How to Start an LLC in Michigan
Michigan is one of the more affordable states in which to form an LLC, and you can form one in only a handful of steps.
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The limited liability company (LLC) is among the most popular business entity structures for small businesses. LLCs combine some benefits of both corporations and partnerships. Follow this step-by-step guide to launch your Michigan LLC and maintain it in good standing.
How to start an LLC in Michigan
To start an LLC in Michigan, you need to register your company with the Michigan Department of Licensing and Regulatory Affairs (LARA). LARA sets the requirements and fees for starting an LLC in Michigan and for operating an out-of-state LLC in Michigan.
Step 1: Choose a name for your Michigan LLC
To begin, you need to make sure that your business name is available. Michigan requires your LLC to have a name that’s unique from other businesses. For example, if a company called “A Delicious Restaurant, LLC” already operates in Michigan, then you can’t call yours “The Delicious Restaurant, LLC.” This rule helps avoid confusion among customers and members of the public.
Name availability and name reservation
You can check the availability of your LLC’s name in Michigan’s business name database. The name of a Michigan LLC must end with the words “limited liability company” or with the abbreviations “LC” or “LLC” (with or without periods). Your LLC cannot contain the words “corporation” or “incorporated” or their abbreviations. Those may suggest to someone that your business is a corporation.
Once you find an available name that you like, you can reserve the name for up to six months by filing an Application for Reservation of Name (CSCL/CD-540). The name reservation fee is $25. You can file the application online, in person or by mail.
Professional LLCs in Michigan
In Michigan, members of some licensed professions must form a professional limited liability company (PLLC). The name should end with one of the following words or abbreviations: “professional limited liability company,” “PLLC” or “PLC” (with or without periods). Dentists, physicians, members of the clergy and attorneys must form a PLLC in Michigan. Every member of the PLLC must have a professional license for the occupation.
Michigan LLCs with trade names
Some businesses operate under a trade name that’s different from the company’s legal name. This is called an assumed name, fictitious business name or “doing business as” (DBA) name. For example, your business’s legal name may be “Karen Jones Marketing and Advertising Services, LLC,” but you may want to operate informally as “Karen’s Marketing.” In that case, you need to ensure that the trade name “Karen’s Marketing” is available and apply for a Certificate of Assumed Name (CSCL/CD-541). The fee for filing a trade name for a Michigan LLC is $25.
Step 2: Select a resident agent in Michigan
When starting an LLC in Michigan, you need to name a resident agent and registered office. A resident agent, also called a registered agent, receives official mail on your business’s behalf. The resident agent must keep a physical address in Michigan (not a P.O. box). That address is called the registered office.
An individual can serve as your resident agent if they are at least 18 years old and available to accept mail during normal business hours. Alternatively, you, a friend or a family member can serve as a resident agent. But keep in mind that the resident agent’s name will appear in the state’s public records.
Many small-business owners opt to use a commercial provider as their resident agent. Online legal service Bizee, for example, provides registered agent services in all 50 states. If you form your LLC through Bizee, they serve as your resident agent for free for the first year.
Step 3: Obtain Michigan business licenses
Not every Michigan LLC needs a business license to operate, but some do. Companies in regulated industries, such as child care and construction, need to get a license from the state. Those in professional occupations, such as healthcare, need a license from the Bureau of Professional Licensing. You can use the state government’s business license search to check the requirements in your industry.
The city or county where your company operates may require you to get a business license as well. You can contact your city or county to learn more about local licensing requirements. Retail businesses must register for a sales tax license from the Michigan Department of Treasury. You’ll need to collect sales tax from your customers and remit the tax to the state on a monthly, quarterly or annual basis. The filing frequency depends on the amount of tax you collect from customers.
Step 4: File LLC articles of organization
Next up is to file your LLC’s articles of organization (Form CSCL/CD-700) with LARA. You can either submit the articles online, in person or by mail. The filing fee is $50. The articles of organization officially authorize your LLC to operate in the state of Michigan. Note that there’s a different set of articles (Form CSCL/CD-701) that PLLCs need to file.
You’ll need the following information to fill out the Michigan LLC articles of organization:
- Business name.
- Name and address of the resident agent (P.O. boxes insufficient).
- Duration of the LLC if it ends on a specific date.
- Name and signature of the organizer who is filling out the form.
- Any additional information authorized by law, such as a late start date.
LARA will examine the articles of organization to make sure you’ve provided all the required information. Then the department will file your business information in the state records. LARA will return your original articles to your business’s registered office address. It can take two to four weeks to process your articles of organization.
Foreign LLCs operating in Michigan
Have you already established your LLC in another state and would now like to operate in Michigan? In this case, your business is considered a foreign LLC. If you have a foreign LLC that you’d like to operate in Michigan, you have to fill out an Application for Certificate of Authority to Transact Business in Michigan (CSCL/CD-760). Attach a certificate of good standing from your home state to this application. The filing fee is $60.
