If you're planning to form an LLC in Michigan, you have two options: you can hire third-party companies that build corporations and LLCs on behalf of clients, or you can do-it-yourself at a much lower cost.
For a hands-off approach, hiring an LLC formation service means business owners like you could sit back and relax as your own LLC, S-Corporation, C-Corporation, non-profit, and other business entities beyond sole proprietorship are built from scratch. Click here for a list of the best providers around. We also reviewed the popular IncFile, Zen Business here, and Rocket Lawyer in this article.
Of course, outsourcing the process comes at a cost. Of course, to pick a good state to form LLC is an imperative. Based on that, why not form your LLC in the state of Illinois, or what about Maryland LLC formation process? Also, Ohio LLC formation process keeps your private assets protected in case your business is sued.
If you would rather handle everything yourself, you'll be pleased to know that starting an LLC is affordable and really easy and just involves several steps. Also, we explained how to start an LLC in Virginia and NC LLC formation process. Or if you opt for LLC in Texas, it's another state where the process is seamless and affordable, similar to how to form an LLC in Pennsylvania and Wisconsin LLC formation process. And, if you decide to form your LLC in the state of Colorado, it's another effortless process.
6 Steps to Start an LLC in Michigan
Half of these steps can be done online, at the comfort of your own home. However, since these involve a good amount of research and serious decision-making, I recommend you don't rush your decision, especially in steps 1 & 2. Also, only file the actual LLC formation form once you're 100% sure of the business name and resident agent. You can also compare it with forming an LLC in NJ. And it is good to be aware that some states don't offer all types of LLC as explained in our 'How to form an LLC in California' review.
1. Search and Pick a Business Name
When you start your LLC, the first thing you should decide on is the LLC name. The LLC naming rules in Michigan is the same as most states:
- The chosen name must include the phrase "limited liability company" or any of its abbreviations like L.L.C. or LLC.
- The LLC name cannot use any term that may confuse with the government (such as State Department, FBI, Treasury), financial institutions (like "Bank," "Attorney), educational organizations (University, State), and so on.
- You can search if the name/s you want is already taken. Use the search function available at the Michigan Department of Licensing and Regulatory Affairs (LARA).
- Consider researching if the domain names (.com, .net, or .org) that match the name of your LLC are still available. This is important if a big part of your business will be web-based.
LLCs usually don't need a trade name (DBA) to operate, so whichever name you decide for your company, it could serve as the brand name and official business name where checks and payments can be addressed.
2. Decide on a Michigan-based Registered Agent
Your Michigan LLC needs to appoint a registered agent to ensure someone will receive possible service of process, tax documents, and other correspondence from the government. This person must be a Michigan resident agent, which means the position can be held by:
- You - if you reside anywhere in the State of Michigan and you are willing to put your name and address into public records, then you can fill this position.
- A family or friend - There are no special requirements to become a registered agent in Michigan, except for residing in the state and being available during business hours (8 to 5) to sign on behalf of the LLC when receiving mail. As such, even your friends or family members can serve as your LLC's registered agent.
- Registered Agent service - You can pay a registered agent service, so you wouldn't have to worry about failed obligations due to lost mail.
In addition, check out how to form an LLC in Florida, where you need a registered agent service to link the business and the state.
3. Get a FEIN (Federal Employer ID Number)
Any business forming an LLC is required to apply for an EIN (employer identification number). In Michigan State, this is more commonly known as FEIN.
You can get this nine-digit employer identification number (EIN) or tax ID from the Internal Revenue Service (IRS) either online or by mail. It is completely free of charge.
Note that this is only required if you're planning to hire employees under the LLC. A one-member LLC may not obtain an EIN anymore.
4. File the LLC Articles of Organization
The Articles of Organization is the legal document that will officially form your Michigan LLC (once approved). Download and fill out this form, then you must file it with the Michigan Corporations Division, Department of Licensing and Regulatory Affairs.
This document should indicate your chosen LLC name, Michigan resident agent, and the industry your business is under.
- You can pay the filing fee by check or money order.
- Make it payable to the “State of Michigan.”
