Sole Proprietorship in Michigan

Michigan is home to over nine hundred thousand small businesses within highly diversified and advanced industries, from cutting-edge manufacturing to next-generation transportation and automotive manufacturing. The state provides a strong infrastructure, an extensive transportation network, a highly educated and efficient workforce, technology hubs and cluster industries, and small business grants among others. If you file a sole proprietorship in Michigan then you will be able to maximize your profitability by utilizing a range of state resources.

What is a sole proprietorship in Michigan?

If you are wondering how you can start a sole proprietorship in Michigan, then first it is important to understand what type of entity you want. A sole trader or proprietorship is the easiest business structure that you can establish. This is mostly due to a lack of state laws and government regulations related to the formation of the entity. It is also known as an unincorporated business, meaning the owner is responsible for all profits earned and liabilities incurred. It has a different tax structure compared to LLCs or corporations and doesn’t require the filing of federal forms.

Important features of sole proprietorship in Michigan

Small business owners prefer to file sole proprietorships in Michigan due to the salient benefits and features this type of entity has. Some of the key features are:

• One of the top features is that this type of entity has minimal formality. This type of entity has few state reporting requirements and fewer documents are required to start a sole proprietorship in Michigan.
• It is beneficial, especially for small businesses like home-based entities, bakeries, small retail outlets, and consultants among others.
• A key feature of a Michigan sole proprietorship is that unlike with a partnership or corporation, you will not be required to share the profits.
• The business structure of a sole proprietorship is quite simple as it has a single owner.
• When you file a sole proprietorship in Michigan, all decisions regarding management, finance, and operations will be made by the owner.
• The tax structure of a sole proprietorship is different from that of other structures. It has to be filed through the owner’s income tax return.
• The process of dissolution or closure of a Michigan sole proprietorship is also quite simple.

Steps to Start Sole Proprietorship in Michigan

If you are thinking about how to start a sole proprietorship in Michigan then you need first start by identifying the different requirements for a new entity. You will be required to focus on several details like finances, management, and operations. You will also need to understand the various requirements in Michigan like obtaining business licenses and tax IDs. Let’s look at some of the features that will help you run the business smoothly once you file for a sole proprietorship in Michigan.

1. Prepare a business plan

First-time business owners prefer to start a sole proprietorship in Michigan because of the simplicity of the business structure. If you want to establish this type of entity structure then one of the focal points to start with is creating an elaborate business plan. There are certain benefits to making an operational plan as it will help you identify the key strengths and weaknesses of your company. A solid business plan will provide a clear view of budgeting and other financial requirements, customers and markets, competition, sales and marketing, and also state compliances and requirements. The components of a strategic plan will vary depending on the type of business activity, structure, location, and objectives. Some of the most common features of a general business plan are:

• Executive Summary
• Company Description and Objectives
• Entry and Strategy
• Product and Services
• Target audience and competitors
• Short-term and Long-term goals
• Marketing Plan and Sales Tactics
• Financial Plan and Projection

2. Choose a Michigan business name

When you start a sole proprietorship in Michigan, one of the first requirements is choosing a business name. The name you choose for your business can build a brand or can even lead to the failure of the company. It is important to understand that a business name will communicate the nature of the business and its objectives to customers, competitors, and industry partners. Here are some easy tips to follow while choosing a business name:

• Keep the business name as simple as possible and make sure that it is easy to spell.
• The company name should represent your product or service like “Sarah’s Bakery”.
• It is important to balance creative names with relevance.
• You can use the free business name creator tools that are available on the internet.
• Check to make sure that the chosen name is copyright free.
• Conduct a trademark search for the chosen name.
• If you want to take your company online then check for domain name availability.

3. File the Assumed business name certificate

If you want to file a sole proprietorship in Michigan then you need to select a name first. There are two types of names that your company can have:

• Your full legal name can be used as the company name
• You can register an assumed business name or DBA

For example: Your name is Jason Hicks and you want to start a Michigan sole proprietorship as an IT Consultant. You can use your own name like ‘Jason Hicks IT Consulting.’ Alternatively, you can choose to use a name like “Hick’s consulting”. In such a scenario, Hick’s Consulting will be considered as an assumed business name or DBA. You will be required to conduct a name availability search.

Do you want to start a sole proprietorship in Michigan?

