Having a Michigan LLC is a better and cheaper option than having other business structures. A limited liability company (LLC) reduces the owners’ personal liability and protects their personal assets. One can start an LLC in two ways, domestic LLCs or foreign LLCs (LLCs in more than one state). By following some basic steps, you can easily form an LLC in Michigan.
On this page, you’ll learn about the following:
- How to Form an LLC in Michigan
- After Starting your Michigan LLC
- Michigan Foreign LLC
- Why an LLC in Michigan
- Businesses Contributing to Michigan’s Economy
- Michigan LLC Formation Review
How to Form an LLC in Michigan
An LLC or a Limited Liability Company is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection. This section gives you a step-by-step guide on how to start an LLC in Michigan.
Step 1: Decide a Name for Your LLC
Deciding on a business name is the first step to start an LLC. In Michigan, before you name your LLC, it is important to note a few things. Firstly, make sure the name is available to use. If the name is available, then check if the name complies with all the Michigan business naming requirements. Once you pass through them, you can successfully name your business.
Why do you need a proper business name?
If you want your LLC to have special identification, your company name is essential. However, many people face many issues by avoiding focus on choosing a business name for their LLC business formation filings.
Here are some of the major benefits of choosing the best LLC names.
- Helps establish a company’s presence in the market;
- Creates a new identity that will resemble your LLC;
- Allows ease in finishing your LLC registration process;
- You can get the EIN once you have your name registration certificate
Requirements when deciding a name for your LLC
LLC Name Search: A business name search is required to check if the desired name is available or not. If the name is available then the business owner has to fill up a name reservation form and send it to the Secretary of State, Michigan. To do the name search, one has to visit the Business Entity Search page on the official Secretary of State website. Send the name reservation form to the below address by mail to reserve your LLC name in Michigan. The cost of a name reservation is $25.
Important Quick Links:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau
P.O. Box 30054
Lansing, MI 48909.
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Step 2: Assign a Registered Agent in Michigan
A registered agent, or business entity, is a person that will act or work on your behalf. This person or business will receive significant tax forms, legal forms, any internal document, formation documents, annual statements, a notice of lawsuits, and other official government documents in Michigan. Choosing a Michigan registered agent for service of process for your LLC is required.
Make sure your registered agents are residents of Michigan. These professional service providers must have a physical street address in the state. It could also be a business. Here are the recommended resident agent list and employees for you:
Note that availing of the services of professional registered agents would be your best option since you are guaranteed that whoever is handling your legal affairs knows their stuff well. You will enjoy peace of mind and focus only on running your business, as the ‘professionals’ take care of all legal matters.
These LLC formation services are recommended registered agent services as they are authorized to conduct business in Michigan. Compare them to check the best yet cheapest option for you. Besides, they can guarantee you professional service because they have been in the business for years.
Step 3: File Articles of Organization in Michigan
A Certificate of Name Reservation is needed to file Articles of Organization, as other states call it. You need to make reports of this certificate with the Michigan Secretary of State, which costs $50. You may file them online or by mail.
This Michigan Certificate of Formation is a legal document needed to form your business officially. It will indicate details about your LLC in Michigan, like if it is a member-managed or managers-managed.
Before you start filings, you must already have your LLC name and registered agents or employees. You will attach a copy of your Name Reservation Certificate along with a list of the services that your Michigan LLC will offer.
How to File Online
Go to the Secretary of State Online Service. Select “non-subscriber.” Fill out the online form. The website will alert you if your county does not support online filings after selecting your principal county. To know more about online filing, visit the Michigan Certificate of Formation.
How to File by Mail
If you prefer filing real-life forms for your Michigan LLC registration, then you can download the Michigan Limited Company Certificate of Formation. Read the form thoroughly, fill it out, and send the form by mail. It will have to fill, among others, your name, city, state, zip code, and signature. You may also file in person by visiting the office on business days.
Mail To: Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau — Corporations Division
P.O. Box 30054
Lansing, MI 48909
In-person Drop-off: Michigan Department of Licensing and Regulatory Affairs
2501 Woodlake Cir.
Okemos, MI 48864
Step 4: Create Your Michigan LLC Operating Agreement
An operating agreement is a document that legally outlines the proprietorship and operating procedures of your LLC This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
When it comes to an LLC operating agreement Michigan does not require you to have a comprehensive operating agreement, but it is ideal to have one that contains all your details of business operation. This document would be useful if you decide to dissolve Michigan LLC later.
