How to Start an LLC in Michigan

Creating an LLC in Michigan doesn't have to be complicated. There are different ways to do it. Read on to learn how.

Thinking about working on legal papers can seem daunting.

Not to mention, the process of starting an LLC in Michigan can differ with other states.

How do you actually start? What are the requirements? Can someone else do it for you?

Yes to the last question. We'll discuss the answers to the first two as well. Read on.

How to Create an LLC in Michigan

The formation process in every state is usually similar. But some aspects can differ depending on where your business is.

Here's a quick guide on how it works in Michigan:

1. Choose your LLC's name

Like in most states, you need to register a business name. You generally have more options for LLC names than sole proprietorships and partnerships.

But whatever you choose, it still has to adhere to the state's naming guidelines.

Here's a list of what they require:

1. It should contain words that indicate that it's an LLC. You need to add terms like "LLC" or "Limited Liability Company" to your preferred business name.

2. It must be unique and not similar to another company's name. You can't use it if another business has already registered it. You should also avoid those that are too similar to an existing business' name.

   You also can't use articles, suffixes, numbers, etc., to create a distinction.

   Name Availability Search
   You can check if your chosen business name is still available by going to Michigan's Business Entity Search. It'll show if another company has already registered your preferred business name.
   

3. It can't imply a purpose other than what's registered.

4. It shouldn't imply an association with any state or federal government agency/organization.

Let's say you have a business name in mind. What if you're not sure about it yet?

Can you reserve a name for your Michigan LLC?
Yes, you can reserve an LLC name if you're still pondering on it. You just have to file an Application for Reservation of Name and pay the $25 filing fee for LLCs.

Keep in mind that business name reservations last 6 months after filing. But you can re-file the form and repay the fee if you want to renew your reservation.

Now, what about that "other" name you have in mind?

Can a LLC have a DBA in Michigan?
Yes, you can get a DBA or assumed name if you want more flexibility with your business name. For example, a DBA can come in handy for marketing campaigns or company logos.

To register a DBA in Michigan, you need to file a Certificate of Assumed Name and pay the appropriate filing fee. For LLCs, this costs $25 per filing.

Assumed names/DBAs last 5 years in Michigan. You need to re-register it if you want to continue using it after it expires.

2. Assign a resident agent

All Michigan LLCs need to list a resident agent (aka registered agent) in their formation documents to be approved.

Resident agents serve as your company's initial point of contact. And they receive important documents like legal documents, government notices, and tax forms on behalf of the business. They then forward these documents to whoever's in charge of them within the company.

Whoever you assign as your resident agent needs to meet the following criteria:

• At least 18 years old
  
• Have a physical street address within the state (no P.O. Boxes or virtual addresses)
  
• A Michigan resident or resides within the state (for individuals)
  
• Allowed to conduct business in Michigan (for businesses)
  
• Always readily available during regular business hours

You can still change your listed resident agent after you've formed your LLC. To do this, just file a Certificate of Change of Registered Agent and pay the $5 filing fee.

3. Create an operating agreement

Technically, Michigan doesn't require LLCs to have an operating agreement. But having one can come in handy, especially when conflicts arise within the business.

Since it's optional for Michigan LLCs, you don't have to file it with the state when you submit the formation documents. You can just keep it with your company records.

You can draft an operating agreement yourself or have a third party create one for you. The second option usually costs extra.

4. File the Articles of Organization

To start an LLC in Michigan, you need to file your Articles of Organization with the state's Department of Licensing and Regulatory Affairs. Do this online, by mail, or in person.

You'll need to provide the following information in the form:

• LLC's name
  
• Official purpose
  
• Duration (if it'll only exist for a limited period)
  
• Resident agent and registered office
  
• Additional provisions regarding your LLC

Aside from that, you also need to pay the state filing fee when you file the formation documents. This costs $50 per filing in Michigan. After that, you just have to wait until your registration is approved.

5. Get an EIN

Once you've formed your Michigan LLC, you can apply for an Employer Identification Number (EIN). If your company is a multi-member LLC, you'll need one for tax purposes.

Single-member LLCs can still use the owners' Social Security numbers (SSNs) as their EIN.^[1] But getting a separate EIN to distinguish your company's finances from your personal assets is still better.

You can apply for an EIN directly with the IRS or through third-party services. Direct applications cost nothing, but third-party companies may charge you for this service.