4. Get EIN

An EIN or Employer Identification Number is an important requirement for most businesses as it aids with filing taxes. It is also required for opening business banking accounts. Once you file a sole proprietorship in Michigan, you will need to file all the income and expenses using an individual tax return. This tax return is normally filed using the Social Security number (SSN) but you may need an EIN in certain scenarios. You will need to apply for an Employer Identification Number if your company meets the following criteria:

• The sole proprietorship hires employees
• If you have a Keogh plan
• The company opens a business bank account
• If you are required to file excise tax returns
• When you convert or change the entity structure from sole proprietorship to partnership or LLC
• Filing Chapter 7 (liquidation) or Chapter 11 (reorganization) bankruptcy

5. Obtain necessary licenses and permits

If you are thinking of setting up a sole proprietorship company in the state of Michigan then there are several requirements that you need to be compliant with. One of the most vital requirements apart from the assumed name certificate in Michigan is obtaining the appropriate business licenses and permits. The relevant licenses and permits will help keep your business operational. Business licenses in the state can be categorized as under:

• Industry-based business licenses
• City or County licenses and permits
• Professional or occupational licenses
• Regulated licenses
• Zoning permits
• Other local permits

6. Open a bank account for your Michigan business

A bank account is one of the most important requirements for individuals and businesses when it comes to providing financial security and money management. One of the common mistakes committed by sole traders or proprietors is that they operate the business using their personal account and this makes filing their taxes very complicated. The advantage of having a business bank account is that it will keep your personal income and expenses separate from your business gains and expenses. There are several other benefits to having such bank accounts, like the flexibility in terms of accepting debit and credit card transactions from customers. You can open a business bank account before or after you start a sole proprietorship in Michigan.

7. Report and pay taxes

When you start a sole proprietorship in Michigan, there are certain state regulations and compliances that you need to meet. Keeping up with your taxes is another critically important annual state compliance to keep in mind. A sole proprietorship or sole trader is operated by a single owner therefore, the tax structure is different from the tax structure of corporations or LLCs. Normally, such an entity does not have any business tax and instead, the owner has to file personal income tax. In the state of Michigan, the individual income tax rate is 4.25 percent. Apart from this, depending on the business activity, you may be required to file a sales tax of 6 percent.

Ready to Start a Sole Proprietorship Business in Michigan

You no longer have to worry about how to start a sole proprietorship in Michigan as it is one of the simplest business structures. Unlike several other forms of businesses, a Michigan sole trader entity is not required to register with the state. However, there are several state requirements including annual compliances that such a business would have to fulfill to operate and enjoy a good standing with the state.

Business License in Michigan

Every business operating in any state in the nation is required to obtain some form of license or permit. If you start a company in Michigan then you will need to obtain a Michigan business license. There are many types of licenses that may be applicable and the licensing requirement in this state would be different from other states. A business license or permit can be issued to individuals as well as to both domestic and foreign businesses. The importance of a Michigan business license lies in the fact that without it, you will not be able to operate your business or facilitate transactions in the state. Michigan has its own specific licensing laws, regulations, fees, and renewal requirements. An individual or a company may require one or more licenses or permits to operate in the state.

What business license do I need in Michigan?

Michigan is home to an abundant workforce and offers a wide variety of business resources for those planning to form a startup in the state. First, you will need to apply for and obtain a Michigan business license to make your company operational. Licenses can vary according to business activity and location. Therefore, it is important to conduct a Michigan business license search. It is important to note that there are no general licenses in the state and not all businesses require licenses and/or permits.

Steps to Apply for a Michigan Business License

The process of conducting a Michigan business license search can be quite arduous especially when it comes to identifying the type of permits specific to your business. Hence, we have created a list of Michigan business licenses and permits as well as requirements, so it becomes easier for you to understand how they can be obtained.

1. Search for necessary Michigan general business licenses

One of the most common types of business licenses is a general license, and it is applicable in several states. The state of Michigan doesn’t have the provision for a single general operating license or permit for businesses. The primary Michigan business license is one based on the industry your business is classified under. Let’s look at an example to understand this:

Example: You are planning to establish a transportation network company in Michigan. You will be required to apply online in order to obtain a Michigan business license. You will need to use the Michigan Commercial Licensing, Enforcement and Regulation System (MiCLEAR) to apply for the same.

2. Obtain applicable federal licenses

Most small businesses or large enterprises require state business licenses and local permits but some specific industries or areas are governed by the Federal government and may require you to apply for a Federal license. If your business falls under any of the following industries then you will need to contact the respective federal agency for obtaining a license.

• Drug Manufacturing – You will need to contact Food and Drug Administration (FDA)
• Selling of tobacco, alcohol, or firearms – Licenses are issued by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (AFT)
• Investment Advising – You need to approach the Securities and Exchange Commission (SEC)
• Broadcasting – The Federal Communications Commission (FCC) governs these licensing requirements
• Preparation of meat products – Licensing requirements are overseen by the Food and Drug Administration (FDA)
• Ground transportation – You need to obtain a license from the Department of Transportation (DOT)

3. Search for local or county licenses and permits

Once you form a business in Michigan, the city or county your business is situated in will also define the type of license required. The types of licenses, fees, and local ordinances applicable will vary depending on the city or county. Let’s look at an example to understand how you can obtain a Michigan business license at the county or city level.

