Michigan has a rich business history with core industries focusing on healthcare, defense, medical devices, and cybersecurity. While the types of companies have shifted over the years, the state’s commitment to supporting its small business community remains strong. The Great Lake State started supporting small businesses decades ago by creating an economic development team in 1947.
Affluent business owners like East-Lansing-native Larry Page, the CEO of Google parent company Alphabet Inc., and QuickenLoans chairmen Dan Gilbert, both grew up in Michigan. Both are on Forbes’ billionaire’s list.
Whether you live here or are interested in moving to Michigan to start your new business, this guide will help you get started.
Benefits of Opening a Business in Michigan
Opening a business in Michigan has its benefits. The state’s labor force is well educated, with about 31% of residents holding a bachelor’s degree or higher. In counties like Washtenaw County, where Ann Arbor is, the number jumps to 63%.
The cost of living is relatively low in Michigan. For instance, living in Detroit is 98% cheaper than living in Los Angeles. Everything from home prices and daycare costs to gas and groceries is less expensive in the state.
If you plan to open a brick-and-mortar shop here, you’re in luck. The average piece of commercial real estate in Michigan sells for $158,000, compared to the national average of $696,000. The lot sizes here are also more prominent than the national average.
How to Start a Business in Michigan Checklist
When you start a business in this state, you’ll be dealing with the Secretary of the Commonwealth of Massachusetts. This department plays the role of secretary of state, but Massachusetts doesn’t require a general business license to operate (but your city or profession still could). You can handle most of your business dealings online through Mass.gov and MassTaxConnect, the Massachusetts Department of Revenue’s online portal.
1. Create a Business Plan for Your Michigan Company
One of the first things you need to do to open a business in Michigan is to write a business plan. It’s a crucial, detailed report of the company, its purpose, and its growth potential. Most programs include a fleshed-out look at your business idea, a company overview, identify SMART goals, show market research and strategies, look at management and personnel, and offer current and future financials.
The business plan should also discuss attainable state-specific tax breaks or local grants. Some businesses may take advantage of the Michigan Business Development Program, for example, which provides grants, business loans, and economic assistance to companies that create jobs in the state. You can also look into resources provided by the Michigan branch of the Small Business Administration (SBA).
When writing a business plan, it’s essential to identify challenges, too. If you present the project to a bank or investor, they’ll want you to acknowledge these struggles’ reality and have solutions ready.
2. LLC vs. Sole Proprietorship: Choose a Business Structure
After creating a business plan, the next item on your to-do list is to assess possible business structures. In Michigan, a business can take several different forms, including sole proprietorships and limited liability companies (LLCs).
A sole proprietorship is the simplest business structure to create. It’s not registered with the state, is free to set up, and designates all profits to the sole owner.
An LLC is incorporated with the state, costs money to create, and offers liability protection. That safeguards the owner’s assets (like home and car) if the company is issued or ends up in debt.
To set up a Michigan LLC, you need to file articles of organization. These documents include the company name and address, creation date, purpose, title, and address of the company’s registered agent, a list of managing members. The LLC organizer, who is typically the company owner, must sign the document and submit it to the Michigan Corporations Division for approval. There’s a $50 filing fee that must be paid as well.
If you’d rather have an expert handle it for you, you can work with a business formation and compliance company like ZenBusiness.
3. Determine Your Michigan Business Costs
As always, there’s a cost to start a company. To calculate just how much your new Michigan business will cost, use a cost calculator to zero in on fixed prices, ongoing expenses, and one-time costs.
Ongoing expenses could include a lease. Michigan has more than 1.5 million parcels to choose from, with reasonably low commercial rates. Even so, leasing can still be one of your higher ongoing expenses. Taxes are another ongoing expense. While the state is highly ranked for its business-friendly tax climate, taxes will also be a significant factor.
Some new business owners overlook the costs to maintain licenses and permits. Not all businesses need them, but Michigan has a state license search that can tell you what your company needs and how much it costs each year.
4: Create a Name for Your Business
Do you have a name picked out for your business? Like most states, Michigan has rules that every entrepreneur must follow when picking a company name.
