How To Start an LLC in Michigan: 7 Steps
Are you considering starting a new business venture in Michigan? You’ll have many decisions to make, including whether you’ll structure your company as a partnership, a sole proprietorship, a corporation, or a limited liability company (LLC).
Starting an LLC in Michigan is a great option for business owners looking for flexibility. Read on to learn everything you need to know about how to start an LLC in Michigan.
What Is an LLC?
An LLC is a type of flexible business entity, and one of the most popular in the U.S. In Michigan, the right to form an LLC is codified in the Michigan Limited Liability Company Act of 1993.
Unlike corporations, LLCs have fewer legal formalities, which makes them an appealing choice for those who want to avoid complicated requirements such as filing detailed reports, establishing a board of directors, and other corporate obligations.
Benefits of an LLC
There are other important benefits of choosing a limited liability business structure. For example, an LLC in MI can both help you avoid personal liability and simplify your taxes.
Limited Liability Protection
When considering creating an LLC in Michigan, entrepreneurs should factor liability protection into their decision making process. With an LLC, limited liability means that owners don’t have to risk losing personal assets to settle business debts or lawsuits. This means owners of LLCs enjoy protection from liability that is not available for all business entities.
Pass-Through Tax Status and Tax Flexibility
When considering how to start an LLC in Michigan, prospective owners should also consider how they’d like their company to be taxed. Unlike other business entities, LLC owners have a choice.
Most LLCs opt for pass-through taxation, which means that profits and losses incurred by the business “pass through” to the owner’s personal tax return and are then taxed at the owner’s personal tax rates. This avoids the issue of double taxation and allows owners to qualify for a special pass-through tax deduction.
Owners also have the option to be taxed like a corporation instead, which can have other tax advantages. For example, S-corporation tax treatment allows owners to take some money out of their business without paying employment taxes because S-corps do not require employment tax on dividends. So, owners can save on Social Security and Medicare tax costs.
How To Start an LLC in Michigan: 7 Steps
Now that you know the fundamentals of LLCs in MI, read our step-by-step guide to learn more about how to start your own.
Step 1: Choose Your LLC Name
As a new business owner, you’re probably excited to choose the name of your company. When learning how to get an LLC in Michigan operational, you’ll have to follow state regulations. First, your LLC name must be unique and distinguishable from other companies already created in the state. To check if your desired name is available, visit the search page for the Department of Licensing and Regulatory Affairs.
There are also some formal requirements for the name of your LLC:
- Your name must include “limited liability company” or “LLC,” “L.L.C.,” “LC,” or “L.C.”
- Your name cannot include the words “corporation,” “incorporated,” “corp,” or “inc.”
Once you’ve chosen a suitable name, you can reserve it for six months by filling out an Application for Reservation of Name and submitting it online or via snail mail. You can also drop it off in person if you’re excited to make a trip to Lansing.
Many businesses choose to go by names that are shorter or different from their official LLC names. If you’d like your company to be associated with an alternate name, you’ll need to submit a Certificate of Assumed Name.
Step 2: Select Your Resident Agent and Designate Your Registered Office
In Michigan, LLCs are required to select a resident agent and a registered office, which should be included in the Articles of Incorporation (more below).
Resident agents are individuals who accept legal documents, tax paperwork and other important mail and notices on behalf of businesses. Your registered agent must have a physical address in Michigan and be 18 or older.
Your registered office is where your business is officially located in the state.
Step 3: File Your Articles of Incorporation or Certificate of Authority
Michigan requires LLC owners to file Articles of Incorporation when establishing an LLC. Articles of Incorporation are important documents that contain key information about your LLC, such as the company’s name and address, and the agent for service of process.
As of 2022, you can submit your Michigan Articles of Incorporation by filing online for $50.
Companies formed outside of Michigan that are looking to begin business operations in the state will fill out a Certificate of Authority form instead of Articles of Incorporation.
Step 4: Draft Your Operating Agreement
Operating agreements aren’t required in Michigan, but it’s still a good idea to complete one. Operating agreements contain detailed information about how the business will be run and will help ensure all stakeholders are on the same page.
Step 5: Obtain Your EIN
Employee Identification Numbers (EINs) are nine-digit identifiers used by the Internal Revenue Service (IRS) to keep track of businesses. You’ll need to apply for an EIN if your LLC has employees or has more than one member. You can do this for free on the IRS website.
Step 6: Learn About Your Tax and Paperwork Obligations
As a responsible business owner learning how to start an LLC in Michigan, it’s essential that you learn and follow your tax and paperwork obligations. As a pass-through tax entity, your LLC won’t have to pay a separate state tax for the privilege of doing business in MI. However, you do have to file an annual report and pay the filing fee.
Step 7: Pay Your Taxes
If your LLC has employees, you’ll have to pay employer taxes to the Michigan Department of Treasury. You can start this process by filling out Form 518. You will also need to pay state unemployment insurance taxes, which you can pay online.
If your LLC sells goods to customers, you’ll also need to collect and pay sales tax. You can register with the Department of Treasury and will be required to pay sales tax using DOT Form 165.
FAQ: How to Start an LLC in Michigan
How much does it cost to start an LLC in Michigan?
Luckily, Michigan is one of the cheaper states for starting an LLC. The cost is only $50, payable at the time of filing your Articles of Incorporation with the Michigan Department of Licensing and Regulatory Affairs.
Can I operate an LLC in MI from out of state?
Yes. You can fill out a Certificate of Authority and be considered a Foreign LLC. As of 2022, there is a $50 filing fee.
What is a PLLC?
Some licensed professions in Michigan must form a professional limited liability company (PLLC) rather than a regular LLC. These are similar to LLCs but are required for certain occupations like dentists, physicians, and members of the clergy. Every member of a PLLC must maintain a professional license for their occupation. Review the full list of encompassed professions.
Is Michigan a good state to start an LLC?
There are many perks to starting an LLC in Michigan. The start-up and maintenance costs are minimal and the business landscape is friendly to new business ventures.
Do You Need Help Filling Out Your LLC Paperwork?
Online filing can streamline the process of starting an LLC in Michigan. Following the steps in this article will help you get started. Do you still have questions about how to start an LLC in Michigan? If you need help, a free review from an experienced LLC formation company.
Legal Disclaimer: This article contains general legal information but does not constitute professional legal advice for your particular situation and should not be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed in your jurisdiction.