Example: The physical address of your company is in Detroit, MI. Now, if your business falls under any of the categories mentioned by the city then you will need to obtain a local Michigan business license and permit. The categories are Amusement, Consumer Services, Food Services, Gas Station, Lodging, Motor Vehicle for Hire, Night Club, Retail, Second Hand Sales, and Vendors among others. Now, if you want to start a hotel or public lodging then you will need certain clearances from the Detroit Health Department, Fire Marshal Division, and Treasury Clearance. You will also need to apply for a Commercial Certificate of Compliance. Once you have all these clearances, you will be able to apply for a Michigan business license under the Lodging Category. The fee will vary according to the type of hotel and number of rooms like if you were to start a hotel having 1-50 rooms then the fee will be $345/year and if you start a Public Lodging House then the fee is $223/year.

4. Check for professional licenses

Of the many licensing classifications, one of the more significant types of licensing classifications is professional licenses. This License is governed by the Bureau of Professional Licensing (BPL). A Professional Michigan business license is divided into two categories and they are:

• Health Licensing – This area focuses on issuing licenses based on a specific health profession. Some of the common professions include Acupuncture, Occupational Therapy, Behavior Analysts, Pharmacy, Genetic Counseling, Veterinary Medicine, Psychology, Nursing Home Administrator, and Dentistry among others. You will need to apply online using the Michigan Professional Licensing User System (MiPLUS) for the appropriate license or permit.
• Occupational Licensing – The distribution of Occupational Licenses is governed by the Michigan Occupational Code. There are several categories of occupational professions for which you will need to obtain a Michigan business license. Some of these categories include Accountancy, Appraisal Management Companies (AMCs), Real Estate Brokers, Professional Surveyors, Personnel Agencies, Professional Engineers, and Collection Agencies among others.

5. Obtain any other necessary Michigan licenses and permits

The type of business activity will also define whether you need to apply for a Sales Tax License or not. This is a type of Michigan business license required by businesses or individuals planning to sell tangible personal property. The type of business activity can vary from retailing to a variety of services. There is no fee for a sales tax license.

6. Obtain home-based business licenses if required

Home-based businesses are gaining popularity due to several factors with low cost being a primary factor. If you are planning to start a business from home then it may be subject to some business laws as well as state regulations. Most home businesses are normally sole proprietorships, while some may even be partnership firms. When you operate from your home, the type of Michigan business license and permits required may also vary depending on the business activity. You might have to apply for temporary licenses and permits or even occupational licenses. For this reason, it is essential to conduct a proper Michigan business license search. Here are some details to focus on:

• You need to be aware of local zoning regulations and obtain the necessary clearances as any violation can lead to fines or even the closure of businesses.
• You may require local licenses for which you will need to check with the County Clerk’s office or the licensing departments of the city where your business is located.
• The licenses required by a home-based business will depend on the business activity. The following example will provide more clarity.

  Example: If you are an event planner starting your business from home then you may require both yearly and temporary permits and licenses. You will first need to obtain an event planning certification. It is necessary to obtain a Michigan business license depending on factors connected to a specific event like serving alcohol, food preparation and the selling of food, outdoor events, outdoor structures, live entertainment, and large gatherings. If your event has outdoor structures then you will need a building permit and need food licenses from the city’s Department of Health.

7. Renew and maintain licenses

Once you have obtained a Michigan business license, it will remain valid for one year. It is important to note that temporary licenses and permits are required for specific purposes and events and therefore do not require renewal. The licenses issued by the state, or city will need to be renewed to ensure the business operations are not interrupted. Some professional and occupational licenses also need to be renewed annually like the Personnel Agency licenses, which expire each year on December 31st. You can renew Michigan business licenses and permits online using the Michigan Professional Licensing User System (MiPLUS) or the Michigan Commercial Licensing, Enforcement and Regulation System (MiCLEAR).

Need any Assistance in Obtaining Your Michigan Business License?

If you are planning to start a new business in the state of Michigan then it is absolutely essential to obtain a Michigan business license. The types of licenses and permits can vary depending on the location of your company and activity. The Michigan business license search, application, fee, and renewal processes, and requirements are different for each type of license and are detail-oriented.

