Hiring Employees in Michigan LLC – Wages, Laws, Compliance Guide


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Any business structure or corporation stands firm on its foundation laid by the employees. An LLC is no exception to this rule. Hiring employees in your LLC comes with some rules, regulations. Before understanding the rules of hiring employees in Michigan LLC, we must understand what an LLC means.

A Limited Liability Company is a business structure that protects the owners from any personal responsibility of the debts or liabilities arising out of the LLC. If an employee action succeeds to liabilities, the owners get the protection against it. LLCs are a combination of the characteristics of a partnership firm & a sole proprietorship. 

Hiring Employees in Michigan

In order to hire employees in Michigan LLC, there are many requirements that a business has to fulfill. One should keep these points in mind while hiring employees in an LLC. These requirements include:

1. Federal & State Employment posters in Michigan

The employers in Michigan are required to show both Federal & State Employment posters mentioned in Equal Employment Opportunities Act, Americans with Disabilities Act, Fair Labour Standards Act (FLSA),  etc. You should seek professional help to fulfill all the norms or requirements.

2. Federal & State Required Forms

Hiring employees is a lengthier process that involves the filing of different forms & applications. Suppose you wish to hire employees in Michigan. In that case, you must ask your employees to submit the Employment Eligibility Form, the Federal Tax withholding form, the W-4 Form, Workers Compensation Claim Form, Disability Self- Identification Form, U.S. Citizenship and Immigration Services Form, etc. These Legal forms are easy and free to download.

3. Requirements of Michigan New Hire Reporting program

Employers of Business owners are bound by Michigan’s New Hire Reporting Program, under which they have to submit a report consisting:

  • Company Name
  • Company Address
  • Company federal tax ID number
  • Employee’s Name
  • Employee’s Social Security Number
  • Employee’s Address
  • First Day of paid Work

In addition to the forms mentioned above, payments, taxes, tax forms, & requirements, there may be some additional compliance for hiring in Michigan; you must adhere to those norms as well.

Can an LLC Hire Employees?

An LLC or a Limited Liability Company can be regarded as a corporation, partnership, or sole owner business. The owners of the LLC are often referred to as members. Individuals, Corporations &, in some cases, other LLCs can form an LLC as members.

The members form LLCs because of their limited or no liability provided to the owners or members. In the event of liabilities arising out of an employee’s action, the members of the LLC are not personally liable- the LLC is liable for the actionable claim.

Any LLC (even one with a single owner) can hire unlimited employees on wages or salary. (The single-member owner LLC may have different rules and regulations). In addition to the salaried employees, the LLC can appoint Independent contractors for certain tasks on a contract basis. 

Rules to Hire Employees in an LLC in Michigan?

Just like any other business corporation, an LLC is also not immune from certain procedures & rules of hiring. An LLC files many documents & pays a number of taxes to various Government Agencies while hiring employees. Some of the essential rules or steps to hire employees in an LLC are:

