Corporations fall into the following three categories:
- C corporations. These are owned by shareholders who elect a board of directors to oversee operations. They are taxed as a separate legal entity from anyone else involved and provide the greatest protection between businesses and personal assets.
- S corporations. Any earnings are split among shareholders and are taxed at that level only, not also separately as a business entity.
- Nonprofit corporations. These are tax-exempt (though employees still pay taxes on their wages), but this structure requires significantly more paperwork. The business must adhere to strict regulations to maintain its tax-free status.
If you’re ready to form your Michigan corporation, we’ve created this resource to help you get started today.
How do I form a corporation in Michigan?
Steps to Incorporate in Michigan
- Name Your Corporation
- Appoint Directors
- Choose a Michigan Registered Agent
- File the Michigan Articles of Incorporation
- Create Corporate Bylaws
- Draft a Shareholder Agreement
- Issue Shares of Stock
- Apply for Necessary Michigan Business Permits or Licenses
- File for an EIN and Review Tax Requirements
- Submit Your Corporation’s First Report
To start a corporation in Michigan, you must file the Articles of Incorporation with the Corporations, Securities, and Licensing Bureau of the Michigan Department of Licensing and Regulatory Affairs. But there are several other steps to complete before and after this filing.
To simplify the process of forming a corporation in the state of Michigan, we’ve put together 10 easy steps to form your business:
Step 1: Name Your Michigan Corporation
When it comes to naming your corporation, you need to make sure you comply with Michigan business naming laws, and there are also many other factors to consider during the process. This includes making sure your business name is unique, suits your business well, aligns with all regulations, and includes a corporation designator (e.g., “Inc.”).
And don’t overlook the importance of choosing a name for which you can reserve a matching website domain name that has not been taken. Additionally, you should consider any “doing business as” (DBA) names or trademarks you may want.
Here are some guidelines to help you through the naming process:
- Start by brainstorming a list of potential names. Names on this list should match your business’s purpose, and the more names you have, the better. The next several steps will begin to narrow down your options.
- The final version of any name you choose must contain the word “Corporation,” “Company,” “Incorporated,” or “Limited” or the abbreviation “Corp.,” “Co.,” “Inc.,” or “Ltd.”
- Search your prospective business names on the Department of Licensing and Regulatory Affairs business entity search page to eliminate any names that are too similar to existing businesses.
- Corporation names also cannot contain language implying they are organized for a purpose other than stated in the Articles of Incorporation.
- The name cannot suggest it is associated with any government agency or include anything indicating that it will be engaged in illegal business.
- Once you’ve narrowed down your list based on the above, the next task is to search for available domain names to ensure you can secure a website domain that matches your business name.
- Before you commit to your business name, search online to make sure it isn’t already trademarked at the federal or state level. If not, you could consider getting a trademark for it and/or a logo or slogan. To do so at the state level, you will need to file an Application for Registration of Trademark/Service Mark with the Michigan Department of Licensing and Regulatory Affairs and pay the associated $50 fee. But while it’s easier and quicker to file at the state level, filing at the federal level offers broader protection, especially if you plan on doing business outside of Michigan.
- If you would like to do business under a name different from your official business name (often called a “doing business as,” or DBA, name), you will need to file a Certificate of Assumed Name and pay a $10 filing fee.
- Once you have settled on a business name, you may choose to reserve the name if you are not ready to register it. You can do this by submitting an Application for Reservation of Name with a $10 filing fee. Name reservations are good for six months before you need to renew the name registration or register your business. You can apply online, in-person, or by mail. The mailing address is Michigan Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau, Corporations Division, P.O. Box 30054, Lansing, MI 48909.
Step 2: Appoint Directors
The board of directors oversees the operations of the business. The initial incorporators — those filing the Articles of Incorporation for the business — often appoint the initial board of directors. Afterward, the board is elected annually by shareholders (those who hold stock in the company — this can include the original incorporators).
In Michigan, only a single incorporator is required, and only one member on the board is needed, although having more is generally advisable.
Incorporators may be directors and shareholders. In fact, a single person can start a corporation and hold all associated titles. But the three titles are associated with different roles within the company. To clarify, here are some of the different roles that exist in a corporation:
- Incorporators are responsible for starting the business and filing the initial paperwork.
- The board of directors oversees the operation of the business.
- Shareholders finance the business by owning shares in the company; they also often have voting power when selecting the board of directors.
- Officers execute the duties associated with running the business.
The incorporators should appoint the initial board of directors before filing the Articles of Incorporation. Then, the appointed directors should meet to approve corporate bylaws, determine the share structure, and solidify other matters before filing. That way, your business starts on the right foot with plans clearly in place.
