § 450.1202 (2022) along with the appropriate fee
• Prepare bylaws for your Michigan Corporation
• Apply for necessary business licenses and permits

Steps to Move an LLC to Michigan

The state of Michigan provides a pro-business environment that facilitates the success, growth, and expansion of small businesses and medium enterprises. The state is home to diverse industries and you can transfer a business to Michigan in any of these high-growth industries. Some of the top industries include advanced manufacturing, technology cluster industries, auto production, the semiconductor industry, and the financial services sector among others. The following two options make moving LLC to Michigan possible.

Register as a foreign LLC

Moving your business to Michigan can be highly beneficial from the perspective of expansion. In a scenario where you would want to operate your company in the existing state and also expand to Michigan, the solution that works best is to register your LLC as a foreign entity. The process of moving an LLC to Michigan is known as foreign qualification. The process of foreign qualification is governed by the 2022 Michigan Compiled Laws, Chapter 450 – Corporations, Act 23 of 1993 – Michigan Limited Liability Company Act, Article 10. The following steps would be helpful with registering a foreign LLC:

• Hire and maintain a registered agent in Michigan for handling service of process pursuant to MI Comp L § 450.4207 (2020)
• Identify a name and register the business name or assumed name of the said LLC by filing a Michigan Assumed Name Certificate
• Submit a Certificate of Existence or Certificate of Good Standing from the home state
• Apply for a Certificate of Authority to Transact Business in Michigan pursuant to the provisions of Act 23 of the Public Acts of 1993

Do you want to register a foreign LLC in Michigan?

Dissolve a home LLC and form a new LLC in Michigan

If you are thinking of moving an LLC to Michigan but don’t want to operate your company in two different states then this is a viable option. All you have to do is close or dissolve your limited liability company in its current state and register a new LLC in Michigan. The procedure can be exhausting as you will be required to file different types of documentation in the former and new state before you will be able to transfer a business to Michigan. Let’s look at an example to understand this.

Example: If you are operating a limited liability company in the state of Colorado then you will first need to file a Statement of Dissolution for Colorado LLC. The LLC dissolution can be categorized as a voluntary, Administrative, or Judicial dissolution. There is a $25 fee for filing this statement. You will also need to collect a certificate of good standing from Colorado, which will be submitted in Michigan.

• Appoint a Michigan registered agent to facilitate service of process
• Identify and reserve a business name using the Application for Reservation of Name after conducting a name availability search
• File Articles of Organization pursuant to MI Comp L § 450.4203 (2022) along with the appropriate fee
• Prepare LLC operating agreement
• Apply for necessary business licenses and permits

Move Your Business to Michigan with IncParadise

Michigan is fast becoming one of the most popular tech hubs for startups and foreign entities. Its robust infrastructure and the availability of a talent pool help businesses to achieve steady growth and accelerate their expansion plans faster. If you want to transfer a business to Michigan then the state presents many opportunities. IncParadise can help you with the process of moving a Corporation or LLC to Michigan with ease.

Doing Business in Michigan

Doing business in Michigan can be quite promising from the point of view of stable growth and future expansion. Michigan boasts of a strong economy with the Real Gross Domestic Product (GDP) at $567.94 billion. The state has a pro-business climate driven by a wide variety of Michigan small business incentives. Michigan has also received from the Standard & Poor’s (AAA) the highest credit rating amongst the 15 states with AAA ratings. The state is also home to several Fortune 1000 companies as well as industries such as finance, technology, insurance, real estate, manufacturing, logistics, service, film, transportation, communications, and trade shows. The progressive income tax structure along with tax credits and other tax-related benefits makes it easier for entrepreneurs to start a new business and achieve sustainable growth.

Why do businesses prefer doing business in Michigan?

Doing business in Michigan is a very enjoyable experience due to the several advantages that the state offers. The state has a robust infrastructure and strong supply chain management. Several companies headquartered in the state are now listed in the Fortune 500 list including ExxonMobil, Walmart, and Amazon. New businesses can also check the availability of Federal and Michigan small business grants to help provide the initial financial boost required. Let us take a look at some of the advantages of conducting business in this state.

