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As an LLC owner, you enjoy several advantages, including having no personal liability for your company’s obligations. Your assets get protected if the company gets involved in a legal lawsuit.
To enjoy this and other benefits, you must first own an LLC. But do you know the process of forming a Michigan LLC?
Here is a detailed step-by-step guide on forming an LLC in Michigan.
If you want help forming your LLC, ZenBusiness is our top pick for fast and affordable LLC setup, all online.
Step 1: Naming Your Michigan LLC
The first step to forming your Michigan LLC is to find a suitable name. Consider finding a simple name that potential clients can easily remember.
The business name you give to your LLC should comply with the state’s naming rules and requirements.
Below are the Michigan LLC naming requirements:
- The name must be different from other entities operating in Michigan. You can only be sure about this by conducting a business name search through Michigan’s naming website.
- The name should include “Limited Liability Company” or one of its abbreviations, LLC and L.L.C.
- Don’t include words similar to those used in government agencies, including the FBI, CIA, and Treasury.
- Adding restricted words such as Bank and University to your Michigan LLC name may require additional paperwork.
- Professional names like doctor and lawyer need you to be licensed first to use them.
You can reserve Michigan LLC names for up to six months. The name reservation fee is $25, and you can file your application either online or by mail.
Step 2: Appointing a Registered Agent for Your Michigan LLC
Your LLC must have a legal representative responsible for receiving lawsuits and other legal or government notices.
This legal representative is known as a registered agent. It can be an individual or corporation/business entity.
The chosen registered agent must maintain a physical address or registered office in Michigan.
You can serve as your own LLC’s appointed registered agent or nominate someone in the company. The best practice is to hire an individual or a business entity outside your company, especially if you don’t live in the state.
Step 3: Filing the Articles of Organization
The next step in forming your Michigan LLC is to file the Articles of Organization with the Michigan Corporations Division.
You must supply the following information when filing the Articles of Organization:
- The name of your LLC
- The LLC’s registered agent information
- Why you formed your Michigan LLC
- Duration of your company other than perpetual
- Your name and signature if you’re the one forming the LLC
- Any other information permitted by law
LARA permits you to fill out the information and file it online. Alternatively, you can print out the form, fill it out, and then send it by mail through the address provided on the form.
The filing fee for Michigan LLC’s Articles of Organization is $50, non-refundable.
It takes approximately 15 days to examine the information in the document and file it in the state records. Once approved, they’ll return the original copies to the registered office provided on the document. However, you can pay more to expedite the process.
If you have a foreign LLC that you want to run in Michigan, file the Certificate of Authority Application Document online or by mail. Doing so costs a non-refundable fee of $50.
Step 4: Creating the Operating Agreement
Michigan doesn’t require LLCs to have an operating agreement. That said, an operating agreement is essential for the smooth running of a company.
The operating agreement describes how you plan to run your Michigan LLC. It lists out the rights and responsibilities of each member, including the managers and owner.
After creating this document internally, allow all members to review and sign it, so you can avoid any conflicts in the future should they arise.
Step 5: Getting the EIN
All Michigan LLCs with more than one member must apply for the Employer Identification Number from the Internal Revenue Service (IRS).
This number helps identify your LLC for taxation purposes, the same way SSNs work.
An EIN comes in handy when your LLC wants to do the following:
- Applying for a business bank account
- Hiring employees
- Filing and managing business taxes
Step 6: Complying With Michigan’s Employer Obligations
You must comply with the state’s additional requirements if your Michigan LLC seeks to onboard employees.
Your obligations as an employer include:
- Reporting new employees to the state government within 20 days after hire. You can undertake this process online through the Michigan New Hires Operation Center website.
- Withholding taxes from your employee’s wages, including local income, state, and federal, then forward them to the government.
- Paying unemployment taxes to the Michigan unemployment fund.
- Buying a Workers Compensation Insurance for all your employees to cover work-related injuries.
Step 7: Obtaining Licenses for Your Michigan LLC
Some Michigan LLCs need a business license to operate in the state, even though others don’t. You may need to confirm this requirement with the state government.
LLCs providing construction, healthcare, hotel, and child care requires a state license to run their operations.
If your Michigan LLC is a retail business, it may require a sales tax license from the state government to run smoothly.
Step 8: Paying Taxes and Complying With the Federal Requirements
LLCs in Michigan don’t pay income taxes or file tax returns. Being flow-through entities, LLCs remit all income they earn to owners. These entities cannot be taxed.
However, as an LLC owner, you have to pay Michigan’s income taxes. Members must also pay these taxes from what they’re getting from the company.
Michigan LLCs must file an annual statement before the 15th of February every year. The bureau will send this statement to your registered office 90 days before the due date, and its filing fee is $25.
LLCs in Michigan have to pay unemployment taxes and forward withheld taxes from employees’ wages to the government.
LLCs that go for corporation taxation are subject to a flat 21% federal income corporate tax.