Michigan Business Entity Search

Legally creating a business entity includes selecting an appropriate company name and conducting a Michigan business name search. It is essential to choose a name that befits your company or business activity. It is important to focus on a unique and memorable name that will help your company stand apart from your rivals. Since the company name needs to be distinct, here are some tips to help make choosing the right name easier:

• Choose a name that is easy to remember
• You can use business name generators online
• Try to choose a name that is not limiting in terms of business expansion
• You can be creative with a company name
• A name that conveys meaning or purpose is recommended
• Use a variety of online resources for brainstorming company names
• Follow the Michigan business name rules and guidelines

What is a Michigan business name search?

If you’ve decided to establish your startup in the state of Michigan, then conducting a Michigan business name search using the Corporations Online Filing System (COFS) can be quite helpful. Each state in the USA has a process for making information concerning business entities searchable. The governing authority for such a search varies from one state to another. For example, in some states, the entity search is facilitated by the office of the Secretary of State. If you want to conduct a Michigan business entity search then this will be facilitated by the Michigan Department of Licensing and Regulatory Affairs (LARA).

Example: You want to establish a new company in Michigan. The said business is a travel agency or tour operator in Ann Arbor, Michigan. You want to name it “Ann Arbor Travel”. Once you have chosen this name then the next step is to visit the website of the Michigan Department of Licensing and Regulatory Affairs (LARA) – Search for a business entity. When you check for Michigan business name availability then it will bring up a profit corporation with the same name and active status. This means you will not be able to use this name. Now if you change the name to “Ann Arbor Travel and Tours” and conduct the Michigan business name search again then it will show the availability of the said name.

Naming your Michigan LLC

Once you have a business plan in place, it is important to focus on naming your business. A company name is considered to be the primary business identification for that business. Therefore, you must take plenty of precautions when choosing a name. You can use the help of business name generators or similar tools and conduct an online Michigan LLC name search to determine the appropriate name. A business name carries a lot of weight and it is important to remember that it takes anywhere from 5 to 8 impressions for your future customers to remember the name. Let’s look at the two important points to consider when it comes to naming your limited liability company.

General LLC naming rules

One of the most important details to consider when naming your company is the Michigan business name rules and regulations. The naming and reservation of an LLC are governed by Act 23 of 1993 Michigan Limited Liability Company Act, MI Comp L § 450.4205 (2020). The general rules for an LLC name are:

• It should have words like Limited Liability Company or abbreviations like LLC or L.L.C.
• Names should be distinguishable and not contain words or abbreviations like Incorporated, or Inc.
• The LLC should not refer to specific services like medical practices, attorneys, or even banks without obtaining the necessary licenses or permissions
• You need to also check the restricted word list for specific industries or professions

Search LLC business name availability on the state’s Department of Licensing and Regulatory Affairs website

Once you have successfully conceived a name for your limited-liability company based on Michigan business name rules, the next step is to conduct an availability search. The Michigan Department of Licensing and Regulatory Affairs (LARA) offers an online option to conduct a Michigan LLC name search. The following examples are of the different ways to search:

• Search by Entity Name – This is the most common form of a Michigan business name availability search. This search is especially meant for new domestic and foreign entities. You can search for a name that begins with, exact match, keyword, and Soundex. Let’s look at an example to understand this process.

  Example: If your chosen name is “MOMLIFE APPAREL” and you conduct a search in the database for Michigan business name availability using just MOMLIFE APPAREL or MOMLIFE APPAREL LLC then it brings up a company that is active and based in Troy, MI. Now, if you tweak the name a little and make it MOMLIFE APPARELS then the Michigan LLC name search reveals that the name is available for reservation.

• Search by an Individual Name – The second option is to search using an individual name. An individual name here can be the name of a resident agent, member, officer, or owner among others. This option can also be used for a Michigan LLC name search. As an example, if you type the word ‘Mark’ and search, then it will bring up 10,000 records in the database.

Do you want to form an LLC in Michigan?

Naming your Michigan Corporation

When we refer to a new company formation, branding and marketing, sales, banking, and customers there is one characteristic that connects them all and that is a company name. Your business name will help you in setting the overall brand image and tone where the customer expectation is concerned. These days there are plenty of online tools or business name generators available that can help you in generating a short, yet powerful name that is relevant to the ideology or goals of the company. This will help you quickly come up with a name so that you can conduct a Michigan Corporation name search. Let’s look at several of the details to consider when naming your new corporation.