• Emerging Startup Ecosystem – The state of Michigan is considered to be one of the newest startup ecosystems in the USA. The Global Startup Ecosystem Report (GSER) has revealed that Michigan is considered the best high-tech hub emerging in the Midwest. The city has been conferred with the title of an emerging high-tech hub and is ranked among the top 10 startup ecosystems in Detroit and Ann Arbor. Startups will not only be able to apply for Michigan small business grants but can also bid for a venture capital investment. The venture capital share in the state of Michigan has had a jump of 866 percent between 2016 ($300 million) and 2020 ($3.1 billion). The state is also home to several accelerators and incubators for startups and entrepreneurs like Ann Arbor SPARK, Automation Alley, and NextEnergy among others.
• Diverse Talent Pools – One of the top requirements for any new business is a skilled, reliable, and committed workforce, and Michigan offers all of these and much more. It is home to some of the top universities and colleges such as the University of Michigan, Ann Arbor, Michigan State University in East Lansing, Wayne State University in Detroit, and Michigan Technological University in Houghton, among others. Whether you plan to establish a software startup, want to explore transportation services, or start a new business in the temperature-controlled logistics industry, Michigan’s diverse talent pool will not disappoint you. The state has successfully created a strong talent pipeline overseen by the Michigan Economic Development Corporation (MEDC), which makes doing business in Michigan highly profitable.
• Grant Programs – Every business requires a strong financial plan and some form of funding to give the startup the initial boost it requires. This is where Michigan small business grants can be helpful as they are different from loans. You have to pay a loan back, but grants are not paid back. The most important is the MI Business Grant Program administered by the Department of Treasury. Some of the other grant programs in the state include Michigan Small Business Relief Program, the Michigan Small Business Restart Program, Entrepreneurship & Innovation Program, and the International Trade Program among others.

Incentive Programs in Michigan

When you form a startup in Michigan there are several benefits for you to enjoy including a wide variety of Michigan small business incentives programs. These programs have been created to target first-time entrepreneurs as well as existing small and medium-sized enterprises (SMEs). Here is a list of some of the most popular and top incentive programs in the state.

Michigan Business Development Program (MBDP)

If you are planning to start a company and are searching for Michigan small business funding options, then the Michigan Business Development Program (MBDP) might be just right for you. This program is administered by the Michigan Economic Development Corporation (MEDC) on behalf of the Michigan Strategic Fund (MSF). The primary objective of this funding program is to enable business growth by encouraging investment in the state and offsetting costs. A business can apply for this type of funding through the creation of qualified new jobs as well. You can receive funding in the form of Michigan small business grants, direct loans, or other categories of economic assistance. The maximum amount available under this program is $10,000,000.

Critical Industry Program (CIP)

The Critical Industry Program (CIP) is a Michigan small business funding program that provides qualified investments to qualified companies. Here, a qualified investment refers to a loan, grant, or other economic assistance towards a project undertaken by the company applying for funding. This Michigan small business grants program is administered by the Michigan Economic Development Corporation (MEDC) on behalf of the Michigan Strategic Fund (MSF).

Strategic Site Readiness Program (SSRP)

The Strategic Site Readiness Program (SSRP) is administered by the Michigan Economic Development Corporation (MEDC). This is a type of Michigan small business incentives program that provides financial incentives to eligible businesses or applicants. The activities eligible for this incentive program can vary from land acquisitions to infrastructure improvements, creation of wastewater infrastructure, improvement of buildings, building construction or demolition, and environmental remediation among others.

Jobs Ready Michigan

The Jobs Ready Michigan program has been created specifically to meet the growing talent needs of small businesses, which are expanding in the state or planning to relocate to Michigan. This is a flexible program and is highly responsive toward the specific talent requirement of companies, thus making doing business in Michigan effortless. The program addresses the various costs associated with the recruitment and training of individuals in occupations that are considered high-skill, high-demand, or high-wage. If your company is planning to create jobs in the state then you will be eligible to apply for this Michigan small business grants program.