Step 3: Choose a Michigan Registered Agent
A resident agent, referred to in most states as a “registered agent,” is the point of contact for anything legal having to do with the business. The resident agent has to be available during normal business hours and to receive any tax documents, legal forms, and so on that might be sent to the business.
You are required to name a resident agent when you file the Articles of Incorporation. The requirements for a resident agent and accompanying registered office in Michigan are as follows:
- The resident agent’s address (not a P.O. box) must be in the state, which may be the same as the place of business.
- The resident agent can be a person or a business authorized to transact business in the state (such as a registered agent service).
- The business office address or resident address of the resident agent must be the same as the stated registered office address.
Step 4: File the Michigan Articles of Incorporation
Once all the previous steps have been completed, you should have everything you need to file your Articles of Incorporation. This document officially registers and establishes your business with the state. In this document, you will need to include:
- The name of your business
- The purpose of the business. As per the instructions on the form, you don’t have to get very specific unless it’s an educational corporation.
- The number of authorized shares of stock separated as common shares and preferred shares. The primary difference is that preferred shares don’t come with voting rights but do often come with better financial benefits for the shareholder. The number of shares authorized is often determined by the board of directors or the incorporators. You will also state the rights associated with each share class, as determined by the board of directors or incorporators.
- The name, physical address, and mailing address of the registered agent
- Names and addresses of all incorporators
- Any additional information you wish to include
- Signatures of incorporators
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau
P.O. Box 30054
Lansing, MI 48909
You must also pay an associated fee, which is $10 plus an additional amount, depending on the number of authorized shares as follows:
- $50 for 1 to 60,000 shares
- $100 for 60,001 to 1,000,000 shares
- $300 for 1,000,001 to 5,000,000 shares
- $500 for 5,000,001 to 10,000,000 shares
If you have more than 10,000,000 shares, it’s $500 for the first 10,000,000 plus $1000 for each additional 10,000,000, or portion thereof.
Step 5: Create Corporate Bylaws
The next step is to have the incorporators or the board of directors create the corporate bylaws. The bylaws establish all of the rules and day-to-day activities of your business. This is a good idea, but Michigan also requires it for all corporations.
Your corporate bylaws may include:
- A clear statement of your business purpose
- A list of the board of directors and the rights, responsibilities, and qualifications of each
- Details of your management structure and the duties of each officer
- Annual meeting scheduling and goals for directors and shareholders
- How ownership and shares are distributed and how the stock is sold or transferred
- How changes are made or voted on
- Details of any committees and their responsibilities
- Process for removing a board member
- How conflicts of interest are to be handled
While you are not required to file your bylaws anywhere, you are required to keep them in a safe place with any other corporate records. It’s often a good idea when starting to set up a corporate records book where you can keep all of your corporation’s important papers, including bylaws, minutes from meetings, and stock certificates.
Step 6: Draft a Shareholder Agreement
The shareholder or stockholder agreement is a document that outlines the rights and responsibilities of all shareholders in the company. It should include the following:
- Shareholders and their contact information (address, phone number, etc.)
- Shareholder responsibilities, including rules about officer appointments and any actions that shareholders are allowed to take on behalf of the business
- Shareholder voting rights, including whether a simple majority or higher percentage may be required for certain decisions
- How changes to the original shareholder agreement may be made
- How stock can be sold or transferred
- The financial obligation and time commitment for each shareholder
- A clear outline of how dividends are distributed
- A plan for the distribution of assets should the business close
Again, this agreement can be drafted from a template, but you may want to utilize professional assistance. Your shareholder agreement should be kept with your other important corporate records.
Step 7: Issue Shares of Stock
One of the requirements for starting a corporation is issuing stock. When you filed your Articles of Incorporation, you stated the number of stock shares (common and/or preferred) that were authorized. The number of shares you issue should always be less than or equal to this number.
You’ll need to estimate how much capital you require before issuing shares of stock so that you can determine a reasonable value for each share. Shares of stock may also be issued in exchange for services or other noncash value and capital contributions.
Each share is only issued once. However, after being issued, it can be traded and sold. All issued shares must be documented in the company’s annual report. Although it is not typically required, most corporations issue certificates to shareholders, indicating their shares.
Stock may be issued publicly or privately. Privately issued stock is usually issued to the founders, managers, employees, or a private group of investors. A public corporation makes a portion of its stock shares available for public purchase.
Companies that issue public stock need to file quarterly statements with the Securities and Exchange Commission (SEC). They must also track how many shares are issued and to whom. You should also check with the Department of Licensing and Regulatory Affairs Securities and Audit Division for regulations and requirements at the state level.
Step 8: Apply for Necessary Business Permits or Licenses
To keep your business on the right legal footing, make sure you take the time to research any required permits or licenses. What permits and licenses are needed depends on the business services you provide, the county or city where your business is located, and whether you have employees.