Step 5: Filing a Michigan LLC EIN
The Employer Identification Number or, simply, the E.I.N. is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify types of business for tax purposes and taxes in general. It is like a Social Security number dedicated to a business’ taxes. The EIN is necessary for any active business or any form of business for that matter.
EIN is needed when the LLC hires employees. Hiring employees in Michigan LLC requires specific rules and regulations. One should know about them before hiring employees. EIN for Michigan foreign LLC should be obtained if your LLC is based in other states.
To obtain EIN (aka FEIN) one has to fill up a form (Online or by mail) and submit it to the IRS. Before sending the form, ask for EIN Assistant. Enter details of your LLC, and finally complete the form and send it to the address given.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
And that’s all! Congratulation, you are now done with all the necessary steps to form your Michigan LLC. If you still haven’t used a professional service from here, I strongly recommend having one to handle the remaining tasks.
After Starting your Michigan LLC
After forming your LLC, there are still some things that you will need. Take note of the following:
- Get a company business bank account
- File Michigan business permits & licenses
- Get liability for business and professional liability insurance with coverage for employees
- File a Michigan LLC annual report or biennial report
- Already existing LLCs that wish to operate in Michigan must register as Michigan foreign LLC.
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including fees for late filings to make sure your LLC is up-to-date.
Michigan Foreign LLC
To register a Michigan foreign LLC, one has to file the foreign LLC formation certificate with the Secretary of State, Michigan. Forming a foreign LLC allows you to operate your business in more than one state in the USA as a single business entity. Check Michigan Foreign LLC to know more about having a foreign LLC.
Cost of Michigan LLC
The LLC cost in Michigan includes a one-time cost of a name reservation fee ($25) and a filing fee ($50). Apart from these state fees, there is a registered agent service fee to be paid by the LLC. There is one expedition fee if you want to reduce the processing time. On the tax front, LLCs get to choose the tax structure from a set of tax classification options.
Generally, LLCs do not have to pay any taxes on their business income. However, individual members have to pay federal income taxes. LLCs with employees may have to bear the cost of insurance for employees and employer tax. If you hire employees in your Michigan LLC, then obtain EIN from IRS for employer taxes. Read on the LLC cost in Michigan to know more about the cost of forming an LLC in Michigan.
Why an LLC in Michigan
Michigan, which is ranked 10th in the country for providing a business environment to start-ups, has become a choice of many businesses. Having an LLC in Michigan is cost-effective because of tax benefits. Other than the filing fee, there are not many annual costs to be paid. LLCs have to pay a few federal taxes. Read more on Michigan’s classification of LLC tax.
Along with a reduction in tax liabilities, there is a business funding option available in the state, especially for the woman-owned business. Having any type of business in Michigan brings potential customers. Some of the best ones out of them are discussed below.
Michigan Development Corporation Renaissance Zone
The Michigan government has started this program. Under this program, the government will decide and give recognition to the eligible next Michigan Business. Also, the program allows businesses to receive tax exemptions for a period of 10 years. The taxes that fall under this list of exemptions are:-
- Personal property tax which individual member of an LLC has to pay
- Utility user taxes are charged from the residents of the state.
- Taxes that are charged on real property.
There is no way that an LLC in Michigan gets dissolved due to a certain event of the member’s life. According to the Michigan state law, an LLC can be dissolved in only three situations:-
- If the state judge has given an order to dissolve the LLC due to misconduct of activities.
- If all the voting members of the LLC are ready to dissolve and vote for the motion unanimously.
- If the event occurred is specified in the bylaws, it will lead to the dissolution of the LLC.
Any other event than above mentioned three will not lead to the dissolution of an LLC.
Duration of the LLC with partnership rules
In the states, when a firm wants to ensure that the business they have started should stay for a longer period of time, then they are considered to be taxed as a corporation. But in the case of Michigan LLC, there is no such issue. The LLC can also remain for infinite time, also, one can change their partnership business to an LLC for reserving their tax rights. The whole process will be tax-free, and the transfer of all the assets will be done by filling a simple transfer form.
Freedom of contract
According to the LLC laws in Michigan, the member has the complete right to adopt their cash flow and withdraw their name from the LLC if they notice that any further management decision can cause loss. In the same way, any person can join the LLC without making any financial contribution.