File the Articles of Organization with your payment by mail to this address:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau
P.O. Box 30054
Lansing, MI 48909
Once you've submitted this form, you have to wait 10 to 15 days to learn if your company has been approved. If you're in a hurry, you may expedite your filing for a fee.
When Will I Know if My LLC application was approved?
Michigan's Corporations Division will check and approve your application.
If you're good to go, expect to receive by mail your stamped and approved Articles of Organization.
The best way to check if your business is official is by making an L.L.C. name search. If you find your chosen L.L.C. name, then your search should display the name and ID number.
5. Create an Operating Agreement for your LLC
LLCs are not required to file an operating agreement to the State of Michigan Department of Licensing and Regulatory Affairs. However, the government may request your operating agreement at any time, so you should have the document already in place.
The LLC operating agreement is a crucial part of any limited liability company because it provides structure and outlines names of members, percentage of ownership of each member, operating procedures, and other important business details you want to be included.
The operating agreement also ensures all members of the Michigan LLC are on the same page about everything involving the business.
6. Maintain Your LLC
Once your LCC is approved, you need to file additional documents to be able to continue your LLC business in Michigan.
Obtain a Copy of the Certificate of Good Standing
Also called the certificate of existence or certificate of status, this certificate proves that your LLC is legally allowed to conduct business in Michigan.
It is not required for LLCs to get one, but if a potential client or customer asks for one, it is always good that you have it already in place.
Get a Business bank account, credit card & insurance
Open a bank account and credit card under the Michigan LLC name. This will make sure your personal income and LLC revenue shares are kept separate and traceable with a paper trail.
And once your business begins to expand and increase revenues, make sure to get business insurance appropriate for your LLC.
Get Business licenses and permits
Some businesses may be asked to obtain a business license, permit, and/or certification to start the actual operations of their Michigan LLC.
The requirements would vary completely on a case-to-case basis. For example, a restaurant must obtain health permits, zoning permits, fire safety certification, and so on.
Proper Tax Filing
The Michigan Department of Treasury does not require the LLC to pay a state tax or corporate income tax.
It isn't subject to double taxation, which means Michigan LLC owners must pay taxes to the state on their personal tax returns. This will depend if you own a:
- Multi-member LLC, Form 1065 Partnership Return.
- Single-member LLC, Form 1040 Schedule C.
If you're selling a physical product, talk to the MI Treasury Department about collecting sales tax.
If you have Michigan-based employees, you might also have to dig into employee withholding taxes and unemployment insurance taxes.
Submission of Annual Statement
Any Michigan LLC is required to file an annual statement every year, on or before February 15th.
This report is important because it lets you keep your business information up-to-date. The details required here include the physical address, registered agent, members and managers of the LLC, shareholders (if there are any), contact number, and so on.
You can file this report online via Michigan's Department of Licensing and Regulatory Affairs.
In Michigan and other states, if you miss filing your annual report, you may face fines. For multiple missed deadlines, the LLC could be up for automatic dissolution. When this happens, all LLC owners will also suffer from the loss of limited liability protection. Also, some states like New York offer flexible taxes as described in our 'How to form an LLC in NY' article.
Cost of Forming a Michigan LLC
The Michigan LLC Articles of Organization filing fee is $50, which you will only pay ONCE throughout the life of your LLC.
Other fees include:
- Expedited service request (ranges from $50 to $1000) depending on how quickly you need your LLC created.
- Filing of your annual statement ($25 each time). Make sure to file this report on time (before February 15th every year), since Michigan charges a $50 late fee if you missed the deadline.
- Fees of required business permits and licenses
Wrap Up: Do You Really Need an LLC in Michigan?
The main reason an LLC is formed is to avoid personal liability for the debts of a business they own or are involved in.
With the liability protection attached to an LLC, the personal assets of owners, managers, or members will not be dragged. Instead, only the LLC will be liable for the debts and liabilities incurred by the business.
If this isn't reason enough to choose a limited liability company as a structure for your business, maybe you'd find "no double taxation" a better reason to go with an L.L.C. Plus, this kind of business entity is the most hassle-free since you don't have to conduct regular meetings or meet complicated requirements. As long as you follow the steps above, your L.L.C. will be allowed to operate as long as you want it to.