Starting a limited liability company (LLC) can be an exciting venture made even better with careful planning. If you’ve never formed an LLC and are looking to start a business in Michigan, you might wonder where to begin. This guide will walk you through your next steps, detail the associated costs, and help you outline your path to forming your small business. Follow these step-by-step instructions to get your Michigan LLC formed and be on your way to growing your business most efficiently.
The 5 steps to form an LLC in Michigan:
To start an LLC in Michigan, you’ll need to file your business with the state, appoint a registered agent, and decide on an Operating Agreement. But before you contemplate the bigger decisions and get started on registering, you’ll need to knock out the easiest step of all: solidifying a name for your new business.
While some steps are more complex than others, this step-by-step guide will help simplify the process of forming an LLC in the state of Michigan. As you check off each of the five steps below, your Michigan Limited Liability Company will be closer to reality.
Step 1: Name Your Michigan LLC
You likely have an idea of what you’d like your business name to be, but naming a business is more than just a creative way to market your services; it also has to comply with state regulations. In this case, you’ll need to register your business under a unique name with the state of Michigan.
Your best bet is to create a list of possible names before running each through the Michigan Department of Licensing and Regulatory Affairs (LARA) name search page to find one that is not in use. It might be helpful to check a more detailed explanation of the requirements for naming your business in Michigan. Keep in mind that slight changes in spelling and punctuation or choice of suffix will not be enough to distinguish your business in the eyes of the state.
To comply with Michigan’s state law, your company’s name must end with the proper suffix. In this case, you have four options: including the entire phrase of “Limited Liability Company,” the abbreviation “LLC,” or a punctuated version of the previous as “L.L.C.” or “L.C.” Regardless of which option you choose, it must appear at the end of your company’s name.
Keep in mind that some words are prohibited. For instance, you can not include the word “corporation.”
Once you’ve found a name that satisfies your business goals and Michigan’s requirements, you’ll need to lock it in. To reserve the name before someone else, you’ll need to deliver an Application for Reservation of Name and a $25 filing fee to the Department of Licensing and Regulatory Affairs. If the name you’ve chosen is approved, it will be put on hold for six months — allotting plenty of time for you to finish establishing your LLC.
If the owners of a company want to do business using a name that is different from the original name used to form the business, they must also register the secondary name. Also known as “Doing Business As” (DBA), this secondary name doesn’t replace the original name, but it can serve as an additional, legal name for the business. Once you find one that is available, you’ll want to file a Certificate of Assumed Name.
Another thing to consider is whether you want to trademark anything with your Michigan LLC. You can visit the United States Patent and Trademark Office‘s site to see whether or not your business name or logo is trademarked. To trademark something for your business, you’ll want to submit your mark alongside the Application for Registration for Trademark/Service Mark, which requires a non-refundable $50 filing fee. Note that if you plan to do business outside of Michigan, you may want to broaden your protection and file a trademark at the federal level with the USPTO.
Step 2: Appoint a Michigan Resident Agent
To continue with the registration process, Michigan requires that every LLC appoint a registered agent, also known as a resident agent. The person or entity appointed will be the point of contact for all legal matters — if your company is subpoenaed or sued, the state of Michigan will deliver papers to your registered agent. They will also be the point of contact for any service of process.
While the owner of the company can be the registered agent (if they reside in Michigan), this is not always the best option. Let’s face it, being served papers in front of customers is a sure way to deter business, and, with so many alternatives, it might be in your best interest to hire an outside registered agent service.
Some other benefits of hiring an outside registered agent like ZenBusiness include:
- Flexible business hours: A registered agent service is always available during regular business hours, providing you more flexibility to work when you’re most productive.
- Ensure compliance: Running a business requires you to follow state and federal regulations. It’s a lot to keep up with, and a registered agent service can ensure your business is compliant and in good standing.
- A consistent address: Your registered office address will likely remain the same, which means you have more flexibility with your business location in case you have to move.
As long as they are a resident of the state of Michigan or a business entity authorized to do business in Michigan, and have a physical street address within the state, hiring an outside registered agent is an affordable way to save you possible troubles later on.
Step 3: File Michigan Articles of Organization
Once you’ve secured a name and registered agent, it’s time to certify your LLC in the state of Michigan. To do so, you’ll need to complete your Articles of Organization and file it with the Michigan Department of Licensing and Regulatory Affairs’ Corporations, Securities, and Commercial Licensing Bureau, Corporations Division. Before you begin filling in the form, ensure you have all of the necessary information.
You’ll need the following information to fill out the form accurately:
- The name of your LLC
- The purpose of its formation
- The duration of your company (if not perpetual)
- The name and address of your Registered Agent
Whether you prefer to go in-person, send your paperwork through the mail, or utilize the online system, you will need to include a nonrefundable fee of $50 when filing your Articles of Organization. If you’d like the service expedited, you can pay an additional $50 for a 24-hour turnaround, $100 for the same day, $500 for a two-hour service, or $1,000 for it to be completed in one hour.
Step 4: Create an Operating Agreement
Operating Agreements are not always required — and not mandatory in Michigan — but help create governance for an LLC. An LLC Operating Agreement covers the rules your company will follow, lists LLC members and their percentage ownership, discusses how finances will be handled, how decisions will be made (including partner voting structure), and details any additional necessary regulations.
If you’re starting your LLC alone, you may feel an Operating Agreement is unnecessary, especially since one is not required to proceed in the state of Michigan. However, Operating Agreements can also outline what happens to your company in the event of your demise and can help protect you and your assets in case of dissolution or bankruptcy. If, in fact, you are starting your LLC with partners or other managers, each party will need to agree to the terms and sign the document.