General Corporation naming rules

One of the focal points of naming a corporation is following the state guidelines or Michigan business name rules and regulations. The naming of a profit corporation is governed by 2020 Michigan Compiled Laws, Chapter 450 – Corporations, Act 284 of 1972 Business Corporation Act (450.1101 – 450.2099), MI Comp L § 450.1211 (2020). The general naming rules for a profit corporation in Michigan are:

• It should have words like “Corporation,” “Incorporated,” or abbreviations like Corp. or INC.
• The name should be unique and should not imply that the said corporation has been organized for any purpose other than what is outlined in the articles of incorporation.
• According to Michigan business name rules, certain words cannot be used like “security,” “industrial bank,” “trust company”, or “surety.”
• You need to also check the restricted word list for specific industries or professions.

Search Michigan Corporation name availability in the state’s Department of Licensing and Regulatory Affairs website

Once you have identified a name for your corporation in compliance with the Michigan business name rules then the next step is to conduct a Michigan Corporation name search. This name availability search is facilitated online by the Michigan Department of Licensing and Regulatory Affairs (LARA). There are different ways to conduct the name search and they are:

• Search by Entity Name – This is the foremost option for Michigan Corporation name search. This search can be used by both domestic and foreign entities. You can think of any name and then apply search criteria like exact match, begins with, soundex, and keyword. Let’s look at an example to understand this process.

  Example: The name chosen for your corporation is “WALKER MANUFACTURING”. Now if you conduct a Michigan Corporation name search in the database using just WALKER MANUFACTURING or WALKER MANUFACTURING INC. then it brings up a company that is active and based in Wyoming, MI. Now, if you tweak the name a little and make it WALKERS MANUFACTURING or WALK MANUFACTURING then it shows the said Michigan business name availability. Now you can file the Application for Reservation of Name.

• Search by an Individual Name – Another Michigan Corporation name search option is where the name of an individual can be the name of a resident agent, director, and president among others. This option can also be used for identifying Michigan business name availability. As an example, if you type the word ‘Godfrey’ or ‘Irwin’ then the search reveals 636 and 934 names respectively in the database.

Are you thinking of registering a Corporation in Michigan?

Need any Assistance in Michigan Business Name Search?

A business name is the face of a company. Therefore, it is important to conduct a Michigan business name search while maintaining compliance with all state naming guidelines. The Michigan business name availability will help you to proceed with name reservation and also facilitate other processes like the filing of formation or incorporation documents, banking, issuance of licenses, and filing of taxes among others. The entire process of entity search may seem complex, if so then IncParadise can provide meaningful assistance.

Michigan LLC Annual Filing Requirements

The chosen structure is a determining factor when it comes to the business formation process as well as state annual requirements. Michigan, like any other state in the USA, has certain annual requirements that every business must be compliant with. One of the key requirements is the Michigan LLC annual statement. The annual statement is another name for the annual report. This document contains comprehensive information concerning the financial standing of a company. Generally, an annual report includes the overall financial performance of the said LLC along with the various activities undertaken in the prior fiscal year. The Michigan LLC annual requirements will be different for domestic and foreign LLCs.

Michigan LLC Annual Statement

Most forms of businesses including LLCs have to be compliant with state laws including filing an annual report in Michigan. The annual report is known by many names such as, “statements of information” and “yearly statements”. The information required can vary from one state to another. The Michigan LLC annual requirements are governed by the 2020 Michigan Compiled Laws, and the filing of the annual statement will be in accordance with MI Comp L § 450.4909 (2020).

What does it include and how to file?

An LLC annual statement is a document that provides the state with updated information on the said entities operating in the state. If you are wondering how to file an annual statement in Michigan, it can simply be submitted online or by mail. According to the Michigan LLC annual requirements, you may be required to provide the following company information:

• Business name
• Entity ID (LARA)
• Principal Office street address
• Registered agent information
• Purpose and Activities

What is the due date for filing?

As a limited liability company, filing an annual report in Michigan is an important step toward maintaining an active status in the state. The annual statement must be filed by the 15th of February each year. If the registration of your LLC has taken place after September 30 in a given year, then you can skip the Michigan LLC annual requirements in the first year. The filing fee for the Michigan annual statement is $25.

For Example: If you registered or formed your limited liability company on April 22, 2022, then the Michigan LLC annual statement will have to be filed by February 15, 2023. Similarly, if your LLC was registered on October 22, 2022, then you don’t have to file the annual statement in 2023. You can file it by February 15, 2024.

Do you want to file an Annual Statement for your LLC?

Penalties if fail to file

The Michigan LLC annual statement must be filed by the 15th of February each year. It is an important annual state requirement. Failure to file by the due date will lead to penalties. There is an initial penalty of $50. If you fail to meet the Michigan LLC annual requirements for 2 consecutive years, then an administrator’s notice will be issued and the company will be regarded as “not in good standing” with the state.