State Essential Services Assessment (SESA)

This is a different type of Michigan small business incentives program. The program has two parts: the State Essential Services Assessment (SESA) Exemption, and the Alternative State Essential Services Assessment (SESA) Incentive. The exemption program is primarily for projects planned or operational in eligible distressed areas (EDAs). The alternative SESA incentive program focuses on projects undertaken in other areas (non-distressed areas). The SESA exemption can be to 100 percent exemption for a maximum period of 15 years. The alternative SESA incentive is equal to a maximum of 50 percent exemption for a period of up to 15 years. The SESA incentive program makes doing business in Michigan quite advantageous.

Michigan Community Revitalization Program (MCRP)

The MCRP is one of the top Michigan small business incentives programs and is made available to small businesses by the Michigan Strategic Fund (MSF). The focus of the Michigan Community Revitalization Program (MCRP) is to encourage as well as promote redevelopment of brownfield and historic preservation sites along with structural renovations of sites located near high-impact corridors and in traditional downtowns. This program may require businesses or applicants to pay an application fee or any other expense, which is incurred during administering of the award. The proposed incentive amount can be less than or more than $1,000,000.

Funding Support Programs in Michigan

The Michigan Economic Development Corporation has created several programs that focus on Michigan small business funding. One of the key factors that contribute to operating a business successfully is access to capital. Most small to medium-sized businesses require some form of capital, and this is made possible through MEDC Capital Access. MEDC Capital Access is made up of several other programs and their primary objective is to help small businesses throughout the state receive loans from banks as well as lending institutions. Some of the programs within MEDC Capital Access include the Collateral Support Program, the Loan Participation Program, and the Capital Access Program.

Growing MI Business Grant program

The Growing MI Business Grants Program by the Michigan Department of Treasury provides funding to businesses in different industries. This Michigan small business grants program aids in the creation of a process by which small businesses can receive a specific percentage of the financial losses incurred by the entity. It is calculated based on the said entity’s entire timeline of operation. The total amount of funds available to eligible businesses is $409 million. Some of the business categories eligible under the Michigan small business funding program include entertainment venues, recreational facilities, exercise facilities, food establishments, and public lodging establishments among others.

Michigan Small Business Survival Grant Program

The Michigan Small Business Survival Grant program supports the funding needs of various businesses in the state that have been disproportionately impacted by COVID-19. This Michigan small business grants program makes grants available of up to $20,000 for businesses that closed down due to the Covid-19 impact. It also awards grants of up to $15,000 to businesses that are operational or partially closed. The grant is disbursed through nonprofit economic development organizations (EDO) in the state like Invest UP, Target Alpena, Middle Michigan Development Corporation, Lansing Economic Area Partnership, and Ann Arbor Spark among others.

Ready to Start a Business in Michigan?

Every new startup or business requires some form of financial assistance during its formation and operational stage, this helps them to execute their business goals in a better way. The state offers several kinds of assistance through the Michigan small business incentives programs specifically for small and medium enterprises across diverse industries. If you want to start a new business in this state then there are plenty of funding programs you can take advantage of after registering or incorporating your company.

Michigan Business Tax

Most business entities are required to file tax returns at the federal level as well as the state level. If you have registered a company in Michigan then some form of business taxes may be applicable. A Michigan business tax calculator will help you in determining your taxes but before that, you will need to understand the various taxes required by the state. The Michigan business tax rates, as well as the filing processes, will be different from those in other states of the USA. It is also important to note that foreign entities would be required to file taxes in their home state (state of formation) as well as Michigan or other states of operations.

What taxes do businesses pay in Michigan?

The state of Michigan is considered to be one of the top states for new and expanded corporate facilities. It is currently ranked number 3 with the most popular being the Detroit-Warren-Livonia metro area. The state offers some remarkably aggressive film incentives, which have generated economic activity amounting to $430 million. The state also has a fairly good business tax climate that attracts entrepreneurs to the state.

Corporate Income Tax (CIT)

The Corporate Income Tax (CIT) has a flat rate of 6% and has to be filed by profit corporations in the state of Michigan. This is one of the important Michigan Corporation taxes and will not be applicable if the apportioned gross receipts are less than $350,000. There is a formula for this type of tax and is currently based on an entity’s sales in the state, divided by its total sales everywhere. The CIT has replaced the Michigan Business Tax (MBT) since 2012. It is important to note that certain tax credits or tax incentives like the Small Business Alternative Tax Credit program help in providing some relief.