For starters, no two businesses can have the same name. The state says every company should be “distinguishable from one another” and doesn’t allow duplicate titles. To see if a name is available, conduct a business entity search on the Michigan Department of Licensing and Regulatory Affairs website.
The state lets you reserve a name for $25. If you don’t plan to incorporate your business for a few months, this is an excellent way to hold the title so it won’t vanish.
You also can’t use “restricted words” in a company name. Restricted words are inappropriate words or any words that refer to a government agency. There’s a list of local stories and more information about naming a company in Michigan’s Choosing a Business Name ebook.
As you settle on a company name, you may also consider registering the matching domain name. If this feels outside of your wheelhouse, ZenBusiness can help you create a domain name.
5. Register Your Business and Open Financial Accounts
You’ll need to register the type of business you selected above. If you plan to write an LLC, you’ll submit your formation documents and pay a filing fee. You’ll renew your status every year by filing an annual report through the Department of Licensing and Regulatory Affairs (LARA). You can also refer these tasks to a business formation company.
Whether your business is in Flint or Ann Arbor, your LLC needs a federal employer identification number (EIN). This nine-digit number is issued instantly online by the IRS. It’s used when you file federal taxes and hire employees, but the state of Michigan will also use it for state taxes.
Once you obtain this tax ID, you’ll have to register it and the company with the Michigan Department of Treasury, which you can do online. Note: If you choose to open your business as a sole prop, you can use your social security number as your tax ID instead, though it leaves you open to potential identity theft.
Some businesses in Michigan need special business licenses and permits. Check Michigan.gov to see what your company needs.
It’s a good idea to open business bank accounts so you can keep personal and business finances separate. Comerica Bank and Fifth Third Bank are two popular banks in Michigan, but online options streamline the business banking process that can be considered. Also, consider any business insurance you may need, such as general liability and workers’ compensation, and unemployment insurance if you hire employees.
6. Market Your Michigan Business
Even before opening your doors in Michigan, it’s essential to think about how you’ll attract customers. There are many DIY marketing tactics you can use to get the word out about your new company. For starters, open social media accounts on the channels where your future customers are.
If you’re targeting seniors, you’re in luck. Michigan’s population skews older, with about 26% of the state’s population aged 65 or older. This demographic gravitates toward Facebook, while the younger crowd leans more on Snapchat and Instagram.
There are also free online directories you can add your business to, including Google My Business and Yelp. Both also include options for customer reviews, which can help as digital word-of-mouth marketing for your company.
Consider inviting local media to your grand opening and to different events you hold throughout the year. When an H&M opened in Detroit, the Detroit Free Press covered the event, drawing large crowds.
Examples of Good Businesses to Start in Michigan
Michigan offers excellent opportunities for many different kinds of businesses, but currently, the state employs the most people in healthcare, manufacturing, and food services. Other companies that work in the state include:
- Administrative support
- Real estate and rentals
- Educational services
- Transportation services
Michigan has an inviting business climate that’s attractive to new entrepreneurs. The Great Lake State offers a low cost of living, business-friendly tax codes, affordable commercial real estate, and an educated workforce. For those interested in learning how to start a business in Michigan, you’ll likely find favorable conditions and numerous opportunities.
How to Start a Business in Michigan FAQs
How much does it cost to start a business in Michigan?
Most entrepreneurs start a business with less than $25,000, but other microbusinesses can be activated for just $5,000. Your startup funds will go a little further in Michigan than in other states as the cost of living is low, and business taxes are reasonable.
What is an excellent city to start a business in Michigan?
While you may gravitate towards the bigger cities of Detroit or Grand Rapids, research shows Holland, Michigan, is the best place to start a business. It was selected as the nation’s best city to start a small business because it boasts many startups, the potential for revenue growth, and excellent access to resources.
How much does it cost to open an LLC in Michigan?
The price to file as an LLC in Michigan is $50. This filing fee must be submitted along with completed Articles of Organization to the state for approval. The filing fee in Michigan is lower than in most states.
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