Businesses Contributing to Michigan’s Economy
Many businesses are established and running successfully in the state of Michigan. But not every business is a part of the top industries of the state. Knowing Michigan’s leading sectors is very important for new entrepreneurs when forming an LLC in Michigan.
Michigan produces more than 19% of the total automobile generated by the state. The total contribution of the automobile industry to the state GDP is $188 billion. Out of this value, $134 billion comes directly, and $53 billion comes to the contribution through indirect automobile production purposes like its transports. The reason behind such an enormous contribution is the talented labor pool that is present in the state.
The agriculture sector has a whooping contribution of around $104.7 billion in a year to the state and provides 17% of the total jobs in the state. The state is very well known for producing Christmas trees by contributing 1.55 million fresh trees every year.
The tourism sector is the largest tax-paying sector of Michigan, giving around $3.6 billion to direct tax to the state. The total contribution of this sector to the GDP of the state is $22.4 billion. The tourism sector mainly comprises summer activities and hunting and skiing and skating in the winter season.
The state is ranked 5th among the states of the USA in terms of advanced manufacturing. The significant insights of the industry are:-
- The state is known for making 37% of a total military vehicle.
- The rank of state in terms of aerospace production is 4th nationwide.
- More than 3000 businesses are serving the defense industry by making potent weapons for them.
The contribution of advanced manufacturing in the state GDP is around 19% and is employing 629,000 people approximately.
Some small businesses in the state are mentioned below.
- Online currency trading
- Christmas trees business
- Hunting equipment renting
Michigan LLC Formation Review
Time needed: 5 minutes.
Just to recap, here are the easy steps again when forming an LLC in Michigan. Click on the steps in this list to read the full detail.
- Name your Michigan LLC
The first thing you must do is to choose a company name, which should be unique, easy to find, and available in the state.
- Choose a registered agent
In Michigan, it is mandatory to select a registered agent for your LLC. You can check out our list of our 5 Best LLC Services in the United States.
- File a formation certificate
Filing a formation certificate is necessary when forming an LLC. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create operating agreement
An operating agreement is not a strict requirement but something encouraged when you start an LLC.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
How Fast Can I Form an LLC in Michigan
If you are forming an LLC in Michigan, you should take advantage of the state’s free online filing system, TotalLegal. This website also provides free Operating Agreements, which will list who is eligible to become members of the company. Opening a bank account is also a simple process with this document. Getting your business started quickly and legally is crucial, so it’s important to know how long it will take to form the company.
There are many ways to form an LLC in Michigan. The first is to purchase a domain name for your business. You can also use a fictitious name to operate multiple businesses under the same LLC. The process of registering an LLC is easy and takes no longer than a few business days. There are many options to choose from online and by mail. To get your LLC off the ground, you can post a legal need on UpCounsel. UpCounsel accepts only the top five percent of lawyers, and their average experience is 14 years.
You can also use ZenBusiness to get your documents filed. This service will guide you through the process, as well as give you advice on branding your new company. You should also choose a business name, brand voice, colors, and logo. Then, choose a business address, set up a website, and determine your marketing strategy. This step is crucial for your business. In order to form an LLC in Michigan, you should follow all the guidelines and rules of the state to avoid any unnecessary hassles.
If you are a resident of Michigan, then you can file your LLC by yourself. However, it is always worth having a professional than doing it yourself to handle legal complexities, paperwork, and other documentation.
Apart from the formation fee of $50 (domestic LLC) and $50 (foreign LLC), LLC costs in Michigan include $25 for Annual Reports every year. LLCs are liable to pay sales tax of 6% every year.
It takes 24 hours to get a Michigan LLC if you file it online. For the mail filing, it takes 3 to 5 business days to get an LLC.
Every year all the LLC have to submit an Annual Report and pay $25 to the Michigan Secretary of State and renew the LLC. It is mandatory to renew your LLC every year.
Generally, for the LLCs, it is a default tax structure. Once you will obtain the EIN, you will get the various tax structure options to select. Sometimes LLCs choose S Corp to reduce federal tax burdens.
These above-mentioned broad steps are pretty much the essential step instructions for forming an LLC in Michigan. LLCs are easier to establish than other business structures. Small businesses, especially start-ups can easily start their LLC in Michigan at a bare minimum cost. These business types have a ‘pass-through taxation’ advantage for which they are excluded from certain taxes.