This quick guide on how to start an LLC in Michigan will take you through the necessary steps. A Limited Liability Company is a legal structure that secures your personal assets in case liabilities arise with your business.
This is a very popular structure used to set up businesses. Apart from liability protection, LLCs also offer easier management, ease of setup, avoid double taxation, and several other benefits. Setting up a Michigan LLC costs $50 filing fee. That’s the required fee for submitting the Articles of Organization.
Let’s take a look at the steps involved to create an LLC in Michigan.
1. Choose A Name For Your Michigan LLC
Finding a suitable name for your LLC is the first step to starting. Michigan requires the name to be “distinguishable upon the records”.
Simply put, this means the name for your MI LLC should be different from other registered entities in the state. It should also be easily distinguishable, so the name shouldn’t be very similar to existing entity names.
Generally, it’s a good idea to think of a few names. That way, if your first choice isn’t available, you can move to the next choice. A simple way to check for existing entity names is to do a Corporations Division Business Entity Search. This is a database of existing Michigan entities and provides a fairly accurate result.
You can also call the Corporations Division at 517-241-6470 to check existing entity names.
MI LLC Name Designators
When you form an LLC in Michigan, it must have a proper name designator. This is usually the words “limited liability company” or its legally accepted variations. These include:
- Limited Liability Company
The naming statute for Michigan LLCs is available online for a more detailed outlook of naming do’s and don’ts.
Name Reservation Requests (Optional)
MI makes it possible to reserve a name for the LLC without actually forming the company. This requires filing an Application for Name Reservation. This form is also available as Form 540 on the Licensing And Regulatory Affairs website.
This form requires a filing fee of $25. Once accepted, the name reservation is valid for six months. Once this period is over, you may file the form again to extend the reservation.
2. Appoint A Michigan Resident Agent
Appointing a resident agent is mandatory when setting up an LLC in Michigan. Most states use the term “registered agent” for this function, however, both are pretty much the same.
The Michigan Resident Agent is a person or entity that receives the ‘service of process’ on behalf of your LLC. Service of Process includes legal documents like notices of lawsuits, subpoenas, summons, etc. Other communication too may be sent to the resident agent.
A Michigan Resident Agent must have a street address in Michigan. PO Box addresses are not accepted.
So, your resident agent can be:
- A person who is over 18 years of age and a legal resident of Michigan.
- An entity licensed to do business in the state.
The person you choose can be you, your friends/family members, or anyone else, provided they satisfy the address requirements. Similarly, the entity may be another business, including a commercial resident agent company. Your LLC can’t serve as its own resident agent.
Many people prefer to use a commercial resident agent, simply for convenience. Their experience can be an asset, they’re pretty much always available during business hours, and it helps privacy.
The latter comes into play because the contact details of resident agents are added to public records. Using an agent makes it possible to keep your own address private (or addresses of your friends/family).
Failure to maintain a Michigan Resident Agent can result in the state suspending your LLCs privilege to do business in the state.
3. Filing Articles Of Organization For Your Michigan LLC
Articles of Organization are the most important step for your Michigan LLC filing. The LLC comes into existence when the state approves the Articles of Organization.
You can specify a future date for the articles to come into effect, though this can’t be any later than 90 days after the documents are received by the administrator.
Articles of Organization can be filed in person, via mail, or online. It makes better sense to file online, as the method is more convenient and relatively quick.
When filing online, you can use the Corporations Online Filing System. You might need a CID (Customer ID) and PIN to use the online filing system. It’s possible to generate these when you file the documents. The filing fee of $50 can be paid via MasterCard, Visa, or Discover.
To file via mail, you’ll need to download and fill Form CSCL/CD-700 (Articles of Organization). Include the filing fee as a check or money order payable to “State of Michigan”. The mailing address is:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau
P.O. Box 30054
Lansing, MI 48909
To file in person, fill the same form (Form CSCL/CD-700). In this case, payment can be made via check, money order, MasterCard, Visa, or Discover. The address is:
2501 Woodlake Circle
Telephone: (517) 241-6470
Michigan LLC Cost (Filing And Expedite Services)
The fee for filing Articles of Organization for a Michigan LLC is $50. It can take 10 business days for approval of the Articles of Organization. However, should you need it, the state makes it possible to speed up the process.
Expedited Service Request costs extra, but can make the document processing significantly faster. Available options are:
- 24-hour review – $50
- Same day review – $100, for documents received by 1 p.m.
- Two-hour review – $500, for documents received by 3 p.m.
- One-hour review – $1000, for documents received by 4 p.m.
4. Create An Operating Agreement
An Operating Agreement is an important part of running your LLC. This is an internal document for your LLC that doesn’t need to be filed with the Michigan Corporations Division or any other department. Though it’s not a legal necessity to have an Operating Agreement, it is highly recommended to have the agreement in place.
This document can help with easier governance of your Michigan LLC. Amongst other things, the Operating Agreement can include the approach to taxation, how much of the LLC is owned by each member, the distribution of profits/losses of the LLC, conflict resolution, and more.
An Operating Agreement also serves as proof that your LLC is being run properly. While it’s especially important for multi-member LLCs, single-member LLCs should have an operating agreement as well.
5. Get A Federal Tax ID (EIN)
Get your Federal Tax ID only after your LLC has been approved by the state. The Federal Tax ID is also known as EIN (Employer Identification Number) and FEIN (Federal Employer Identification Number).
You’ll have to file a form with the IRS to get the EIN. There is no filing fee, and you can file the form online.
However, there are situations where it isn’t possible to file the form online. These include LLCs owned by individuals who don’t have an SSN (not US citizens), and where the LLC is owned by another entity.
In such situations, you can file Form SS-4. This form can be filed via mail or fax. Using fax is relatively faster than mail.
Getting an EIN isn’t explicitly mandatory, but it does affect several aspects of your business. This includes opening a bank account or getting credit cards for your LLC, hiring employees, and doing business with other companies. Several other services too may require an EIN.
6. Annual Statements For Your Michigan LLC
Every Michigan LLC must file an Annual Statement. This statement is due by February 15 every year. The only exception is businesses that were registered after September 30 in the preceding year. However, these businesses too will have to file the statement regularly thereafter.
Filing fee for Michigan Annual Statement is $25. You can file the statement online or via mail. Only companies that are in good standing with the state can file online. If your LLC is not in good standing, you’ll have to file the Annual Statement via mail.
Michigan mails the Annual Statement Form to the LLC’s resident agent each year. The $25 filing fee can be attached as a check or money order payable to “State of Michigan”.
7. Necessary Licenses And Permits
Michigan doesn’t offer a general license for doing business in the state. As such, you may need licenses and/or permits for your business. These depend on the LLC’s industry and/or location of business. The county/city may need specific licenses and permits for your business.
Similarly, specific state licenses may be necessary, depending on your industry.
Any business is liable to pay taxes. The specifics can vary, but it is very important to stay compliant. It is a good idea to consider hiring professional assistance for managing and filing taxes efficiently. You could consider taxes at three levels.
County/city taxes are local taxes imposed by the location of your business. These can vary by industry and location of your business.
State taxes too depend on the location and industry of your business. This can include specific business taxes imposed by Michigan.
Federal taxes usually consider LLCs for pass through taxation. This means that the business isn’t taxed separately, but your profits/losses form a part of your personal income tax returns.