Michigan INC Annual Filing Requirements

An annual report, also known as the Michigan annual statement, is a key business document. The annual statement is one of the integral Michigan Corporation annual requirements. This report is required to be filed by various types of businesses including domestic and foreign corporations. The report has to be filed with the Michigan Department of Licensing and Regulatory Affairs (LARA) – Bureau of Corporations, Securities & Commercial Licensing – Corporations Division. The requirement and the contents of an annual report will vary depending on the type of entity and the jurisdiction or state of formation. If you are wondering how to file an annual statement in Michigan, then you need to know that there is a process to file.

Michigan Annual Report for a Corporation

If you have already or recently registered a corporation in the state then you will need to maintain all Michigan Corporation annual requirements including filing your annual statement. Domestic corporations and foreign corporations will have to file their annual reports pursuant to 2020 Michigan Compiled Laws, Chapter 450 – Corporations – MI Comp L § 450.1911 (2020).

What does it include and how to file?

Filing an annual report in Michigan is important but the contents of the annual statement may vary from one state to another. It is not a financial statement but it may contain financial information concerning the said company. As a part of the Michigan Corporation annual requirements, the following information is required in the report:

• Business name
• ID number as assigned by LARA
• Name and address of the registered agent
• Statement of business purpose or general nature
• Names and addresses of officers and directors
• Signature and title of the person filing the report

What is the due date for filing?

Once you’ve incorporated in the state, your company will need to be compliant with all Michigan Corporation annual requirements. Filing the annual statement will ensure your compliance and help your corporation to maintain an active status with the state. Filing an annual report in Michigan for a corporation requires you to be mindful of the due date, which is the 15th of May each year. The filing fee for the Corporation annual report is $25.

For Example: If you incorporated your company on June 10, 2022, then according to Michigan Corporation annual requirements, you will need to file the report by May 15, 2023.

Filing an Annual Report for your Corporation is easy!

Penalties if fail to file

Filing an annual report in Michigan by the due date is of vital importance. Failure to file the statement may lead to fees and penalties. According to Michigan Corporation annual requirements are governed by MI Comp L § 450.1921 (2020). Neglecting, failing, or refusing to file the annual statement will lead to a penalty fee of $10.00 for each month that the corporation is delinquent, and will not exceed $50.00. If a corporation is unable to file the annual statement for a period of 2 years then it will be dissolved 60 days from the date of the expiration of the 2-year period pursuant to MI Comp L § 450.1922 (2020).

Other Filings Requirements

The annual report or annual statement is one of the most important corporation or Michigan LLC annual requirements, but it is not the only annual requirement. Each state requires new and existing companies to remain in good standing with the state. This is only made possible by fulfilling all annual state requirements. In Michigan, other filings or requirements include state and business taxes. The business taxes are normally due on April 30th or by the end of the fourth month after the end of a tax year. Apart from this, you may also need to renew your state business licenses and county licenses annually.

Need any Assistance with Filing Michigan LLC or INC Annual Reports?

Annual compliances are different in each state of the USA. Therefore, the Michigan Corporation annual requirements might not be similar to Florida to Kansas. An annual compliance consists of business or state taxes, and filing an annual report in Michigan. If you choose us as your registered agent in Michigan then we can assist you with any information you may require related to the annual report. We can also help you avoid penalties by filing it by the due date.

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.

Michigan Corporation

Entrepreneurs prefer to register a corporation in Michigan due to the flexibility of conducting business in the state. There are several factors including overall pro-business climate and infrastructure that play a key role in this endeavor apart from the various benefits of incorporating in Michigan. The state has a stable and growing economy and offers a wide range of small business incentives including tax credits. Some of the top corporations in the state include Stellantis North America (formerly Chrysler), General Motors Corporation, Airflow Sciences Corporation, Altair Engineering Inc., Lear Corporation, and Northwest Broadcasting, Inc., among others.

What is a Michigan Corporation?

A traditional C Corporation is also known as a business or profit corporation and it is one of the popular legal structures in the USA. If you are planning to form a corporation in Michigan then it is important to understand the entity structure. In terms of taxation, the owners or shareholders of a C Corporation are taxed separately from the company. If you are wondering how to form a corporation in Michigan then the process will depend on the type of corporation you want to form. The various types of corporation that can be formed in the state are:

• Profit Corporations
• Foreign Corporations
• Nonprofit Corporations
• Secretary of State Corporations
• Professional Service Corporations
• S Corporation
• Ecclesiastical Corporations
• Close Corporations
• Certified B Corporations™ (B Corps™)

What are the benefits of incorporating in Michigan?