Be sure to search for the following:
- State and city sales tax license (if you are selling goods)
- Regulatory or professional licenses or permits (associated with the services you provide)
- Any local business licenses or permits, including alarm permits, building permits, health permits, occupational permits, signage, or zoning permits
There may be still other licenses and permits required for your business, so you’ll have to do some research.
Step 9: File for an EIN and Review Tax Requirements
Corporations are treated as separate entities, which means they need their own tax identification number separate from the Social Security numbers of the shareholders. As such, you will need to obtain an Employer Identification Number (EIN) from the IRS. This number acts like the corporation’s Social Security number for tax purposes.
Visit the IRS website and fill out their online form. It only takes a few minutes and is free. Afterward, you will receive your EIN. Keep track of this number, as you will need it for future documentation and filing your business’s tax returns.
Remember that corporations must pay their own taxes separate from any taxes paid on shareholder earnings. This must be done at the federal and state levels by submitting the appropriate returns each year.
Step 10: Submit Your Corporation’s First Report
In Michigan, all corporations are required to file an annual report by May 15 each year. In this report, you will need to provide the following information:
- Corporation name
- Registered agent name and office address
- Names and addresses of all officers and directors
- A statement of the type of business services provided
- Names and addresses of the shareholders (for professional corporations)
Your preprinted annual report form will be mailed to your registered office three months before the due date. It can be returned via mail or filed online and must be accompanied by a $25 filing fee.
How much does it cost to start a corporation in Michigan?
The cost of starting a Michigan corporation can vary considerably, depending on the size and type of business and location. At a minimum, you will need to pay the $10 fee for filing the Articles of Incorporation and the associated fee for the number of shares authorized. Additional fees may include:
- Expedited service fees ranging from $50 to $1,000, depending on the requested turnaround time
- Registered agent service fees
- $10 name reservation fee
- $10 for an assumed name
- Fees to reserve a domain name and create a website
- Licensing and permit fees
$25 annual report fee
- Fees assessed for amendments or other business filings
- Fees for an accountant or tax consultant
- Costs associated with renting space
ZenBusiness can help alleviate any stress of getting your corporation off the ground by assisting with many of the required steps for a low annual fee.
What are the benefits of a corporation in Michigan?
Many benefits come with starting a corporation in Michigan. As a business type, the benefits of a corporation include:
- Protection of personal assets
- Legal recognition as a separate entity in and outside the U.S.
- The ability to issue stock (which can help with funding and capital)
- Does not dissolve if owners leave or pass away
There are disadvantages you should be aware of, however. Among these are the tax structure (profits are taxed at both the corporation and personal income tax levels), and there is a lot more red tape and paperwork involved than other structures, such as limited liability companies (LLCs).
How is a Michigan corporation taxed?
How a corporation is taxed in Michigan depends on its designation. Corporations may be designated as a C corporation, an S corporation, or a nonprofit.
C corporations are treated as separate entities and must file their own tax returns. In addition to this, all shareholders file tax returns for earnings and dividends on their individual tax returns. This results in “double taxation.” While that might seem less than ideal, there are some benefits to this tax structure, including more flexibility in what can be deducted.
S corporations are pass-through entities. All profits are passed through to the owners, who must pay on their individual income taxes.
Nonprofit corporations are exempt from paying federal and state taxes, provided they stay within the rules for nonprofit activity. However, anyone drawing a salary from a nonprofit corporation will pay income tax on that salary.
Visit the Michigan Department of Treasury website for more information about additional taxes your corporation may be responsible for, including sales and use tax, withholding tax, and International Fuel Tax Agreement (IFTA) tax.
Alabama Corporation FAQs
- Does running a corporation in Michigan involve more paperwork than running other types of businesses?
Corporations are known for requiring a lot more paperwork and record keeping. This is not surprising, considering they tend to have more laws to comply with and more people involved. Consider bylaws, shareholder agreements, keeping track of all stock issuances, meeting notes, etc., and the paperwork can add up pretty quickly.
- What is the difference between an LLC and a corporation in Michigan?
LLC stands for limited liability company. This type of business structure is a pass-through entity for tax purposes, and it is useful in keeping the owners’ assets separate from business assets (as with a corporation). However, LLCs do not have a board of directors and do not issue shares.
- How do I change my corporation’s name in Michigan?
You can change the name of your corporation in Michigan by filing a Certificate of Amendment and paying a filing fee.
- How many people are needed to form a corporation in Michigan?
A single person can form a corporation in Michigan.
- Can I form my Michigan corporation online?
Yes! By using the Department of Licensing and Regulatory Affairs Corporations Division online filing system, you can take care of all of your business filings, including initial registration.
- How do I dissolve my Michigan corporation?
To dissolve your corporation, you will need to file a Certificate of Dissolution and pay a $10 filing fee.
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