  • Federal Employer Identification Number – Every LLC must obtain an Employer Identification Number (EIN) from the Internal Revenue Service. EIN helps report taxes & a few other documents to the IRS.
  • Employee Eligibility Form – It is mandatory for an LLC owner to check if the employee is eligible for employment in the U.S. An LLC has to ask the employees to submit the I-9, Employment Eligibility Verification Form to verify the identity of the employee & to authorize the employment. the I-9 form is a mandatory requirement while hiring an employee.
  • Employee’s Social Security Number – The employee has to have a valid Social Security Number (SSN) to work. LLCs have to ask the new employees to submit their SSN before employment. The SSN is helpful in payment & tax purposes.
  • Setting up a process for collection & payment of the appropriate taxes – There has to be a due process for the employees’ future collection & payment of taxes. This process needs to be set up by the employer (in this case, the LLC)
  • Employee handbook – In the hiring process, one of the crucial elements of hiring paperwork is an Employee Handbook. Although it is not essential in Michigan, it is usually needed as one of the legal documents in many other states. An Employee Handbook consists of a complete list of all the basic rules & policies of the company.
  • Michigan payroll Taxes – An LLC that is running a business with employees or businesses with employees has to pay many federal taxes & state Taxes. Following the rules on payroll taxes is also an essential requirement.  After hiring employees, an LLC is subject to the State Unemployment Compensation Act. Under the said Act, an LLC will have to pay Unemployment tax to the state & to do that; the LLC must register itself with the Michigan Workforce Commission. The process involves simple steps & can be completed in 20 minutes. 
    Payroll taxes also include Federal Income Tax withholding, an employer can withhold money from the employee’s account for the income tax.
  • Workers’ Compensation Insurance An LLC operating in the state of Michigan has to carry workers’ compensation insurance & has to display relevant posters.
  • New Hire Report or Report of the New Employee – An LLC has to
    • Report about hiring the new employees in the form of “Report of New Employee(s)” to the Michigan Workforce Commission within 20 days from the date of hire.
    • Deposit and report federal employment taxes as per the IRS procedures for payroll reporting & payment.

Laws Relating To Wages Of Employees

The State of Michigan follows a combination of federal laws and State-enforced laws. Provisions such as basic minimum wage, working hours, leave of absence, and other rights and protections are ensured to the employees working in the State through these laws.

  • The current standard minimum wage in Michigan is $9.65 per hour as of January 1, 2021.
  • Employers in Michigan must comply with any final pay requirements when an employee’s employment terminates.
  • Employers are prohibited from discriminating against and retaliating against employees who fall into one of many protected categories under Michigan law. Employers must also provide equal pay for equal effort, as well as protect whistleblowers.
  • The business LLCs have to abide by the federal as well as State regulations while employing workers in their business enterprises.

Structure Of Wages Of Employees

This section covers Michigan employment laws and regulations, including state civil rights legislation, payroll requirements, vacations and leave of absence, whistleblower protection acts, and labor laws that affect unions.

Michigan Minimum Wage

The Improved Workforce Opportunity Wage Act is operative in Michigan which covers employees above 16 years of age. Under this Act, the minimum wage is determined at the rate of $9.87 per hour in 2021. The minimum wage is set to hike with every financial year. However, in case the unemployment rate hikes beyond 8.5% in a year, then the wage hike is not enforced in the State. There are certain exclusions to the minimum wage rule applicable in the State of Michigan.

Tipped Employees

The federal legislation, Fair Labor Standards Act allows businesses to pay a lower hourly minimum wage if that salary, plus any tips earned, equals at least the full minimum wage for each hour worked. Employers may give tipped employees an hourly rate of $3.67 in 2021 if the total hourly compensation is equal to the state minimum wage.

Youth Minimum Wage

Michigan minimum wage laws have established provisions to enable employers to pay young employees under the age of 17 years a subminimum wage up to 85% of the standard minimum wage applicable in the State.

Trainees

Trainee employees in the State under the age of 20 years have the right to receive a sub-minimal wage at the rate of $4.25 per hour for the first 90 days of employment under Michigan minimum wage legislation. The law also oversees any act of the employers of replacing any employee to hire young employees at a lower salary rate.

Learners

Under the Michigan minimum wage laws, employers should compensate the student learners a subminimum wage rate lower than the standard minimum wage offered in the State.

Michigan Overtime Laws

The standard work hours in a week are set at 40 hours in the State of Michigan. In case an employee works beyond the 40 hours threshold in a week, then the employer should compensate such employee at the rate of 1.5 times their usual pay rate for the number of hours worked beyond the 40 hours work limit.

Child Labor

The Youth Employment Standards Act (YESA) of Michigan forbids adolescents under the age of 18 from working in certain vocations that are dangerous or hazardous occupations such as construction, factory, and mining. Michigan’s child labor laws limit the kind of jobs that children can do, as well as the number of hours and times they can work.

