From Idea to Business: How to Start an LLC in Michigan
Are you looking to start a business in Michigan? If so, you will need to create a Limited Liability Company (LLC) or another business entity in Michigan. This article will walk you through the five basic steps to start your LLC in Michigan. We will also provide some helpful resources along the way. So let's get started!
How to start a Limited Liability Company in Michigan?
A Limited liability Company (LLC) is a business hybrid that combines corporate characteristics with a partnership or sole proprietorship. Forming a limited liability company allows you to separate your business assets from your assets, which creates a liability shield and protects all your assets from creditors.
There are some instances when you, as a business owner of the LLC, could risk personal assets for business debts, specifically if you fail to move assets to your LLC. If this should happen, the court could breach that veil using its personal property to repay the corporation.
Starting an LLC in Michigan is only the first step of the process. to get started, you need to file articles of organization with the Michigan Department of Licensing and Regulatory Affairs. This form must include the name, purpose, and address of your LLC as well as information about the organizer or organizers who are responsible for filing the application.
The cost to start an LLC in Michigan is $50, but filing the articles of organization is the first step of the process! I will cover the rest below.
Why should I choose an LLC over other business structures?
The types of business structures a company uses determine tax rates, ways to raise funds, how personal responsibility for liabilities will exist, and the steps to start. Creating Limited Liability Companies is the simplest way of building a separate legal structure for business owners.
There are a number of benefits for choosing an LLC over other types of entities. First, Michigan LLCs have fewer formalities and can be comprised of just one member. LLCs also provide the most flexibility when allocating profits, losses, and distributions among their members. Michigan LLCs are considered pass-through entities for tax purposes, meaning that income is not taxed at the business level; instead, all income, losses, and expenses are "passed-thru" to the members and paid at the individual level.
Moreover, there are fewer regulatory requirements for an LLC in Michigan, which makes it easier to maintain and manage. Under the Michigan Limited Liability Act, Michigan LLCs are not required to hold annual meetings, prepare minutes for those meetings or have the same level of documentation and minutes as corporations. This is helpful because it allows an LLC owner to manage and operate their business without failing to meet their obligations.
Starting an LLC in Michigan Is Easy; start with a Michigan LLC Application.
Forming an LLC in Michigan simply requires filing articles of organization with the Michigan Department of Licensing and Regulatory Affairs. Once the articles of organization are approved, the business is legally created and ready to operate.
The Michigan department of licensing and regulatory affairs (LARA) allows business owners to submit articles of organization online or via mail.
Choose a name for Your Michigan LLC.
Before filing your articles of organization with the State of Michigan, you need to choose a business name for your LLC; once you have your business name, you can then file your articles. Your LLC name must be distinct from other companies registered in Michigan. You can search our Michigan businesses database to see if there's an available name.
If you have several names in mind but aren't ready to file your articles, you can reserve a name for six months by submitting a reserved name application with LARA.
Further, it is important to remember that you can be a Michigan business and act under a name that is different than the name of your LLC. This is what is known as an assumed name.
Doing Business As (DBA) or Trade Name
Many business owners want to conduct business under a different name than their LLC. Michigan requires you to register an assumed name for your Michigan LLC. This process is known as filing a "Doing Business As," or DBA.
If you are applying to register an assumed name in Michigan, you must do so with the Michigan LARA; generally, the filing fee is $20.
Registered Agent
In choosing a name when filing your articles of organization, you will also need to pick a registered agent. A registered agent is a Michigan resident or business entity that agrees to accept the service of process on behalf of your Michigan LLC. You also need to include the registered agent's name and address in your articles of organization.
If you are a Michigan resident, you can choose to be your own registered agent. However, you can also use a registered agent service that can act as your agent and registered office in the State of Michigan if you wish to remain anonymous.
After Articles of Organization have been filed.
So you have submitted the articles of organization to the department of licensing and regulatory affairs, and your LLC is now legally formed!
There remain several other steps as part of your LLC formation that you need to address.
Prepare an Operating Agreement
The State of Michigan does not require an LLC operating agreement for a single-member LLC. However, they can be highly recommended. An operating agreement is a contract between the members of a Michigan LLC. It outlines details such as how profits and losses will be allocated, the roles and responsibilities of each member, and other aspects related to the operation of the business.
Moreover, an operating agreement also helps protect your limited liability and shows that your LLC is an independent enterprise. Underlying the operating agreement is the Michigan limited liability Act. For any provisions that are not affirmatively stated or if there is no operating agreement, the LLC will be governed entirely by statute.
Obtain an Employer Identification Number (EIN)
The final step in the "formation" process of an LLC in Michigan is obtaining an employer identification number. Not every LLC in Michigan requires an EIN. However, it can be helpful to have one. If there are multiple LLC owners, you will always need an EIN.
An EIN will also allow you to establish a business bank account, file federal, state, and local taxes for federal income and state income and obtains a Duns-and-Bradstreet number.
To obtain an EIN, you can file an application with the internal revenue service and receive your EIN within a matter of minutes. Sometimes there may be issues that you run into, such as when there is another business in another state with the same name. In these situations, you will need to fax the IRS showing that your business is different than the business with an already issued EIN.
After Starting Your LLC: Michigan Requirements
So your new limited liability company is set up in Michigan; great! Now you have several final steps you should take before running your business.
Insurance and banking requirements
One of the first things you should consider for your Michigan limited liability company is obtaining insurance; this can include an umbrella policy, workers' compensation insurance, disability, and more. Consider other business insurance types that protect you against unplanned events and accidents.
Although we never want to plan for something bad to happen, it is always better to be prepared. Michigan law doesn't require you to have insurance, but it can help protect your business in the long run.
Additionally, once your business is open and should open a business bank account. This will help you keep track of your finances and can help you down the line should your Michigan LLC be audited.
To open a business bank account, you will need to provide the bank with a copy of your articles of organization and your employer identification number.
Business Licenses and Tax Registration
One of the other things you will need to do for your LLC is register for different business licensees. Michigan does not require any special permits to start your Michigan LLC, but you may need to obtain a Michigan business license depending on the type of business you're running.
You may also have to register with the Michigan Department of Treasury to obtain a reseller's certificate if you are selling goods and to ensure the state sales and use tax to collect customer taxes.
File Your Annual Reports
To keep your company in good standing, you will need to file an annual statement. The annual statement is filed with the Michigan Department of Licensing and Regulatory Affairs. This document is due by February 15th of every year and must include the Michigan LLC's name, principal address, and any changes since its formation. You can file by mail or file online.
File Federal Income Taxes
Annually you will have to file taxes for your LLC. Michigan is a pass-through state, meaning the LLCs income will be reported on the owners' tax returns. Depending on whether you are structured as a single-member LLC or a multi-member LLC will instruct on how your taxes are reported on your return.
When filing as a single-member LLC, all your income will be reported on Schedule C on your Form 1040. If you are filing as a multi-member LLC, your income will be reported on a Schedule K-1 which is issued from the LLC to you, and then you report the income on Schedule 1 of your Form 1040.
Do you want to start an LLC? I am here to help take you from Idea to Business! Contact Me
I am a business and tax attorney that can help you form your LLC. As a small business owner, I take great pride in helping Michigan entrepreneurs like you succeed.
Forming a Michigan LLC is an important decision. If done correctly, it can be a great way to achieve liability protection for your business assets and allow you to engage in business in the state. With my help, I will ensure that our Michigan limited liability company is properly formed and registered with all applicable agencies so you can confidently grow your business.
If you are ready to talk and see how we can bring your idea to life, schedule a free consultation or call me at (248) 522-6272 to get started!
