If you’re a licensed professional, such as a doctor or accountant, and you want to formally practice in Michigan, you may consider starting a Michigan professional corporation (PC). Michigan actually requires those starting a corporation offering professional services to incorporate as a Michigan PC, not a regular corporation. We will walk you through step-by-step how to form a professional corporation in Michigan.
What is a professional corporation in Michigan?
A Michigan PC is a business structure that one or more licensed persons can form to provide professional services. The state defines licensed persons as individuals who earn a license and have the authority to practice a professional service — think lawyers, accountants, architects, and doctors.
Michigan sometimes refers to these entities as professional service corporations.
Determine whether a Michigan PC structure is right for you
Is a professional corporation or a professional limited liability company the right choice for your business?
Michigan offers two entity types for professional service providers: PCs and professional limited liability companies (PLLCs) .
PLLCs have stricter requirements in terms of what types of professionals can form them. Only dentists, osteopathic physicians, physicians, surgeons, doctors of divinity or other clergy, and attorneys at law may form their businesses as a PLLC.
PCs, on the other hand, can be formed by one or more licensed professionals, a definition that is intentionally broader than the PLLC option.
PLLCs are easier to form and maintain and have different tax treatment than a PC, which may be advantageous. However, PLLCs don’t offer the same high-level liability protection that PCs do, and with a PLLC, you can’t issue stock.
How will ownership be divided?
Ownership of a PC is divided into shares, which are granted to shareholders. For Michigan PCs, shareholders must be either a licensed professional or an entity owned by a licensed professional providing the same service that the current PC offers.
A shareholder’s proportion of ownership may be determined by his or her initial investment in the PC or as decided by the PC’s board of directors.
How will the PC be managed?
PCs don’t have as much flexibility in terms of management structure as other entity types, like PLLCs.
Under Michigan’s Business Corporations Act, all corporations must have a board of directors. This group handles big picture matters, such as electing officers and making financial decisions. The board of directors also represents the shareholders.
Corporate officers oversee the day-to-day business operations. By law, every corporation must appoint a president, secretary, and treasurer.
Choose a name for your Michigan PC
When choosing a name for your Michigan PC, keep in mind that it must include either “professional corporation,” “PC,” or P.C.”
You also need to check that the name you want is available for use. At ZenBusiness, we offer name reservation services, where we can search for your preferred name and reserve it until you incorporate with the state. Our team can also search and register your business domain name so you can have a real online presence.
Select a Michigan registered agent
All Michigan PCs must have a registered agent. This is a person or entity who receives legal documents on behalf of the PC. A registered agent can be any of the following:
- Michigan resident
- Michigan corporation
- Michigan limited liability company (LLC)
- Foreign corporation or LLC authorized to conduct business in Michigan
ZenBusiness offers registered agent services, where we can connect you with a registered agent in Michigan who meets state requirements for a registered agent in Michigan.
Complete your Michigan Articles of Incorporation
The Articles of Incorporation is the document that officially establishes your PC with the state. You can enlist someone else to file your Articles of Incorporation, or you can do it yourself. This document must include the following information:
- Name of PC
- Specific professional service(s) that the PC will provide
- Number of authorized shares
- Designation of registered agent
- Name and contact information of incorporating persons
The incorporator will file the Articles of Incorporation with the Corporations Division of the Michigan Department of Licensing and Regulatory Affairs. You can do this either online, by mail, or in person.
Establish a corporate record in Michigan
Michigan PCs must maintain corporate records of any actions taken by the PC. Examples of documents that your corporate records may include are the corporate bylaws, meeting minutes, resolutions, and incorporation documents.
Designate a Michigan PC board of directors
All Michigan corporations must have a board of directors. The board is necessary to getting your business up and running efficiently. The initial incorporators of a Michigan PC must elect a board of directors by a majority vote. This can be done at either the first organizational meeting or in writing.
Create Michigan corporate bylaws
Bylaws are the rules for a PC. This document defines the responsibilities, powers, and operations of the PC. Under Michigan law, you don’t need to file the corporate bylaws, but they must be adopted by either the initial incorporators, board of directors, or shareholders.