Cost to Start an LLC in Michigan
The basic cost to start an LLC in Michigan is $50, which you pay to LARA when filing for your Michigan LLC’s Articles of Organization. However, there are more costs you’ll incur in the process, raising the initial cost.
The optional, extra costs include:
- Name reservation fee – $25
- Annual statement fee – $25
- Certificate of good standing – $10
What to Do After Forming Your LLC in Michigan
After forming your Michigan LLC, you should take additional steps to ensure it remains operational.
An ideal way to do so is to ensure the LLC adheres to all the laws, rules, and regulations required by Michigan.
Consider taking the following actions after formation.
Put Your LLCs Business Finances in Order
The only way to put your finances in order and track your business expenditure is by first separating your business and personal finances. That way, you ensure that you and other members aren’t liable for the company’s debts. If you lose your business assets, you’ll still have personal valuables to lean back at.
To ensure your business finances remain in order, you can start by opening a separate business account specifically for the LLC. All transactions related to your Michigan LLC should pass through this account, not personal accounts.
Also, apply for business credit cards and use them for all your LLC expenses. Having and using company credit cards for business purposes puts you in a better position to get loans.
Maintain Good Standing With the State
Your LLC can avoid problems by maintaining good standings with Michigan.
Ensuring your LLC remains in good standing isn’t that difficult. You can do this by renewing your business license and permits as required, submitting your annual reports, and paying all the needed taxes.
Getting a good standings certificate shows that you legally formed your Michigan LLC and properly maintained it. You can request this certificate by mail, online, or phone. Michigan’s good standings certificate costs about $10.
If your LLC is in bad standing with the state, you can still restore it. You need to file a Certificate of Restoration form CSCL/CD-770 through the LARA bureau and pay your past dues, including taxes and annual statements and a $50 nonrefundable fee. To restore a foreign LLC, file the certificate of restoration form CSCL/CD-771.
Get an LLC Website and Promote Your Business on Social Media
Your LLC needs a website to reach a larger audience and generate more profits. A website helps build trust with your customers.
Consider establishing your presence on social media platforms to reach a larger audience beyond Michigan. Use these platforms to promote your products and encourage potential customers to visit your website.
Get Contracts in Place
Consider preparing contracts if you plan to work with vendors and other clients. Every arrangement you make must be in the LLCs name and not a personal name.
Employment contracts might be necessary if your LLC in Michigan seeks to onboard employees.
Other things you should consider doing include:
- Getting a business insurance cover
- Hiring an accountant
- Getting a trademark for your name and logo if you have one
How to Keep Your LLC Compliant in Michigan
Keeping your Michigan LLC compliant ensures you stay ahead of issues and run smoothly.
To keep your LLC compliant in Michigan, ensure you file the annual statement every year, due every 15th of February. Doing so includes paying a filing fee of $25 to the Department of Licensing and Regulatory Affairs.
Depending on the business, ensure you get the needed licenses and permits and renew them accordingly. Lastly, pay all your taxes on time to avoid penalties and putting your LLC in bad standing with the state.
Tax Filing Requirements for LLCs in Michigan
There are various types of Michigan state tax that you may register for. These include sales tax, employer taxes, and state business tax.
You must collect and pay sales tax if you sell goods to residents. Register with the Michigan Department of Treasury and ensure you pay sales tax periodically for all the goods you sell.
If your Michigan LLC has employees, you must sign for employee withholding tax and register to pay state unemployment insurance through Michigan Unemployment Insurance Agency (UIA).
State Business Tax
LLCs in Michigan remain pass-through business entities by default unless they change the taxation method. Only LLC members pay the income taxes per their shares, not the LLC.
Should you treat your LLC as a corporation, you get to file a separate tax return as a company. The corporate tax is a flat 6% of the income.
Frequently Asked Questions
Here are a few more quick answers to common questions from future business owners.
How long does it take to register an LLC in Michigan?
It takes between 10 and 15 working days for Michigan to examine and approve your Articles of Organization documents. But you can pay the additional fees to expedite the process.
What tax structure should I choose for an LLC in Michigan?
You can either leave your Michigan LLC as a pass-through business tax entity or decide to change it to C-corporation.
Leaving it as a pass-through entity means that the LLC will not file income tax returns or pay income taxes. Flow-through entities avoid double taxation, which is a problem in C-corps. A pass-through tax structure might suit owners who live off their LLCs’ profits.
Choosing the C-corporation method subjects your Michigan LLC to a flat 6% corporate income tax. The C-corp taxation route might be ideal for those seeking to retain profit and finance growth.
Should you hire an LLC formation service in Michigan?
It’s not necessary to hire an LLC formation service in Michigan, as the process is easy and quick.
Hiring an LLC formation service might suit busy people looking to save time and the hustle of preparing company documents. An LLC formation service might be necessary for Michigan non-residents or persons unfamiliar with the state’s requirements. You can view our top picks for the best LLC services for some recommendations.
Filed under: Michigan Business Guides