Okay, now that you know how to create an LLC, you might ask, do you really need to do it yourself? Not exactly.

3 Ways to Start a Michigan LLC

Choosing to process paperwork yourself has its perks. But you can also leave it to someone else such as a lawyer or a formation service.

You can weigh out your options below.

• Do it yourself
  This is the easiest and simplest way to start an LLC in Michigan. It's a great option if your formation needs are straightforward. You could be creating an LLC with few members and employees in only one state, for example.

  It's also the least expensive option. There's no need to pay for anything else besides the filing fees. But it's not the most convenient option.

  It also wouldn't be the best choice if you need to start multiple LLCs in various states.

  What types of LLCs can you create in Michigan?
  You can start 3 types of LLCs in Michigan: domestic, foreign, and professional LLCs. All of these can be single-member or multi-member LLCs.
  

• Hire a lawyer
  Working with an attorney is best if you need someone with in-depth knowledge of Michigan's business laws and regulations. You also get more comprehensive legal assistance.

  They can even draft your LLC's paperwork and other legal documents needed for your business (e.g., employee contracts).

  However, the legal fees can get very expensive. Even more so if they need to handle something complex. It's not the suitable option if you have limited budget.

• Get help from a formation company
  A formation company can handle every step of the process for you. You wouldn't need to do anything besides provide information about your business.

  They offer convenience without costing you an arm and a leg. In fact, most of them just charge the state filing fees. Unless, of course, you pay for the higher-tiered plans.

  Which option do you prefer to form your LLC?

  Most also offer multiple business services (i.e., registered agents, annual filing, and EIN applications). You could say it's a good all-in-one option.

  One downside is that some charge for services that are generally free. For example, applying for an EIN doesn't have to cost you. But a formation company might charge you for it. Add-on charges can also pile up pretty quickly. It's best to budget how much you're paying for convenience.

After creating an LLC, you might think you're done with all the paperwork. Unfortunately, that's not the case.

What to Do After Starting an LLC in Michigan

There are a few things you need to do to keep your company in good standing. These are requirements from the government.

File your annual report.
All Michigan LLCs have to file an Annual Statement after their registration is approved. The state department sends a pre-printed copy of the form to the company's assigned resident agent around 90 days before the due date.

Keep in mind that all LLCs must file their Annual Statement/Report by February 15 of each year. The exception is new LLCs formed after September 30, which are not required to file in the year following their formation.

You can file it online, by mail, or in person. It costs $25 per filing for standard LLCs. Professional LLCs must pay a filing fee of $75, with a $50 penalty fee for late submissions and payments.^[3]

Get the required permits and licenses.
In Michigan, LLCs don't need a general business license to do business within the state. But some municipalities may require them if you want to do business in their jurisdiction.

You may also need specific licenses and permits depending on your industry or business activities. You can check Michigan's online database to see what licenses or permits your company needs to operate.

File and pay taxes.
Unlike corporations, Michigan LLCs are not required to pay income taxes as separate legal entities. They enjoy pass-through taxation. Members just need to file and pay income taxes on the company's earnings as part of their personal tax returns.

The standard income tax rate in Michigan is 4.25%. But if LLCs choose a C-corporation tax status, they'll need to pay the corporate tax rate of 6% instead.

Aside from income taxes, other taxes your LLC might be subjected to are:

• Sales tax (if you sell taxable goods and services)
  
• Employer tax (if you have employees)
  
• Self-employment tax (unless you're taxed as a C- or S-corporation)

Separate your personal and business finances.
Opening a business bank account is entirely up to you. But it's an excellent idea for any business owner.

Not only will it allow you to keep better track of your business expenses, but it can also strengthen your company's liability protection.

It can prepare you for any questions regarding your business' financial records. You can easily prove you're not personally using company funds.

Not to mention, it's easier to open a business bank account if you've already formed an LLC.

What the Experts Say

CreditDonkey asked a panel of industry experts to answer readers' most pressing questions. Here's what they said:

Bottom Line

Starting an LLC in Michigan doesn't have to be so complicated. You can get it done in 5 steps. Just choose an LLC name and assign a resident agent.

The operating agreement is optional but can come in handy. Then you'll just have to file the Articles of Organization and get an EIN.

You can do it all yourself or hire someone else. The latter can make it more convenient, but costly.

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