Did you know that one of the world’s most bellowed pizza brands, Domino’s, was started in Michigan? Not to mention a cohort of other prospering businesses such as General Motors, Kellogg’s, and Whirlpool.
If you’re considering how to start a Limited Liability Company (LLC) in Michigan, you’d be in good company!
But first, you’ll need to learn about the Michigan state rules and regulations that lay out the requirements for forming your LLC.
Here’s a detailed primer on navigating the LLC formation process in MI.
Steps to form an LLC in Michigan (MI)
- Step 2: Hire a registered agent
- Step 4: Obtain an EIN from the IRS
Step 1: Choose a business name for your Michigan LLC
First things first, your newly minted business will need to go by a legal name.
Michigan state authorities urge you to choose a distinguishable business name. Otherwise, they may deny your registration. A business name is deemed unique when it doesn’t sound too close to another company registered in the state. To verify the above, use the Michigan’s Business Entity Search feature.
Apart from the brand bit, your MI LLC’s business name must also include one of the following designations (or abbreviations) at the end:
- Limited Liability Company
Reserve your LLC business name
If your preferred business name for your LLC in MI is available, then you can file for a name reservation to claim dibs on it. Doing so prevents others from taking it for 6 months. You can make the name reservation by mail or online. The state fee is $25.
Assumed name (optional)
Suppose you prefer to use a different name from your officially registered business name when your LLC conducts business. In that case, you can apply for an assumed name, also called fictitious name, doing business as (DBA).
You must register the assumed name with the Michigan commercial licensing bureau by filing a form and paying a $25 filing fee. You can submit it online or by mail.
Step 2: Hire a registered agent
All Michigan LLCs must have a registered agent. This person will have an office location listed and will receive official LLC communications.
The registered agent requirements are straightforward:
- A company or person 18 years of age or older
- Located in the state of Michigan
- At a physical street address (no P.O. boxes are permitted)
- Are available during regular business hours.
Some LLC owners choose to act as their own registered agents. It’s allowed so long as they will be present at a physical street address in MI and available to receive mail during business hours (9 am – 5 pm).
The registered agent will receive all legal mail — this is also referred to as Service of Process for your LLC. The registered agent and office location are listed in the LLC articles of the organization filed with MI.
Commercial Registered Agent Service
Business owners can list themselves or a friend as a resident agent to act as the LLC’s registered agent. Or you may choose to hire a commercial registered agent service — a private company that you pay on an annual basis to handle your legal communication. The cost of such services in Michigan is about $100-$300 per year.
Step 3: File the Michigan LLC articles of organization
The LLC articles of organization filing with the Michigan Corporation Division are the cornerstone of forming your LLC. You can either submit an online form or print it out and mail it.
The standard filing fee is $50.
On top, you can choose to pay extra for expedited service. The current expedited LLC filing fees in Michigan are as follows:
- $100 — same-day formation documents processing
- $500 — two-hour formation documents processing (if filed before 3 pm)
- $1,000 — one-hour formation documents processing (if filed before 4 pm)
Requirements of information to include
The Articles of Organization for your LLC must include:
- The LLC business name
- The purpose of the LLC
- For a professional LLC, list the professional services your LLC will provide
- Duration for the LLC (if not perpetual)
- Registered agent’s name
- Registered office address
- Signature(s) and name(s) of the LLC’s organizers
Note that for professional LLCs in Michigan, the following requirement is included in the Articles of Organization:
All members and managers, will be duly licensed or otherwise legally authorized to render one or more of the professional service(s) for which this limited liability company is organized except as otherwise provided in Section 904 of P.A. 23 of 1993 or prohibited.
For LLCs that are not professional LLCs, the Michigan Corporations Division clarifies:
A limited liability company may be formed for any purpose for which a corporation can be formed under the Business Corporation Act or for which a partnership may be formed. An “all-purpose clause” is permitted.
Once the Articles of Organization form is received, the processing time for your LLC’s approval is about 5-10 business days. However, this can vary on other factors, such as if the office is experiencing a backlog or has any questions. Also, expect a faster turnaround if you file online instead of by mail.
If the above is too long, you can pay extra for expedited company formation — same day, in two hours, in one hour.
Step 4: Obtain an Employer Identification Number from the IRS
The next step is to obtain an Employer Identification Number (EIN) from the IRS for your LLC. It is a unique 9-digit number primarily used to identify your LLC on tax filings. Single-member LLCs without any employees may choose to use the business owner’s social security number instead.
