Michigan provides a business-friendly atmosphere, a diverse and skilled workforce with an affordable cost of living, and a favorable business tax climate. Michigan is a premier gateway for the expansion of business globally.
An LLC merges the benefits of a corporation and a partnership. It creates a shield between your personal assets and the business liabilities. A Michigan LLC is advantageous due to favorable state laws for the business and many other reasons.
Stated below are the pros and cons to be considered before forming an LLC in Michigan:
Pros
- Various tax abatement
- Protecting rights of minority members
- Contractual freedom provides flexibility to adapt their cash flows and risks of loss to further their management plans by creating classes of membership
- Flexible distribution of profits
- An LLC can choose perpetuity to avoid automatic dissolution
Cons
- Few advantages require presence in Michigan
Setting up an LLC in Michigan is easy.
Create a Michigan LLC in five easy steps
Step 1: Name your Michigan LLC
Select a name for your LLC that will comply with the Michigan State law guidelines. The name must state the purpose of your company and be accessible to clients and customers.
Follow the below procedures:
- Your name must have the phrase “Limited Liability Company” or one of its abbreviations “L.L.C.,” or “L.C.”, with or without periods.
- Your name must be distinguishable from the other names in the records of the Michigan office administrator.
- Your name must not include any word or derivative that will deliver a purpose other than the purpose permitted in its articles of organization.
- Your name must not include words or abbreviations such as FBI that may imply a government organization.
- Your name cannot include state restricted or prohibited words or abbreviations such as attorney unless a licensed lawyer or another licensed individual is a member of the LLC, or your LLC has undergone paperwork to operate as such. The Restricted word list.
- Is the name available? A registered, reserved, or an assumed name cannot be used to name your LLC. To be sure about the availability of the desired name, do a prior Business Entity Search with the Michigan Department of Licensing and Regulatory Affairs.
- (Optional) Is the desired URL accessible? You can look for the desired web domain available on the internet before settling on a name. It is advisable that the domain name matches your business name for obvious reasons.
FAQs
- Can I reserve a name for my LLC in Michigan?
Yes, you can reserve a name in Michigan for six months by filing an Application for Reservation of Name form with the Michigan Department of Licensing and Regulatory Affairs. The application can be filed online or via mail. The filing fee is $25.
- How can I register a DBA or fictitious name in Michigan?
You can register a DBA, or an assumed name, or a trade name by filing the “Certificate of Assumed Name” with the Michigan Department of Licensing and Regulatory Affairs. The filing fee is $50. This needs to be renewed after every five years. You can avail an optional expedited service by paying an extra amount. Refer to the form for details.
Step 2: Appoint a Registered/Resident Agent
A registered agent, known as a resident agent in Michigan, is an individual or a business entity that is obliged to accept legal notices, service of processes and government documents on behalf of your business. A resident agent acts as the point of contact between your company and the state.
A resident agent must be a resident of Michigan (have a physical street address) or be an entity legalized to conduct business in the state. An individual or entity with a PO Box as the only address cannot serve as a resident agent. It is mandatory to have a resident agent for all LLCs in Michigan.
Benefits of a registered agent:
- Available during traditional business hours
- Accepts lawsuits while keeping you in private
- Manages legal work without letting you stress over it
FAQ
- Can an individual from the company become a registered agent?
Yes, anybody from your LLC can become a registered agent considering they meet all the requirements.
Step 3: File an Articles of Organization for your Michigan LLC
Articles of organization is a legal document that officially registers your LLC with the Michigan Corporations Division. Articles of organization briefs the State with necessary details about your LLC. This can be filed online, or via mail, or in person.
The filing fee is $50, and an optional expedited service can be rendered by paying an additional fee and filing the expedited service request form. Refer to the articles of organization application for more details.
Following details are required to file articles of organization:
- Name of the LLC
- Purpose for which the LLC is formed
- Duration of your LLC
- Name and address of the registered agent
- Authorized signature
File via mail: Download Articles of Organization form
File online: Articles of Organization
Mail to:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau — Corporations Division
P.O. Box 30054
Lansing, MI 48909
Office Address (to submit in person):
Michigan Department of Licensing and Regulatory Affairs
2501 Woodlake Circle
Okemos, MI 48864
FAQs
- How much does a Michigan LLC cost?
The Michigan LLC filing fee is $50, and the annual statement filing fee is $25.
- What is the processing time for Michigan LLC formation?
The processing time for Michigan LLC is 24 hours if filed online or 2-4 weeks if filed via mail.
- What is a foreign LLC?
A foreign LLC is an LLC that has expanded its operations to that state from its domestic state. A Certificate of Good Standing has to be submitted to register as a foreign LLC.
File “Application for Certificate of Authority to Transact Business in Michigan”:
- How to get a Certificate of Good Standing?