Corporate bylaws typically include the following provisions:
- Purpose of the PC
- Shareholder voting rules
- Number of directors and term limits
- Meeting requirements
- Officer positions and appointments procedures
- Conflict of interest disclosures
- Dispute resolutions procedures
- Bylaws amendment requirements
You can draft your own bylaws using an online template or hire an attorney to create them.
Hold first board of directors meeting
Any member of the board may call the first board of directors meeting. At this meeting, the board will make business decisions, such as adopting bylaws, electing officers, authorizing shares, and selecting the tax treatment of the PC.
Handle Michigan tax obligations
To prepare for your PC’s tax obligations, you need to obtain an employer identification number (EIN) for your PC. An EIN is necessary for filing taxes, opening a business bank account, and hiring employees. You can apply for an EIN through the IRS or use ZenBusiness’s EIN service, and we’ll take care of it for you.
PCs can choose to be taxed as a C corporation (this is the default) or as an S corporation. C corporations are subject to double taxation, meaning the income is taxed once at the corporate income tax level and then again at the personal income tax level when distributed to shareholders.
S corporations, on the other hand, are considered pass-through entities because their income passes through to the shareholders where it’s taxed only once. S corporations must make a special election for this tax treatment, and there are several ownership requirements.
Michigan PCs may be subject to a number of different state taxes, such as corporate income tax, withholding tax, and Michigan business tax. For a full list of state tax obligations, visit the Michigan Department of Treasury website.
To see that your PC is meeting all of its local tax obligations, check with the local tax authority.
Obtain Michigan business licenses and permits
Michigan doesn’t have a general state business license requirement. However, there may be local licenses or permits necessary for your PC to operate, so it’s your responsibility to research and obtain what you need. Michigan offers a state license search database, which may be helpful.
Keep in mind that there may be industry licensing requirements specific to your profession.
With licensing possible at the federal, state, and local level, in addition to your industry’s requirements, it may be overwhelming to find out what exactly you need to legally operate. ZenBusiness can help. We’ve partnered with Business Licenses, LLC, to make the process easier by doing the research for you and providing a business license report.
Acquire insurance for your Michigan PC
Michigan doesn’t require general business insurance or professional malpractice insurance for businesses. However, you may consider purchasing these policies to protect yourself financially.
If you plan on hiring employees, you will most likely need to purchase workers’ compensation insurance. This type of insurance is required by law for most businesses and prepares you to cover an injured worker’s medical bills and disability benefits, if necessary.
Open a business bank account
Since corporations are taxable entities separate from the shareholders, corporations need their own business bank account. Even for entities who are not required to maintain a separate account, the IRS encourages a business bank account. By keeping your personal and business funds separate, tax filing time will be much easier.
Start your Michigan PC today!
At ZenBusiness we take pride in helping entrepreneurs realize their business goals and dreams. We’re here to assist you in creating a successful business. Check out our services to see everything we offer. For more information or questions, contact us today.
Michigan Professional Corporation FAQs
What are the filing fees for a Michigan PC?
The filing fees for a Michigan PC vary based on the number of authorized shares. From time to time, the filing fees may change. For the latest filing fee information, visit the Corporations Division of the Michigan Department of Licensing and Regulatory Affairs.
Do I need a lawyer to form a Michigan PC?
Although a lawyer can offer valuable advice, you don’t need one to form your PC.
Does Michigan have other professional entity types?
Yes, Michigan offers a PLLC. However, only certain professionals designated by statute are allowed to form a PLLC.
Can professionals from different fields form a Michigan PC together?
There are no restrictions on professionals from different fields forming a Michigan PC together.
Will I be taxed as an S corporation or a C corporation in Michigan?
You can choose the tax treatment of your PC. By default, PCs are taxed like regular C corporations and subject to corporate income taxes. Any distributions made to shareholders will be taxed again. Alternatively, the PC’s board of directors may make an S corporation election for the PC, meaning the PC will be treated as a pass-through entity, and all income will be taxed only once when reported on the shareholder’s income tax return. To qualify for S corporation status, however, the PC must meet the following requirements:
Issue only one class of stock
Have no more than 100 shareholders
Have only shareholders who are U.S. residents, estate, trusts, and tax-exempt organizations
Be a domestic entity
An attorney or accountant can provide further guidance on which tax treatment is best for your business.