Step 5: Apply for an EIN
To finalize your LLC, you’ll need a Federal Employer Identification Number (FEIN), also known as an EIN or tax ID. Unless you are a single-member LLC with no employees, this nine-digit number is required for tax purposes, including filing taxes, hiring new employees, and opening business bank accounts. Fortunately, obtaining one through the Internal Revenue Service (IRS) is instant and straightforward. To apply, you can either call the IRS Business and Specialty Tax Line at (800) 829-4933 or visit the IRS FEIN Application Page online. Once you submit the short application, you’ll immediately receive your EIN — at no cost to you.
How much does it cost to start an LLC in Michigan?
Starting an LLC in Michigan is relatively affordable. Filing your Articles of Organization will only cost you $50 — unless you prefer to expedite the process.
However, if you choose to reserve your desired name ($25) and partner with ZenBusiness to file an Operating Agreement ($35), forming an LLC in Michigan will cost you $110.
Of course, if you prefer to get your LLC up and running as quickly as possible, expedited costs could turn an affordable process into a wallet-thinning one. Total costs for starting an LLC, with name reservation, an Operating Agreement, and a one-hour expedited service, would be $1,110. Add in the cost of hiring a registered agent, and your costs will rise yet again.
What are the benefits of an LLC in Michigan?
When starting a business, there are various forms it can take. Ninety percent of ZenBusiness customers, along with the majority of entrepreneurs, choose to form an LLC. Compared to corporations, limited partnerships, and other forms of entities, LLCs come with enticing benefits.
Forming a Michigan LLC means you’ll reap the following benefits:
- Personal asset protection: Your personal liability will be separate from your business liability and debts.
- Avoid double taxation: You’ll only pay personal taxes rather than personal and corporate taxes.
- Flexible management: You’re not required to have a board of directors or annual meetings.
- Less reporting: Compared to corporations, LLCs have fewer required meetings and reports.
How is an LLC taxed in Michigan?
LLCs are typically considered “pass-through entities,” meaning they are not subject to corporate taxes. Instead, the profits and losses are passed through to the owner’s personal income, and the responsibility to pay taxes falls on the individual. This holds for all Michigan LLCs — unless you choose to file as a corporation, you will not be required to pay Michigan’s corporate income tax. However, your LLC might be subject to other taxes, including:
- State employer taxes, if you have employees
- State unemployment insurance taxes, if you have employees
- Sales tax, if you sell goods
For more information on specific taxes that you could be required to file for your Michigan LLC, visit the Business Tax Guide from the Michigan Department of Treasury.
Michigan LLC FAQs
- What is the processing time to form my Michigan LLC?
In three to five business days, your Articles of Organization will be processed with the Michigan Department of Licensing and Regulatory Affairs if you choose to mail in your paperwork. If you file online, the turnaround time can be as quick as 24 hours from when the state begins processing your submission. For an extra fee, you can have your documents expedited and processed in as little as an hour.
- Do I need to file an Operating Agreement with the state of Michigan?
No. The Operating Agreement is an internal document that you should keep on file for future reference. While some states legally require LLCs to have an Operating Agreement, Michigan is not one of them.
- What tax structure should I choose for my Michigan LLC?
When you get an EIN, you will be informed of the available tax classification options. Most LLCs elect the default tax status, which is to be taxed as a sole proprietorship (for a single-member LLC) or a partnership (for a multi-member LLC). For either of these options, the LLC is not taxed, but the LLC members pay taxes on their portion of the profits on their individual tax returns.rnrnYou can also elect to have your LLC taxed as a C corporation or an S corporation. Although most new LLCs don’t choose these options, they do have advantages for certain companies. Be sure to review each option’s details to determine the best one for your business.
- Does Michigan allow a Series LLC?
A Series LLC is a group of limited liability companies operating under one “parent” entity. While each entity under the parent is considered independent, entrepreneurs are often attracted to the structure if they wish to create numerous companies to explore different avenues but not risk one’s success due to the liabilities of another. However, only a few states have adopted Series LLC laws — none of which are Michigan.
- Which licenses and insurance are required for an LLC in Michigan?
Although Michigan doesn’t require a general business license to operate, certain industries require specific licenses and permits. To find out if you’re required to apply for a business license and how to apply, visit Michigan’s State License and Permit Search.rnrnYour LLC might be required to obtain an insurance policy, depending on the type of business and whether you have employees. The types of insurance range from professional liability insurance to unemployment and workers’ compensation insurance. You can find a complete list and industry requirements on the Michigan Department of Insurance and Financial Services website.rnrnIn both instances, we recommend hiring a professional service like ZenBusiness who will provide you with a comprehensive package of all the licenses and insurance required for your Michigan LLC.
- How do I change my LLC name in Michigan?
To change the name of your LLC in Michigan, you need to file a Certificate of Amendment that includes the reason you’re changing your Articles of Organization (in this case, you want to change the name of your LLC). You submit this form to the Michigan Department of Licensing and Regulatory Affairs’ Corporations, Securities, and Commercial Licensing Bureau. There is a $25 filing fee to amend your Michigan LLC Articles of Organization.
- How do I pay my annual LLC fees in Michigan?
In Michigan, an annual report or annual statement is a regular filing that your LLC must complete every year. This annual statement costs $25 and should be filed with the Michigan Secretary of State by Feb. 15.