In other cases, here’s when you would need an EIN:
- Your LLC has more than one business owner
- To use your LLC’s tax ID on federal, state, and local income tax filings
- If you hire employees, it’s a required tax ID for IRS and state tax filings
- To obtain a business bank account
- If your LLC must register to pay sales tax
Remember, obtaining an EIN is simple and done online via the IRS’s free filing service. You also receive your number immediately.
Step 5: Prepare an LLC operating agreement
Michigan has no formal requirement that a new business LLC file a copy of an operating agreement with their office. Nor is there a requirement by Michigan that LLCs must have this agreement at all. Yet, it still makes sense to draft one if you have more than one LLC member (owner).
An operating agreement stipulates the baseline provisions in regards to how different decisions are made in your company. Specifically:
- Ownership share of each business member
- LLC’s standard operating procedures,
- Responsibilities for each member and their roles in the LLC
- Each member’s rights (such as with profit distributions),
- Capital contributions
- Provisions on personal liability and personal assets
- LLC management practices
Plus, any other provisions as deemed necessary for your type of business and by the LLC’s members.
This legal document can protect each owner’s interest in the LLC should a dispute arise. Hopefully, it will prevent such conflicts in the first place by laying out clear expectations for everyone.
If an LLC doesn’t have an operating agreement, then Michigan state law will guide the roles and responsibilities of the members and the operations of the LLC.
How to prepare an operating agreement
There are many operating agreement templates available online. So you may want to grab and customize one for your needs. However, if your LLC ownership structure is more complicated, you may seek professional legal help to prepare your operating agreement.
Step 6: Open a Michigan business bank account
Setting up a business bank account for your LLC isn’t a legal MI requirement. But it’s a must-do to prevent any legal mishaps down the operating road.
Your LLC assets must be separate from the members’ personal assets (or business owners) to ensure personal liability protection. Why? Because financial comingling can result in a “piercing of corporate veil” — an event that effectively nullifies the limited liability your company extends towards your personal assets.
So don’t skim on getting a business bank account early on. Also, this saves time when taxes are due. If expenses or assets become commingled, it’s more challenging to deduct legitimate business expenses. Also, it may put your personal assets at risk for covering business liabilities.
The costs of opening a business bank account in Michigan will vary based on the number of users, the amount deposited, features, and the issuance of checks or credit/debit cards. Overall, expect to pay about $14 a month for a basic business bank account. Most banks issue a decision as to whether a business bank account may be opened very promptly upon the filing of the application.
Michigan LLC taxes, costs, and fees
An LLC is considered a “pass-through” tax entity. It means that federal tax authorities disregard the business structure, and each LLC member merely has to report their business income on a personal income tax return.
If the LLC is taxed as a pass-through entity, each member may need to report estimated self-employment taxes quarterly. Additionally, if the LLC has employees, then income taxes and unemployment taxes will need to be withheld and filed with the state every quarter. Personal income or corporate tax returns are typically filed annually.
But some LLCs elect to be taxed as a corporation. In such instances, the LLC will file a separate tax form. The business entity is taxed, and its members will pay taxes on the salaries or profit distributions they receive. The state corporate tax rate is a flat 6%. Additionally, wages paid out to members may be taxed at an average rate of 4.25% to the state.
An LLC will need to pay additional taxes if the LLC hires one or more employees. Such LLCs will need to register with the Michigan Department of Treasury and Michigan Department of Labor and Opportunity and pay applicable dues.
An LLC will have to pay sales tax if they sell consumer goods. They would then register with the Michigan Department of Treasury. The sales tax rate in Michigan is 6%.
Annual LLC costs in Michigan
Michigan LLCs will need to file an annual report, called Annual Statement, and pay a $25 annual filing fee. You’ll receive a pre-printed form 90 days before the due date and will have to either mail it back or file it online.
Beyond that, there are no extra annual costs involved for Michigan-based LLCs. The state doesn’t charge any other annual renewal fees or franchise taxes for doing business in the state.
Michigan business permits and licenses
Not all LLCs will need to obtain Michigan business permits and licenses. It will depend on the nature of the business’s activities, and the LLC’s location primarily conducts business.
Most often than not, LLCs providing professional services will need specific licenses. Use Michigan has a State License Search to help in finding additional information on what permits and licenses you may need to operate. The site provides comprehensive search functionality and lets you look up Michigan licenses and permits by entering key terms or alphabetically.