There are several benefits of incorporating in Michigan and these can vary from the advantages of the entity structure to various benefits offered by the state. Some of the most common benefits are:

• Limited liability protection – This is one of the salient highlights or advantages of forming a C Corporation. It refers to the fact that once you incorporate in Michigan; the debts, liabilities, and obligations of the company will be separate from the owner and hence the owners cannot be held personally responsible towards the same.
• Unlimited Shareholders – One of the top benefits of incorporating in Michigan is that your corporation can have unlimited shareholders. Shareholders play a key role like electing the Board of Directors of a said company. In a C Corporation, almost anyone can own shares and thus enjoy ownership and this includes non-U.S. citizens and even other business entities.
• Preferred by VC Investors – If you plan to register a corporation in Michigan then the good news is that most VC investors prefer a corporation as compared to other business structures. This is because VC’s enjoy more flexibility investing and also because of the way it is taxed.

Starting a Michigan Corporation

Michigan is ranked as one of the top 10 pro-business states and is also becoming popular amongst entrepreneurs due to the access to the new as well as expanded corporate facilities. The state has a culture of innovation supported by strong industrial infrastructure and business incentive programs. The question is how to form a corporation in Michigan as there are several processes involved. So, let’s look at the various state requirements for new business along with important areas to consider.

1. Name Michigan Corporation

In order to form a corporation in Michigan, you will need to first identify and reserve a business name. In fact, naming a new corporation is considered as one of the most important processes. A business name helps in creating an identity for the said company amongst prospective customers as well as competitors. It is always recommended to choose a name that connects with the product or services offered although you can get innovative as well. There are certain naming guidelines of the state that you will need to follow and they are:

• The chosen name should contain “corporation”, “incorporated”, “company”, and “limited” or the abbreviation like “corp.,” “inc.,” “co.,” or “ltd.,” pursuant to MI Comp L § 450.1211 (2020).
• The business name should be distinguishable from the names of any other business entity that exists in the records of the Department of Licensing and Regulatory Affairs including that of limited partnerships, LLC’s and other corporations.
• The chosen name should not have any restricted words as mentioned by the state.

2. Appoint Michigan registered agent

There are many requirements that you will need to fulfill when you register a corporation in Michigan. One such requirement is that of hiring a registered agent in the state. According to the Michigan Compiled Laws, MI Comp L § 450.1241 (2020), you will be authorized to conduct business in the state if you continuously maintain a registered agent. IncParadise can be your Michigan registered agent as we have knowledge of the state laws and the processes involved for new business incorporation. We can assist you with all new business incorporation requirements and also help you with annual maintenance requirements in accordance with the state laws.

3. Hold an organizational meeting

When you incorporate in Michigan, one of the foremost requirements is that of an organizational meeting. This type of meeting is normally held for appointing officers, appointing directors, and issuance of shares in the said corporation. An organizational meeting is also held to fulfill other purposes like approving bylaws, setting up minute books, accepting the corporate seal, and even for setting up business bank accounts among others.

4. File Michigan articles of incorporation

If you are wondering how to form a corporation in Michigan then the most important step is to file incorporation documents with the state. You will be required to prepare and submit the Articles of Incorporation pursuant to MI Comp L § 450.1202 (2020). You can incorporate online or file the articles by mail with the Michigan Division of Licensing and Regulatory Affairs (LARA), Corporations Division. The fee for filing Articles of Incorporation will vary according to the number of authorized shares issued e.g., the fee would be $50 if you issue anywhere between 1 to 60,000 shares.

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5. Prepare bylaws for Michigan Corporation

When you register a corporation in Michigan, one of the key areas is the preparation of bylaws. The bylaws are necessary as they set forth the rules that will govern a for-profit corporation in the state. Corporate bylaws provide an outline on the various policies as well as procedures in relation with the company like appointing officers and directors, holding organizational meetings, handling any conflict of interest, and dissolving the company among others. The bylaws have to be adopted pursuant to MI Comp L § 450.1223 (2020) and § 450.1231 (2020). Unlike Articles of Incorporation, bylaws are not required to be submitted with the corporation division.

6. Get EIN for Michigan Corporation

Whether you register a Michigan Corporation online or offline, there are some annual requirements that every business needs to be compliant with. One such annual requirement is that of business taxes and in order to file taxes in the state, you will need to apply for and obtain an Employer Identification Number (EIN). It is a unique 9 digit number that is assigned by the Internal Revenue Service (IRS) to business corporations. It is also known as the Federal Employer Identification Number (FEIN) and is helpful for filing of business or corporate taxes in the state.