Rights of Employees

Any business or LLCs in Michigan while hiring employees need to know the employees’ rights. These rights are to secure the employees at their jobs. Employee rights in Michigan are as follows,

Anti-discriminatory Rights

In the State of Michigan, the Elliott-Larsen Civil Rights Act forbids discrimination on the basis of race, origin, sex, color, age, or any other protected class by Michigan companies with one or more workers.

Equal Pay

According to Michigan’s Workforce Opportunity Wage Act, an employer with two or more workers may not discriminate among their employees based on factors like sex and gender, when all the employees are exposed to similar working conditions and the employees deliver equivalent work.

Occupational Safety

The State-enforced Michigan Occupational Safety and Health Administration (MIOSHA) ensures workplace safety and compensation in the event of an accident or death of an employee at their workplace.

Protection to the Whistleblowers

The Whistle blowers’ Protection Act of Michigan bans employers from firing, retaliating, or otherwise discriminating against an employee who discloses or is about to report a violation or suspected violation of a law, regulation, or rule to a public body, verbally or in writing.

Time Off and Leaves of Absence

Employers with 50 or more workers must give eligible employees paid sick and safe leave under the Paid Medical Leave Act (PMLA). Employees are qualified to one hour of paid sick leave for every 35 hours they worked, up to a maximum of 40 hours annually.

Moreover, the employers may be required to provide an employee unpaid medical leave in accordance with the Family and Medical Leave Act or other federal laws.

Final Pay

Employers must pay all salaries owing to dismissed workers before the next normal paycheck, regardless of whether the termination was voluntary or involuntary.

In case of death of an employee, the employer must reimburse all of the dead employee’s outstanding salaries, including fringe benefits, under a signed contract, policy, or plan, to the spouse, children, or parents of the dead employee.

How to Hire Employees Fast in Your Michigan LLC

Hiring employees is a necessary part of running a Michigan LLC. Before you can hire employees, you must obtain your EIN (Employer Identification Number). This nine-digit number is necessary to make payroll taxes to the state and open a business bank account. Obtaining an EIN is not difficult. Follow these steps to begin hiring employees for your Michigan LLC. If you have any questions, don’t hesitate to ask us.

Register your company name with the state. If you have a trademark for the name of your business, you may have to submit additional paperwork or licensure. Make sure that you have a domain name registered for your business, even if you don’t plan on building a webpage. This way, if you do decide to add a webpage, you will be able to use the domain name.

Select a name. An LLC in Michigan must have a unique name. You can conduct a business name search in the state to check if a name is already registered. If you don’t find the name you are looking for, consider a different name. You’ll have a wider range of possible business names. Also, keep in mind that your name may already be in use by another business, so be sure to choose a name that will stand out.

Get the proper paperwork for your Michigan LLC. Michigan businesses are required to obtain workers’ compensation insurance, post employment posters, and pay their employees according to state and federal laws. Additionally, they are required to deposit federal employment taxes. Regardless of whether your company is a sole proprietorship or an LLC, it is important to understand Michigan employment laws before hiring employees. You can begin hiring employees in no time by following these tips.

FAQs

What Is an LLC?

An LLC is a business entity that can be treated as either a corporation, a partnership, or a sole owner business.

Is the LLC liable for damages caused by employees?

The owners of the company are not personally liable for the actions of the employees, the LLC is liable for any such actions.

What is the IRS Form I-9?

Before hiring an employee, under federal law, the business has to verify an employee’s eligibility to work in the United States with the (IRS Form I-9). The business owner also has to make sure the employee has a valid SSN or Social Security Number.

What is LLC self-employment?

LLC members, or LLC owners, are self-employed according to the IRS because they pay themselves through the earnings of LLC.

In Conclusion

All the LLCs with employees are bound by many rules and regulations with reference to wages. It is always advisable to register a registered agent service to understand the laws better. Feel free to share your feedback with us in the comment section below.

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