How to Form an LLC in Michigan

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Michigan LLC Quick Facts

Michigan LLC Costs

Initial LLC Filing Fee – $50

 

Recurring Fee: Annual Statement – $25

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.

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Let IncFile or IncAuthority guide you through the LLC formation process, so you know everything was done right. Only pay state fees!

Quick Reference

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.

Related: How Does an LLC Protect You?

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.

Cost to Form an LLC in Michigan

To form a Limited Liability Company in Michigan, file the Articles of Organization with the Michigan Department of Licensing and Regulatory Affairs Corporations, Securities & Commercial Licensing Bureau.  The LLC filing fee is $50.

Approval for the LLC typically takes between 10-15 business days.  Expedited service is available to reduce the time to file the LLC.  24-hour service is available for an additional $50, same day service is an additional $100, two-hour service is an additional $500 and one-hour service is available for $1,000.  In this situation where the LLC needs to be filed quickly, it is advisable to submit in person at the Michigan Department of Licensing and Regulatory Affairs – Corporations, Securities & Commercial Licensing Bureau office located at 2501 Woodlake Circle in Okemos, MI.  For more information, contact 517-241-6470.

An out-of-state LLC wanting to do business in Michigan will have to register as a foreign LLC by filing an Application for Certificate of Authority to Transact Business in Michigan (CSCL/CD-760) with the Michigan Department of Licensing and Regulatory Affairs.

Guide to Forming an LLC in Michigan

To file an LLC in Michigan, begin by downloading the Articles of Organization (Form CSCL/CD-700) or filing online.  This for is for most business activities, however, if this Limited Liability Company will be providing professional services such as a dentist, physician, surgeon, doctor of divinity, attorney, etc, you can use form BCS/CD 701, though it’s not required. This is the filing form for the Professional Limited Liability Company (sometimes called a Professional LLC or PLLC)

Forming an LLC can be both affordable and is something most people can do themselves. Entity formation companies like IncFile or IncAuthority help guide you through the process and make sure there are no mistakes.

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

Step 1: Name the LLC

Enter the name you want for the LLC.  The LLC’s name also has to differ from other entity names registered with the state of Michigan.  Check on available Michigan LLC names before filing to be sure the one you want is available.

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.

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

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 a 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 Doung 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.

Michigan LLC Name Reservation

Step 2: 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 

Michigan LLC Business Purpose Statement

Step 3: 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.

Michigan LLC Duration

Step 4: Resident Agent

A Resident Agent (more commonly known as a Registered Agent) must be identified to have an LLC in Michigan for service of process.  The Registered Agent can either be a resident of Michigan or a Resident Agent service registered with the state.  The agent must have a physical street address in the state to act as a point of contact to receive legal documents, tax notices, summons, subpoenas, etc on behalf of the LLC.

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 become 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 company like Northwest Registered Agent to be the Resident Agent with a separate registered office address will reduce unwanted phone calls and mailings.

Michigan LLC Resident Agent

Step 5: 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?

Michigan LLC Additional Provisions Member-Managed

Step 6: 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 to have the LLC officially start at a later date (up to 90 days), enter that date in a new article.

Step 7: Signature

The LLC organizer(s) need to sign the Articles.  The organizer(s) are typically the members but can also include or be an attorney, accountant or resident agent.

Step 8: Pay and File

Pay and file the Articles of Organization.

The LLC will be approved in approximately 10-15 business days with standard processing or less with expedited processing.

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Tasks After Forming Your LLC

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, 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 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.

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 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 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.
  • 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: 7 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