If you’re thinking of forming a Michigan professional limited liability company (PLLC), this article will show you how. But first, let’s learn what a Michigan PLLC is and see if it’s the correct business structure for you.
What is a Michigan professional limited liability company, and who can form one?
A Michigan PLLC is a business structure suitable for one or more licensed professionals who plan on providing professional services in the state. At least one of the licensed professionals must be an owner to form the PLLC. Michigan’s law also refers to this type of business as a professional service limited liability company.
Special rules and restrictions apply to PLLCs that provide professional services. You can find more information in Michigan’s Limited Liability Company Act. For license verification and other services, visit Michigan’s Department of Licensing and Regulatory Affairs website.
Should you form a professional corporation or a PLLC?
Professionals in Michigan can form professional corporations (PCs) or PLLCs. These business structures are unique but also share some similar elements:
- A PC consists of shareholders who own stocks in the business.
- A PLLC consist of one or more owners who are called members.
- A PC’s tax obligations rest on whether it’s taxed as a C corporation or an S corporation.
- A PLLC is usually a pass-through tax entity according to the IRS.
Both business structures provide a similar amount of personal asset and legal liability protection to their shareholders or members. However, there are technical differences, and PCs are subject to more complex recordkeeping requirements.
PLLC advantages include ease of formation and a flexible operational structure. These benefits make a PLLC preferable to many professionals.
Choose a name for your Michigan PLLC
Choosing just the right name for your PLLC can be difficult. The following information can help narrow it down.
Your Michigan PLLC name has to meet the following criteria:
- Be unique and not already in use.
- Contain “professional limited liability company,” “P.L.L.C.,” “P.L.C.,” “PLLC,” or “PLC.”
- Accurately represent the nature of the service.
- Not contain words that refer to other business types, like “corporation” or “incorporated.”
- Not contain an abbreviation, phrase, or derivative of a phrase or word that implies a purpose not permitted by your Articles of Organization.
Check availability and reserve your name
You can check with the Michigan business name database to see if your name is available. Once you’ve found an available name, you may want to reserve it until you’re ready to file to ensure no one else claims it. You can reserve it through the state or use ZenBusiness’s name reservation service to hold it for up to 120 days. We also offer a domain name service that makes it easy to reserve a name for your business website.
Select a Michigan registered agent
Michigan’s law requires your PLLC to assign a resident agent (called a registered agent in other states). This agent must be an individual or business with a registered office in the state. They must be available during regular business hours to receive legal documents on your behalf.
ZenBusiness’s Michigan-based registered agent partners can provide you with this service so can stay in compliance and not be tied to the office all day.
Complete and file Michigan Articles of Organization
Forming a Michigan PLLC requires submitting Articles of Organization. A licensed professional member in your organization can file these documents online, by mail, or in person with the Michigan Department of Licensing and Regulatory Affairs.
You’ll need to decide in advance if managers or members will control your Michigan PLLC. Member-managed occurs when members oversee the day-to-day activities of your PLLC and make decisions on the PLLC’s behalf. Manager-managed occurs when you appoint a member(s) or hire an individual(s) from outside the PLLC with or without a stake in ownership to manage your PLLC.
To complete your Articles of Organization, you’ll need the following information:
- Registered PLLC name, email address, and business address
- Registered agent’s name and office address
- Duration of your PLLC if not in perpetuity
- Name, address, and signature of the organizing member
The document must be submitted along with a nonrefundable $50 filing fee payable by check or money order to the State of Michigan. Credit cards are accepted in person. Once the filing is approved, Michigan will legally recognize your PLLC.
Handle Michigan tax obligations
Even if you don’t have employees, your Michigan PLLC likely requires a federal Employer Identification Number (EIN). The IRS issues this number and uses it to identify your PLLC on tax returns and other financial documents.
Your EIN allows your PLLC to open a business bank account and hire employees. ZenBusiness offers a convenient EIN service for obtaining this number.
State taxation depends on your Michigan PLLC’s tax classification. If you elect to register your PLLC as a C corporation, your Michigan PLLC will pay state and federal corporate income tax, and the individual members will also pay those taxes on their individual share of the profits on their personal tax returns. If set up as a pass-through tax entity, only the individual PLLC members have income tax obligations.
Some Michigan PLLCs have to pay state and municipal sales and use taxes for services and purchases. These vary depending on the profession and other factors. For more information on Michigan’s business taxes, visit the Michigan Department of Treasury.
Depending on your Michigan PLLC location, you may also need to pay local taxes. Check with your county and city authorities to see if your PLLC has any additional local tax obligations.
Obtain Michigan business licenses and permits
Licensing may occur on the local, state, or federal level and can be industry-specific.
Each member of a PLLC must have a state license for the professional service they offer. ZenBusiness offers a business license report service that researches and provides a list of licenses and permits needed for your Michigan PLLC.
Acquire insurance for your Michigan PLLC
A Michigan PLLC can protect its members from creditors seeking to collect unpaid debts owed solely by the PLLC. However, insurance is still required to protect your business property and financial assets in case of legal claims.
General Business Insurance
Michigan-based businesses are not required to hold general liability (GL) insurance, but it’s a good idea to have it. GL insurance covers damages caused by your business or your employees’ actions that are not due to your malpractice. Many commercial leases require this coverage. You can learn more about business owners’ insurance online or by contacting a qualified insurance agent.
A Michigan PLLC will protect you from other PLLC members’ malpractice suits in most situations, but it doesn’t protect you from malpractice claims related to your professional conduct. Malpractice insurance can help with this.
Workers’ Compensation Insurance
Your Michigan PLLC must provide workers’ compensation insurance to your employees in most cases. This insurance can protect your PLLC from liability. PLLC members may be eligible for certain exemptions.
It is advisable to contact an insurance agent or attorney to confirm the types of insurance your Michigan PLLC needs.
Open a business bank account
A business bank account provides personal protection by keeping your personal and company assets separate. It also simplifies business accounting and tax filing.
Ready to start your business?
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or are looking to register a domain, our goal is to help you stay on the road to success. Check out our services and contact us today to see how we can help you grow your company.
Michigan PLLC FAQs
What are the filing fees for a Michigan PLLC?
The filing fee for a Michigan PLLC is $50 for the Articles of Organization. Payments can be made by check or money order to the State of Michigan. Credit cards are accepted for in-person applications.
Do I need a lawyer to form a Michigan PLLC?
You do not need a lawyer to form a Michigan PLLC. However, an attorney can help with the process.
Does Michigan have a professional corporation entity?
Yes, Michigan has a professional corporation entity.
Can professionals from different fields form a Michigan PLLC together?
A Michigan PLLC may provide more than one professional service if doing so is allowed by the relevant licensing board. The Michigan LLC Act provides information on exceptions.