Pros and cons of forming an LLC in Michigan
Operating in the Great Lakes State has some solid perks and somewhat fewer downsides. Here’s a quick summary:
Michigan LLC pros
- Easy and affordable setup. The state filing fee is $50
- Minimal paperwork required
- Same-day company formation services available
- Protects personal assets from liability
- Viewed as more respectful compared to a sole proprietorship
- Offers more opportunities for loans
- Michigan’s Corporate website is simple to use and intuitive
Michigan LLC cons
- Requires annual filings and payment of $25
- More regulations compared to a sole proprietorship
- Requires a registered agent
- Potentially time-consuming for a one-person new business
- Less developed corporate regulations and case law compared to some other states
- An LLC in Michigan is a flexible, low-cost business structure for small to mid-market companies.
- It’s easy to form, has few filing requirements, provides fast time turnaround times, and has simple steps (along with plenty of guidance provided by Michigan).
- State laws govern LLCs, and so it’s important to know the rules and regulations for each state in which your LLC does business.
- Forming an LLC in MI is straightforward, so long as you follow this step-by-step walkthrough.
Michigan LLC FAQs
Below are some of the most frequently asked questions (FAQs) about forming an LLC in Michigan.
1. How much does it cost to start an LLC in Michigan?
The filing fee to form an LLC in Michigan is $50. To reserve a business name, there’s another fee of $25. Additionally, if your LLC will use an assumed name, there’s a filing fee of $25. Also, you can pay a $50 expedited service fee to receive your company documents on the same day. To tally that up, you can form an LLC in Michigan for under $150.
2. What is the processing time to form an LLC in Michigan?
The standard processing time to form an LLC in Michigan is approximately 5-10 business days. However, if you file online, then the processing time is quicker. Additionally, you can pay an additional fee for expedited processing of your filings to set up your LLC in one day or even one hour.
3. What are the benefits of an LLC in Michigan?
The benefits of an LLC in Michigan include low formation costs, minimal operational requirements, and no minimum annual franchise taxes. These make LLC formation an attractive option for a new or an existing small business. Having an LLC in Michigan also offers more protection to the business owners from a liability standpoint and helps protect their personal assets.
4. How do I know if my LLC name is available?
To find out if your LLC’s business name is available, business owners can use LARA’s Michigan Business Entity Name Search tool. It allows you to search by entity name for the business entities currently registered with the state of Michigan.
5. Can I be my own registered agent in Michigan?
Yes, you can serve as your own registered agent in MI. You must be at least 18 years old, a Michigan resident, have a physical stress address in MI, and be available to receive mail for your LLC during regular business hours.
6. Does a Michigan LLC require an annual report?
Yes. Every registered Michigan LLC is required to file an annual report by February 15 of each year. If an LLC is formed after September 30, then it’s not necessary to file an annual report for the year that immediately follows its formation. The annual report filing fee is $25. If an LLC fails to file their annual report for two years, they are no longer considered to be in good standing. Also, their business name becomes available to other business entities.
7. Can a Michigan LLC do business in other states?
Yes, a Michigan LLC can do business in other states. However, the LLC may need to register or submit additional filings (and fees), depending on each state’s requirements. You should check other states’ rules and regulations for applicable requirements, filings, and additional regulations.
8. Do I need to file an operating agreement with the state of Michigan?
No. The state of Michigan doesn’t require that an LLC file an operating agreement with its Commercial Licensing Bureau. An operating agreement is an internal document for your LLC. It lays out the baseline principles of your operations. Additionally, it contains provisions that will protect the personal assets and personal liability of each business owner. For a single-member LLC or small business, this may not be needed until the LLC grows larger, adds other members, or hires employees.
9. Which licenses and insurance are required for an LLC in Michigan?
Whether an LLC in Michigan needs licenses will depend on the LLC’s business purpose and activities and the locations in which it conducts business. Michigan’s State License Search provides a tool to search what licenses and permits may be required for different business types. The insurance requirements also depend on where the business is located and its activities. Business owners should consult with local regulations for applicable requirements.
10. Does an LLC need a business license in Michigan?
You don’t need a general business license to operate an LLC in Michigan. But, depending on the nature of your services, you may need to obtain some type of permit or professional license from the state authorities. Consult with the Michigan State Department website to determine the requirements for your LLC.
11. Do LLCs pay taxes in Michigan?
LLCs pay taxes through each member’s personal income tax return or on a corporate tax return. Members may also need to pay self-employment taxes. Additionally, the state collects taxes on the income of the LLC or the members’ salaries. If the LLC has employees, then taxes are collected for payroll purposes. Also, if the LLC sells consumer goods, it will pay a sales tax in Michigan.
12. Do I need to renew my LLC every year in Michigan?
No, you don’t need to renew your registration per se. But Michigan requires LLC owners to file an annual report detailing up-to-date company information.