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2022 Guide to Forming an LLC in Michigan

Michigan LLC Quick Facts

Michigan LLC Costs

Initial Cost:
– State LLC Filing Fee: $50

 

Recurring Fee: Annual Statement  Filing Fee: $25

Michigan LLC Processing Time

It normally takes 10-15 business days for the LLC paperwork to be approved in Michigan.

 

Expedited processing is also available for an additional fee.

Not sure about filing an LLC yourself?

Want an LLC, but not sure about filing the paperwork yourself? Let Zenbusiness, IncFile, or IncAuthority help guide you through the LLC formation process, so you know everything was done right.

IncFile and IncAuthority are both currently running a special where you only pay state fees for your LLC formation!

Overview

Guide to Starting an LLC in Michigan

If you’re thinking about starting a business in Michigan, one of the first things you’ll need to do is decide what type of business structure to create. One option is a limited liability company (LLC). This guide will walk you through the process of setting up an LLC in Massachusetts. We’ll cover everything from choosing a name to filing your paperwork with the state. Let’s get started!

What is an LLC?

The Limited Liability Company (LLC) is a popular entity structure for businesses starting in Michigan. The LLC provides personal liability protection and has the potential to save money on taxes. With our guide, you can learn how to form an LLC in Michigan without an attorney.

Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Steps to Form a Michigan LLC

While it can be intimidating to form an LLC for the first time, with a little research and patience, you can learn how to form an LLC in Michigan without an attorney.

Let’s break down the steps to complete the Michigan LLC formation process.

Total Time: 10 minutes

Step 1: Choose an LLC Name

The first step in forming a Michigan Limited Liability Company is to make sure the name you want is available.  

It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state. The Michigan Department of Licensing and Regulatory Affairs Corporations Division (LARA) makes it easy to search and verify if your LLC name is available.  Here is more information on how to do a Michigan LLC name search.

Additionally, the name of the LLC must include one of the following phrases or abbreviations at the end of the business name:
– Limited Liability Company
– L.L.C.
– LLC
– L.C.
– LC

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

If there is a name you want, but are not ready to register the LLC, you can reserve a name by filing the Application for Reservation of Name. The name reservation will hold a name for up to 6 months, at the cost of $25, paid to the Department of Licensing and Regulatory Affairs.
If you plan to use a different name from the one that you register (perhaps you want to run multiple businesses under the LLC), you can use a DBA or Doing Business As name (sometimes referred to as a fictitious business name, trade name, or assumed name).  To register a DBA, file the Certificate of Assumed Name.

Before finalizing your LLC name, you may also want to see if a domain name is also available to have a matching website address. 

Step 2: Appoint a Michigan Resident Agent

Every LLC in Michigan is required to have a Resident Agent. A Resident Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.

The basic requirements to be a Registered Agent in Michigan include:
– The agent must be a Michigan resident at least 18 years of age or a commercial Registered Agent service
– The agent must have a physical address in the state (PO Boxes aren’t allowed)
– The agent must generally be available during normal business hours at the address provided to receive service of process

Learn more about the requirements for a Resident Agent in Michigan

You are not required to pay for a Resident Agent. Any individual meeting the requirements can be the agent; however, the agent’s name and address becomes public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed.  Hiring a commercial Resident Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.

Step 3: File the Michigan LLC Articles of Organization

The paperwork to officially create an LLC in Michigan is called the Articles of Organization. To submit the paperwork, either file online through the Michigan Department of Licensing and Regulatory Affairs website or downloading and mail the Articles of Organization (Form CSCL/CD-700)

Related: How to fill out the Michigan Articles of Organization

Estimated Cost: 50 USD

When filling out the Articles of Organization, there are a few sections that may be challenging to fill out, especially when seeing them for the first time. Let’s go over a few of those sections to help you get your LLC started right.

Purpose of the LLC

You are allowed to provide more information about what the LLC will do; however, you can keep the included text “The purpose or purposes for which the limited liability company is formed is to engage in any activity within the purposes for which a limited liability company may be formed under the Limited Liability Company Act of Michigan” and not add anything more.

Related: How to Answer the Business Purpose Statement 

Entity Duration

If you intend the business to exist forever, which most businesses leave this field blank.  If you have a specific end date in mind (typically used for investment-related businesses), choose a dissolution date.