Sales and Use Tax

The sales and use tax is an important Michigan business tax and will be paid to the state or local governing body depending on the jurisdiction in which the said business is operating. Normally, a business owner or entity involved in the selling of taxable goods or services has to collect this tax from purchasers or consumers and pass it forward to the appropriate state or local tax authority. This tax is administered by the Michigan Department of Treasury. The base tax rate for Michigan sales tax is 6% and the local tax is also 6%.

Withholding Tax

The withholding tax is a type of Michigan business tax that is levied at the Federal and state level. It is also known as the payroll withholding tax and the current tax rate in the state is 4.25%. The Department of the Treasury, Internal Revenue Service requires employers to withhold employment taxes from their employees. The employment taxes have several components including federal income tax withholding, Medicare taxes, and Social Security taxes. The IRS provides a withholding table also known as Percentage Method Tables for Income Tax Withholding for withholding allowances and applicable taxes. You can also use a Michigan business tax calculator to determine your withholding taxes at the Federal and state level.

Are you thinking of forming a new company in Michigan?

How are Michigan Businesses taxed?

If you are planning to form a new business in Michigan then one of the foremost annual requirements is filing your business tax returns. The state does not have any franchise tax or privilege tax but there are several other forms of small business taxes. The type of Michigan business tax and the tax rates may vary according to the type of entity structure and the location of the said company. It is also important to note that Michigan LLC tax filing requirements will vary from that of a corporation or a sole proprietorship. You may be required to file more than one type of tax return. Let us look at the various entities and their tax obligations in Michigan.

Taxes for an LLC

If you are planning to start a limited liability company in Michigan, then for taxation purposes it will be considered a pass-through entity. This simply means that the LLC will not be required to file federal or Michigan LLC taxes. Since an LLC is a flow-through entity, the income will pass through to the owners and other members. Normally, in such a situation, members have to file personal income tax and the state has a Flow-Through Entity (FTE) Tax.

Taxes for a C Corporation

If you are thinking of incorporating a Michigan C corporation then your company will be subjected to the Michigan Corporate Income Tax (CIT). The tax rate is a flat 6 percent and it replaced the earlier applicable Michigan Business Tax (MBT) in 2012. The CIT Michigan Corporation taxes takes into account the business income of a C corporation along with certain additions as well as subtractions before apportionment and business loss deduction after apportionment.

Taxes for S Corporation

If you elect an S Corporation tax status in Michigan then one of the benefits is that you will not be required to file Michigan Corporate Income Tax (CIT). However, if an S corporation is an insurance company or a financial institution then it will be subjected to CIT. An S Corporation may also be required to withhold on the shareholders and hence be subjected to withholding tax. One of the important Michigan corporation tax filing requirements is that an S Corporation will be required to submit Form 518 for Michigan Business Tax Registration to file taxes in the state.

Taxes for a Sole Proprietorship

A sole proprietorship is one of the easiest forms of business to start in Michigan. A sole proprietorship is run by a single owner and hence is required to file individual income tax. The tax rate is 4.25 percent and you will have to use the 1040 form to file this return each year. A sole proprietorship may also be required to file sales tax depending on the business activity.

Taxes for Partnerships

If you form a Michigan partnership company then the applicable Michigan business tax would be quite similar to that of sole proprietorships. Partners in the company will be required to file their individual tax returns based on the income they have earned through the said business. Apart from this, if your company is based in Detroit then you will be required to file the City Partnership Tax, which is normally due on the 15th day of the 4th month after the tax year ends. This tax has to be filed by partners although the partnership can elect to pay the taxes on behalf of all the partners.

Ready to Incorporate Your Michigan Company?

You can form different types of entities in Michigan from a Sole Proprietorship, to a Limited Liability Company, or a C Corporation. You can also elect for S Corporation status. There is an exhaustive process for new business formation and you will also need to file all applicable taxes each year. IncParadise, one of the top incorporation service providers in the state can provide you with meaningful assistance. We can help to register your LLC or corporation in Michigan.