Step 5: Draft an LLC operating agreement
An LLC operating agreement describes the daily operations of an LLC. It also includes the rights and responsibilities of each member. Michigan doesn’t require LLCs to have an operating agreement, but we highly suggest that you create one.
Here’s what to include in the operating agreement for your Michigan LLC:
- Description of your LLC’s products or services.
- Whether your LLC is member-managed or manager-managed.
- Each member’s name and address.
- The manager’s name and address if the LLC is manager-managed.
- Each member’s contributions of money and property to the LLC.
- Each member’s profit share and voting rights.
- The LLC’s meeting schedule and voting procedures.
- The procedure for admitting new members to the LLC.
- The procedure for electing a manager if applicable.
- Terms, conditions and procedures for dissolving the LLC.
All members of the LLC should have the opportunity to review and sign the operating agreement. Then store it with other business records.
Going forward, hold regular member meetings and document decisions in writing whenever a member or manager acts on behalf of the LLC.
Maintaining good standing for your Michigan LLC
After starting your Michigan LLC, you’ll need to make sure that your company remains in good standing with the state. Here are several more steps to take once you’ve formed your LLC.
Comply with Michigan employer obligations
If your Michigan LLC employs workers, here are the requirements you need to comply with:
- Employee reporting. Federal and state law requires employers to report new employees to the government within 20 days of their hire date. It’s easy and free to register for online reporting at the Michigan New Hires Operation Center.
- Employer withholding. Employers in Michigan must withhold federal, state and local income taxes from their employees’ wages. They must then remit the taxes to the government.
- Paying unemployment taxes. Michigan employers must pay taxes into the state unemployment fund. Unemployment benefits are paid from this fund. The tax rate is based on a business’s age and history of unemployment claims. Register to pay these taxes through the Michigan Unemployment Insurance Agency.
- Purchasing workers compensation insurance. Most employers in Michigan must purchase workers’ compensation insurance to pay for their employees’ job-related injuries. Owners can buy this insurance from a private insurer or apply to become a self-insurer.
A business attorney who specializes in Michigan law can help you learn more about employer requirements and help you stay in compliance.
Pay Michigan LLC taxes
By default, LLCs are pass-through entities for income tax purposes. This means the LLC itself doesn’t pay income taxes and doesn’t file a tax return. It’s the owners, or members, of the LLC who have to pay Michigan state income taxes on their share of the LLC’s income. This income is reflected on their personal tax return.
In addition to state income taxes, Michigan requires all LLCs to file an annual statement. The form is due on Feb. 15. LARA will send you an annual statement form to complete 90 days before the due date. The form will contain up-to-date information on your business and resident agent and should include a $25 filing fee.
The members of an LLC can choose to be taxed as a C-corporation instead of a pass-through entity. If you elect corporation tax status for your LLC, the company will be subject to Michigan’s corporate income tax.
Don’t forget that you’ll also have to pay unemployment insurance taxes and collect sales taxes. You’ll also withhold employee income taxes and remit these to the government.
Comply with federal requirements
Your LLC must comply with Michigan law and federal law. As at the state level, LLCs are pass-through entities for federal income tax purposes. This means the LLC itself doesn’t pay a federal income tax. Every member of the LLC reports their share of the LLC’s profits on their personal income tax return.
Members can choose for their LLC to be taxed as a C-corporation at the federal level. In this case, the LLC will pay a flat 21% federal corporate income tax. Business owners may choose this option because corporations are eligible to take more deductions and tax credits.
Businesses with employees must withhold federal income taxes and Social Security and Medicare taxes from their workers’ wages. Employers must also pay the employer share of Social Security and Medicare taxes along with a federal unemployment tax. The federal unemployment tax rate is reduced if you pay Michigan unemployment taxes in full and on time.
Before filing your federal taxes, it’s likely your LLC will need a federal employer identification number (EIN). An EIN is a must-have for LLCs:
- With employees.
- With multiple members.
- That choose to be taxed as a corporation.
Separate your business and personal finances
Finally, keep your business finances separate from your personal finances. By doing so, you can ensure that the owners of the LLC aren’t personally liable for business debts. Keeping this separation also makes accounting and tax time easy.
Here are some tips for keeping business and personal finances separate:
- Open a business bank account that you use only for business transactions.
- Use business credit cards only for business expenses.
- Use business loans only to cover business expenses and not for personal purposes.
How much does an LLC cost in Michigan?
The costs to form an LLC in the state of Michigan will vary depending on your particular business. The good news is that these costs tend to be lower than many other U.S. states. Generally, you can expect to pay anywhere from $50 to $130 to get your LLC going.
- $50 for Articles of Organization.
- $50 for Articles of Organization - Professional Service LLC.
- $50 for Certificate of Authority to Transact Business in Michigan (for foreign LLC).
- $25 for Reservation of Name.
- $25 for Certificate of Assumed Name.
- $25 for Certificate of Amendment.
- $5 for Certificate of Change of Registered Office.
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