7. Open a bank account for Michigan Corporation

When you start out by forming a new business or a corporation, there are several areas that are critical to the overall success of the business like financial planning. One of the key areas of financial planning is setting up a business bank account. You can open a bank account before or after you incorporate in Michigan. There are many reasons and benefits of applying for a checking account like:

• Keeps personal and business transactions separate
• Ensures clean record-keeping and proper filing of taxes
• It can help you to be legally compliant
• Helps in providing financial security
• Makes your business appear more professional to vendors and customers
• You will be able to accept credit card payments

8. Comply with other tax and regulatory requirements

Once you form a corporation in Michigan, you will be required to file taxes each year. The type of taxes you may be required to file will vary according to the business structure and activity. As a corporation, the most important tax in the state is the Michigan Corporate Income Tax (CIT). Apart from this, your company depending on the business activity and employees may have to file sales & use tax, withholding tax, and other forms of miscellaneous taxes and fees. One of the benefits of incorporating in Michigan is that the state offers several tax incentive programs, which may provide quite some relief.

Know more about starting a Michigan Corporation

If you want to register a corporation in Michigan then as a new business owner you will need information and resources that will aid in the process of setting up a new business. You can form different types of corporation and once you form a business there are other state annual requirements to comply with. 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 in Michigan?

A C Corporation is known as a traditional corporation and you will be required to file Articles of Incorporation pursuant to MI Comp L § 450.1204 (2018). You can also register a Michigan Corporation online using the Corporations Online Filing System (COFS). There is an optional expedited service available where-in you will need to pay additional fee for expedited review and filing.

How do I form an S Corporation in Michigan?

An S corporation is a type of tax designation and is recognized as a legal entity. You will need to first incorporate in Michigan as a traditional corporation and then elect to be taxed as an S corporation. You will need to apply for and obtain an EIN before you can proceed further. The form required to elect S Corporation status is Form 2553, which is available with the Internal Revenue Service (IRS). The election of an S Corporation is governed by section 1362 of the Internal Revenue Code.

How do I form a Nonprofit Corporation in Michigan?

If you want to know how to form a corporation in Michigan, especially a non-profit then you will have to be compliant with the Michigan Nonprofit Corporation Act. You will be required to file Articles of Incorporation pursuant to MI Comp L § 450.2202 (2014). The filing fee for a non-profit is $20 and if you need to expedite the process then there will be an additional fee.

How much does it cost to start a corporation in Michigan?

If you want to form a corporation in Michigan then there will be starting costs associated with the formation. The cost may vary depending on the type of corporation and whether it is a domestic or foreign company. There are three cost categories for a corporation and they are:

• Business Name – The cost associated with name reservation, name registration, or filing DBA
• Cost of Incorporation – This includes filing fees for the Articles of Incorporation and cost of expediting if any
• Business Licenses – This is considered as a variable cost as fee for licenses and permits depend on the business activity, location, and industry.

How do I look up a corporation in Michigan?

One of the important steps towards identifying and reserving a business name is searching for name availability. You can look up a corporation in Michigan, you will need to conduct a business entity search in the LARA Corporations online filing system. This is an exhaustive database containing the name of domestic and foreign entities registered with the state. You can conduct the search using an individual name, business name, and filing number.

How to register a foreign corporation in Michigan?

If you already own a company in any state other than Michigan and want to expand in this state then you need to apply for foreign qualification. This is a process by which you will be able to register a Michigan Corporation online. You will be required to file a Certificate of Authority pursuant to MI Comp L § 450.2002 (2019). You can submit the certificate online, through mail or in-person. You may also require a certificate of good standing depending on the laws of the home state.

Does a Corporation need a business license in Michigan?

Yes. If you are planning to register a corporation in Michigan and want to transact business in the state then you will require proper licenses and permits. The type of licenses and permits required will vary according to business activity and location. You may also require occupational licenses. You can subscribe to our Business License Research Report service, which provides detailed information on different aspects of licensing in the state.

How do I dissolve a corporation in Michigan?

There are several benefits of incorporating in Michigan but at any given point in time, if you want to dissolve your corporation then there is a specific process for the same. The dissolution process will be governed by 2019 Michigan Compiled Laws, Chapter 450 – Corporations, Act 284 of 1972 Business Corporation Act, 284-1972-8 Chapter 8 Dissolution. There are three ways of dissolution in the state and they are:

• Dissolution by Incorporators or Directors
• Dissolution by Action of Board and Shareholder
• Action by Attorney General for Dissolution

Ready to Start a Michigan Corporation?

You can form a wide variety of business structures in Michigan and one of the most popular is that of a traditional corporation also known as C Corporation. There are several benefits of incorporating in Michigan vis-à-vis other forms of business structures. If you are thinking of incorporating a domestic or foreign entity in the state then IncParadise can assist you with the registration process.