Additional Provisions

This is an optional section and not used by most LLCs.  Here you would include additional rules for the operation of the LLC.

The most common provision would be if the LLC were Manager-Managed.  If the LLC is Manager-Managed, meaning the members hired a manager to run the LLC, similar to a CEO of a corporation, a statement would need to be included in this Article.  It’s more common for an LLC to be Member-Managed, meaning the members (owners) are actively involved in the business’s day-to-day operations.

Related: What is the Difference Between a Member-Managed LLC and Manager-Managed LLC?

Additional Articles

Additional articles can be added.  One common one is a delayed effective date.  By default, the LLC is effective on the date submitted.  If you prefer the LLC to start up to 90 days in the future, you would enter that date as a new article.

Consider using an LLC formation service like Zenbusiness, IncAuthority, Northwest, or IncFile to guide you through the LLC formation process, so you know everything was done right.

IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!

You have a Michigan LLC, Now what???

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a Michigan LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: Michigan LLC operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file federal and state taxes, and more.

How much is an EIN in Michigan?

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the LLC members.
  • In some circumstances, a Michigan Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start.
  • Professional License – Certain services such as bakeries, lawn services, dog groomers, and others must be licensed. The Michigan Department of Licensing and Regulatory Affairs, Commercial Licensing Bureau provides oversight to licensed professions.
  • Sales Tax License – To sell products and certain services, registration with the Michigan Department of Treasury will be necessary.

Related: What Business Licenses are Needed in Michigan?

Get Business Insurance

Even with the liability protection of the LLC, business insurance is important to protect the business. The most common types of insurance include:

General Liability Insurance – covers damages owed and medical expenses for accidents that happen at your place of business.
Business Property Insurance – replaces damaged, stolen, or lost business property. This includes your physical business location, equipment, supplies, and anything else you used to run your business.
Business Vehicle Insurance – covers company vehicles and may also include coverage for personal vehicles used for business-related activities. Many personal policies won’t cover your vehicle if there is an accident while being used for business purposes.
Workers Compensation Insurance – mandatory in most states if you have employees, this insurance covers medical expenses that occur because of an accident or injury that happens to one of your employees while they’re at work.

Related: Types of Insurance Your Business May Need

File the Annual Statement

LLCs are required to file an annual statement (sometimes referred to as an annual report) with the Michigan Department of Licensing and Regulatory Affairs.  The annual report must be filed by February 15th, after the year of formation. If the LLC was formed after September 30th, the initial statement isn’t due until the year following. The annual statement state fee is $25.

Related: How to File a Michigan LLC Annual Statement

Common Questions To Starting An LLC In Michigan

How much does it cost to start an LLC in Michigan?

The cost to form an LLC in Michigan is $50 to file the Articles of Organization.

What is the processing time to form an LLC in Michigan?

It normally takes 10-15 business days for the state to process the LLC Michigan Articles of Organization. For an additional fee, one business day processing is available.

Is there a yearly fee for an LLC in Michigan?

Each year, an annual report and a $25 state filing fee will be due for Michigan LLCs.

Can you be your own Resident Agent in Michigan?

No. Anyone can act as a Resident Agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.

Related: What are the requirements for a Resident Agent in Michigan?

Does an LLC need a business license in Michigan?

It’s sometimes thought that the LLC and business license are the same in Michigan, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.

Related: What business licenses are needed in Michigan?

What is a Foreign Limited Liability Company?

A foreign LLC refers to an LLC that is physically operating in states outside of the state where it was formed. Physically operating means having a presence, such as having an office or employee in the state. The LLC would file an Application for Certificate of Authority to Transact Business in Michigan (CSCL/CD-760)

Related: What is the difference between a domestic Michigan LLC and foreign LLC?

What is a Professional Limited Liability Company?

Businesses that require state licensing, such as dentists, physicians, attorneys, etc., can form a Professional Limited Liability Company (PLLC), though it’s not required. Instead of the LLC form, you would use form BCS/CD 701. Filing for a PLLC is very similar to that of the LLC.

Related: What is a Professional Limited Liability Company?

Is an LLC the same as a corporation?

The LLC is one of four main types of business entities. You can learn more about each here:
What is a sole proprietorship?
What is a general partnership?
How to form a Michigan corporation

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