Nestled in the midwestern United States, Michigan has the distinction of being the center of the American auto industry. It’s also rich in natural beauty, with four Great Lakes, and culturally diverse. All kinds of businesses can flourish here. It just takes a bit of planning.
So if you are trying to form an LLC, you might have noticed that there is a lot of information scattered all over the Internet. Piecing together the true process and what you are supposed to do can be a job in and of itself. That’s why we’re here — to strip away the confusing stuff you don’t need to and distill the process into simple, easy-to-follow steps.
In this article, you’ll find all the tools you need to start an LLC in Michigan, including:
- Tips on drafting and filing the legal documents you need for your Michigan LLC formation
- Guidelines for staying within state and federal law
- The actual laws and rules you need to follow
Step 1: Name your Michigan LLC
Your first task is to find a good name for your LLC. This isn’t too hard, but you should be mindful of the rules set down by Michigan law. Michigan Compiled Laws section 450.4204 is the place to start.
Words You Have to Use
First, you have to identify your company as an LLC. That means using “limited liability company,” “LLC,” “LC,” or a similar term. In Michigan, you can also form a low-profit LLC. In that case, you must include “low-profit limited liability company,” “L3C,” or “l3c” in the name.
What is a Michigan low-profit LLC?
A low-profit LLC is a business form that meets the following special requirements:
- It has been formed for at least one or more charitable or educational purposes under federal tax law.
- The LLC’s significant purposes do not include making income or profit.
- The LLC does not have political or legislative purposes under federal tax law.
The main purported benefits of these companies are that they are flexible, lightly regulated, and have greater access to capital than non-profit corporations. Some people hold the opinion that these LLCs are not that useful. If you are interested in forming one, you should speak with a Michigan lawyer or accountant.
You also need to make sure that you add enough words to make your LLC’s name distinguishable from that of other companies doing business in the state.
For example, you might want to open a music store called “Detroit Rock City, LLC,” but there’s already a company named “Detroit Rock City, Inc.” To get your company name accepted, you may have to change it to something like “Detroit Rock and Metal City, LLC.”
Words You Can’t Use
Section 450.4204 forbids your LLC from having words in its name that imply a purpose other than what is stated in its formation documents. For example, if you file articles of organization stating that you want to open up a gun store, you will likely not be able to name your LLC “Lulu’s Fancy Dresses, LLC.”
You can’t use the word “corporation” or any abbreviation that implies your business is one.
The law also forbids you from using words in Michigan LLC names that aren’t allowed under “any other statute” of Michigan. That is broad, vague, and somewhat unhelpful.
A good rule of thumb is to make sure that your name makes sense, given your company’s business and that your name isn’t misleading. (Don’t name your business “Michigan State Police” or “Tax Collector,” for example. )
Also, if your business is regulated by the state (like a law firm or barbershop), you will probably need a license and/or permission from regulators to have a name reflecting that business.
The big rule is this: if you need a license to do your job, double-check with the Secretary of State to make sure your company name complies with the law.
Research the LLC Name You Want
Once you’ve decided on a good name, you need to make sure that it is available. (Remember also that it can’t be too much like the name of a company already doing business in the state.)
The Michigan Department of Licensing and Regulatory Affairs (LARA) has a free and robust search engine on its website. There, you can input several words and phrases to get a good feel for how unique your LLC name truly is.
Michigan DBA: Using a Fictitious Business Name
Though the naming laws aren’t that strict, you may not have ended up with exactly the LLC name you wanted. If that is the case, you’re not stuck with that name for all purposes. Even though your LLC’s official name is set in stone, you can still apply for an assumed business name or DBA (“doing business as”) name.
This is a very common process. Michigan Compiled Laws section 450.4206 tells you exactly what you need to do, and it’s not hard. All you have to do is file a certificate with LARA containing the following items:
- Your LLC’s name
- The DBA you want to use for your LLC
- Your LLC’s identification number, which you should have received when you filed your articles of organization
The state provides a helpful form certificate you can use. There will be a $25 filing fee due with the certificate. Your DBA is good for five years, at which point you will have to renew your registration.
A Michigan DBA expires on December 31 of the fifth full calendar year after the year in which you file your certificate.
Step 2: Appoint a Registered Agent for your LLC
Michigan Consolidated Laws section 450.4207 requires your LLC to have a registered office and resident agent in the state. (Other states use the term “registered agent,” and it means the same thing.) A resident or registered agent is your LLC’s public point of contact. They receive correspondence and service of process for your LLC.
Service of process is a legal term for business letters or legal papers. In other words, your agent is there for the state or the public to communicate with you.
