How to Start Your LLC in Michigan

This step-by-step will take you through the entire process of forming an LLC in Michigan, the selection of a legally complying name, the processing of the state documentation, the taxation, and the maintenance, so that you could start your business with a clear and confident attitude.

1. Name Your Michigan LLC

One of the initial steps that must be taken is the selection of the appropriate name of your LLC, as your business name will be your brand name and your face to the world. Very strong name needs to basically tell the world what your business is, be memorable, and it is important to stand out of the crowd of competitors, since they are operating in Michigan.

It is always useful to establish your business idea before settling over a name. Knowledge of your products, services and your target market will help you to determine a name that will resonate with your objectives. Suggestions are also sought by many entrepreneurs with the help of close friends, relatives, or colleagues since outside opinion can draw out possible problems or misunderstandings.

After coming up with a list of names to shortlist, make a generic web search to ascertain the availability of domains and other related businesses. This can assist you to prevent conflict of brands and ease the future marketing. Inspiration can also be achieved through online name generators of business names, but they are to be used as brainstorming tools and not as decisive ones.

Once you have had a list of possible names you like, you will have to ensure the availability of a name by utilizing Michigan Secretary of State (LARA) business entity search. This will help to make sure that you do not use a name that is already in use or too closely related to an existing business.

Michigan has certain naming requirements of LLC, which should be adhered to. The name of your LLC has to incorporate the words limited liability company or any accepted abbreviation of the name, which is LLC or L.L.C. The name must not incorporate any words that will lead to the confusion with a government agency or involvement in illegal actions. Besides, Michigan keeps the list of prohibited words which can be permitted to be used with special permission.

To ensure that your brand is further safeguarded, it is strongly suggested that you get into the US Patent and Trademark Office (USPTO) database to make sure that your name is not already registered in federal level.

Unless you are willing to establish your LLC now, Michigan also lets you set up a business name. The name reservations should be mailed with the help of the corresponding form of the Michigan Department of licensing and regulatory affairs (LARA).

Address to mail Name Reservation:

Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities and Commercial Licensing Bureau
Corporations Division
P.O. Box 30054
Lansing, MI 48909

Doing Business As (DBA) in Michigan

Once you develop your LLC, you can choose to operate under a different name as compared to your legally registered LLC name. This is referred to as a Doing Business As (DBA) or in Michigan as an assumed name.

DBAs are also typically applied in case a business enters into new product lines or brands. Here, as an illustration, when your LLC is called JJ Waffles and you then come up with JJ Muffins, then registering DBA will enable you to use that new name without having to form a separate legal entity.

Banking flexibility is another major advantage of DBA. As a registered person, it is possible to open a business bank account and receive customers payments using the assumed name, which will contribute to keeping business professional and make account keeping easier.

In Michigan, LARA registers assumed names by mail. The user fee is $25 and entries are done at the same address where the names are being reserved.

2. Select a Registered Agent

The Michigan law demands all LLCs to designate a registered agent. Receiving the legal notices, tax returns, and official mailings of the business is one of the roles of the registered agent.

An agent registered can be an individual or a business entity as long as the requirements of the state are met. The agent must be 18 years old and possess physical street address in Michigan and has to be present during regular business hours. In case the agent is a business organization, it should be licensed to conduct operations in Michigan.

Although most of the owners of LLCs prefer to serve as their own registered agent, they are required to be accessible in the address provided on a regular basis. This is why most entrepreneurs would like to use the services of a professional registered agent to enjoy convenience, privacy and because of peace of mind.

3. Decide on Your Management Structure

The Michigan LLCs may be of member managed or manager managed business set up and such a choice determines how the business will be operated.

Under the member-managed LLC, all the members are involved in the day-to-day operations and management of the business. This is a good framework in small firms where the owners wish to be hands-on. In manager-managed LLC, operations are done by one or more managers, with the other members being passive investors.

Even though a member may be a manager, Michigan has that a manager-managed LLC must have at least one non-member manager. In case your Articles of Organization are silent on the management structure, the default management structure is member-managed.

When the right structure is selected at the initial stage, it can help to define responsibilities and minimize the chances of conflict in the future.

4. Submit Formation of Articles of Organization to LARA

In order to form your Michigan LLC officially, you should submit Articles of Organization to the Michigan Department of licensing and regulatory affair (LARA). This is a document that gives your LLC a legal status.

Articles of Organization would need such details like your LLC name, where you are based, the address of registered agent, business purpose, and contact information.

Michigan Department of Licensing and Regulatory Affairs
Ottawa Building
611 W. Ottawa
P.O. Box 30004
Lansing, MI 48909

Phone: 517-241-9223
Fax: 517-241-0290

5. Write an Operating Agreement

An Operating Agreement distinguishes the ownership of your LLC and its management and the rights and responsibilities of the members of the LLC. Although operating agreement is not necessary in Michigan according to the law, its presence is highly suggested- even a single member LLC.

Having a carefully created operating agreement is beneficial to enhance your liability protection, clarify financial terms, and has a mechanism of dispute resolution. It normally deals with the ownership rights, management, and voting rights, division of profits, and the practices of addition or removal of members.

Whereas, templates are provided on the Internet, an attorney will review or draft your operating agreement that will help you to make sure that it reflects your business objectives and that it is not inconsistent with the Michigan law.

6. Get Your Employer Identification Number (EIN)

The IRS provides an Employer Identification Number (EIN) which is used to identify your LLC when it comes to taxation. EIN is mandatory in case of more than one member of the LLC, employees, or corporations taxation.

It is possible to obtain an EIN through the IRS site free of charge. In the course of application, you are required to designate a responsible party and this person should be an individual who has control or manages finances and operations of the company.

7. Acquire Business Licenses and Permits

Michigan does not have a general state level business license. Nevertheless, your industry and whereabouts might also demand certain state or local licenses and permits to your business.

There is the presence of many professional and regulated sectors that require licenses at the state level, i.e., construction, food service, childcare, finance, and healthcare. The Michigan State License Search tool may be used to determine the requirements used.

Unless you are selling goods or services that are not taxable, then you will have to acquire a sales tax license. Zoning permits, health permits, fire inspections and signage approvals may also be needed by the local cities and counties.

Sometimes running without the necessary licenses will lead to fines, penalty, or even suspending the business operations and therefore the necessary research and compliance is necessary.

8. Determine Your Tax Status

Michigan LLCs are by default considered pass-through entities under taxation. This is an indication that the LLC does not pay taxes to the federal government as income; the profits and losses are recorded on the personal income tax filings of the members.

Single-member LLCs are taxed similarly to solo proprietorships, and multi-member LLCs are taxed similarly to partnerships unless it is an election. In case it is beneficial to the LLCs to pay tax like C-Corporations or S-Corporations, they can choose to be so taxed.

In Michigan, LLCs that choose corporate taxation have to pay a 6 percent corporate income tax.

Additional Michigan LLC Requirements

Once you have established a LLC, you should open a business bank account, which will help you to make a distinction between personal and business finances. This segregation is necessary to ensure protection of liability and ease of reporting tax.

Applying to a business credit card can also assist in establishing credit profile of your business and pay business start up costs. Also, you can protect your investment by acquiring relevant business insurance like general liability, professional liability and workers compensation.

It is also important to have a well-keptened record of the formation document, contract and financial statement in order to be able to comply in the long term and operate with efficiency.

Michigan Reporting Requirements

The Michigan LLCs are required to submit an Annual Statement to LARA by February 15 of every year. The filing fee is $25. Failure to have them filed may lead to fines or administrative dissolution.

Michigan LLC FAQs