A Certificate of Good Standing tells that your LLC is compliant with the state regulations. You can get a Certificate of Good Standing via mail, or fax, or in-person from the Michigan Corporations Division. The cost is $10.
Read instructions to get the certificate.
Step 4: Drafting a Michigan LLC Operating Agreement
An operating agreement is an internal legal document formed under the jurisdiction of LLC members (you may hire an attorney as per necessity). This document outlines the basic working principles of the LLC, rights, authority, and responsibility of its members.
This document is not mandatory by the State to maintain, but it is highly advisable to draft one. An operating agreement states every point clearly that may lead to a conflict of opinion and thus, be avoided, keeping everyone on the same path.
The operating agreement may include the following details:
- Asset and profit distribution
- Rights and responsibilities of members and managers
- Membership interest
- Dissolution process
FAQ
- What is membership interest?
Membership interest tells an individual’s rights in an LLC. It represents the share of profit and voting rights of a member in the LLC. This can be amended as per the contract.
Step 5: Get an EIN
EIN stands for Employer Identification Number (often referred to as a Federal Employer Identification Number or Federal Tax Identification Number). The IRS issues this unique nine-digit number to identify your company for tax and record purposes. EIN provides legitimacy to your business since it identifies your Michigan LLC with the IRS.
EIN lets you keep your Social Security Number private. EIN is free of cost and can be applied online or via mail, or by fax.
Benefits of EIN are stated below:
- Open a business bank account
- Get a business credit card
- Easily apply for a business license
- Get business loan
- File and manage Federal and State taxes
- Hire employees
Apply online: Online EIN
Apply via mail or fax: Download Application for EIN
Mail to: Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
FAQs
- How can I file for an EIN without a Social Security Number?
Social Security Number is not mandatory to get an EIN unless you are applying online for it. You can file the SS-4 form via fax or mail to get an EIN without a Social Security Number.
- How much time does it take to get an EIN?
The number gets assigned immediately online. It takes about 4-8 weeks via mail-in process, whereas the fax arrives in 4-7 business days.
- How are LLCs taxed in Michigan?
By default, the IRS taxes an LLC as a sole proprietorship or partnership based on the number of members in the company. Accordingly, the IRS tells about the tax options available for your LLC.
There are several factors to bear in mind before choosing the tax status for your LLC (financial plans, company goal, etc.) In some cases, you will have to register with the Michigan Department of Treasury (DOT). We recommend speaking to a tax professional can help before making the final call.
- Which license and permits are essential for business in Michigan?
Depending on the type and location of your business, different licenses and permits may be required to operate your business in Michigan. For details, visit the List of Michigan Licenses and Permits.
File an annual report
You are required to file an annual statement of your LLC with the State of Michigan. You must file the annual statement online before 15th February every year. The filing fee for the same is $25, payable to the Department of Licensing and Regulatory Affairs. However, after 15th February, Michigan charges a penalty fee of $50 for missing the deadline.
File online: Annual Report
Dissolve an LLC in Michigan
You can voluntarily dissolve your Michigan LLC. To do so, check the structural documents of your LLC – operating agreement or articles of organization. One of these documents may have the procedures to be followed for dissolution, such as asset distribution, notifying creditors, or transfer of interest. If not, follow the below procedures:
- Take consent of all LLC members – Hold a unanimous voting process and record the number of votes to approve the resolution in the official meeting minutes of your LLC.
- Winding Up
- Close your business tax accounts and cancel every license – Your LLC has many active tax accounts, licenses and permits associated with it under the Michigan state government. Pay off all the debts and taxes. Cancel every license and permit.
- Notify the creditors
- Distribution of assets – Distribute the profits and assets among the creditors and the members of your LLC in accordance with the structural documents.
- File Articles of dissolution – File the articles of dissolution, known as Certificate of Dissolution, with the Michigan Department of Licensing and Regulatory Affairs to voluntarily dissolve your LLC. This can be filed online, via mail, or in person. This document asks for the following details:
- Name of the LLC
- Identification number assigned by the state bureau
- Reason for the dissolution of the LLC
- Effective date of dissolution (to be filled only when a date other than the date of filing is desired)
- Authorized signature
File the Certificate of Dissolution: Download form OR File online
The filing fee is $10, payable to the State of Michigan. Optional expedited service may be requested by filing the Expedited Service Request form and paying an additional fee as per requirement.
Mail to: Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau
Corporations Division
P.O. Box 30054
Lansing, MI 48909
To submit in person: 2501 Woodlake Circle
Okemos, MI
Telephone: (517) 241-6470
Note: To dissolve an LLC completely, you have to file a dissolution form in every state where your business is active. Failing to do so will make you entitled to pay business taxes and file annual statements.
FAQ
- Do I have to file tax clearance?
Yes, Michigan law requires you to request a tax clearance within 60 days after submitting the Certificate of Dissolution from the Michigan Department of Treasury (DOT).
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