Though your registered office can be the same as your place of business, it doesn’t have to be.
If your LLC is sued, your registered agent is the fastest and most reliable way for you to find out. Your company’s resident agent and office are listed on the LARA’s Business Entity Search website for this purpose.
If a person filing a lawsuit can’t find your agent, section 450.4207(d) allows them to serve the LARA administrator (a government official) with their lawsuit instead of you!
Though LARA would surely try to get the papers to you swiftly, the delay or loss of those papers could cost you dearly.
If you are late responding to a lawsuit or worse, don’t respond at all, you could lose the lawsuit by default judgment. This is a harsh result, but it illustrates how important it is for you to retain a good registered agent for your LLC.
The law gives you options about whom you can appoint as your agent. You can name a Michigan resident at your registered office or any entity doing business in the state as your agent. You could even be your LLC’s own resident agent. Just because you can, though, doesn’t mean you should.
Hiring a company is usually a better move. A resident/registered agent company lets your LLC use their company’s address as your LLC’s registered office. The agent then gets your important letters and service of process and passes it on to you.
You might be thinking that the job doesn’t sound hard enough to justify hiring someone else. Being your own agent can be tempting for a few reasons:
- It’s cheap: You’re not paying someone for something you can do yourself.
- It’s simple: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important papers personally.
Those are solid points. But there are also a lot of reasons not to do it yourself:
- No privacy: Your name and address will be public on the LARA Business Entity Search website.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: Agents must be open for service during all business hours. They don’t get time off.
- Business interruptions: If your agency address is the same as your business address, your clients may be interrupted by people serving lawsuits. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your agency address is correct and up to date. If you make a mistake or miss something, that’s on you.
Registered agent companies are an easy way to avoid these issues. They aren’t pricey, either. They usually cost around $100 per year. Their name and address, not yours, are publicly listed. Depend on your agent to make sure you don’t miss anything. That way, you can focus on your business.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
A professional service can also help if your LLC will do business in multiple states and you need to register as a foreign LLC. Just find a company that does business in all those states, pay them a single fee for multiple agents and offices, then let them worry about the details.
Step 3: File Your Michigan LLC Articles of Organization
You have a name picked out, and you’ve chosen a resident agent. Now comes the big step: filing your articles of organization. The articles are your LLC’s birth certificate. Without them, you don’t have an LLC under Michigan law. Thus, it’s important to make sure you do it right the first time.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to Include in My Michigan Articles of Organization?
Michigan Compiled Laws section 450.4203 contains a simple list of what needs to be in your articles:
- Your LLC’s name
- Your LLC’s purpose, which can be stated simply as “any activity for which limited liability companies may be formed”
- The street address (and mailing address, if different) of your registered office and resident agent
- If your LLC has managers (i.e., members don’t manage it themselves), a statement to that effect
- If you intend the LLC to dissolve after a certain amount of time, you have to say when that will be
You can also include any other things in your articles that don’t otherwise break the law. If you want, you can also put in rules like those you would use in an operating agreement (see Step 4 below.) Using your articles of organization this way, though, is not a good idea.
You want to have one document that lists the rules of your company. If you have two and there is a conflict, Michigan law follows the articles and ignores your operating agreement. In this case, you will lose the control that an operating agreement gives you, and you might lose money or business resources as a result.
Therefore, we recommend that you keep your articles of organization and your operating agreement separate.
If you’d like to keep it simple and file the most basic document, Michigan offers form articles of organization you can use.
Michigan LLC Filing Fee
The LARA fee schedule quotes a $50 filing fee for the articles of organization.
Michigan LLC Processing Time
The normal processing time for articles of organization is 10-15 business days. That can translate to three calendar weeks, plus more time for mailing if you file that way. While you might be okay with that, many business owners are ready to get started now. Fortunately, Michigan offers a lot of expedited service options.
The options and their costs are as follows:
- 24-hour service: $50
- Same-day service: $100 (must be by the office by 1:00 p.m. Eastern Time)
- Two-hour service: $500 (must be received by 3:00 p.m. Eastern Time)
- One-hour service: $1000 (must be received by 4:00 p.m. Eastern Time)
For more information, see the LARA online filing system.
Step 4: Draft Your Michigan LLC Operating Agreement
Operating agreements are contracts between you and the other members of your LLC.
You don’t have to have an operating agreement if you don’t want one, but it's a good idea. The agreement contains all your company’s rules and can help settle disputes. It also tells you how to let in new members (LLC owners), let existing members exit, and manage a variety of other unexpected events.
A good agreement lists all key facts about your LLC. If you’ve formed your company with someone else, you each probably have unique jobs. A well-written contract outlines each job and gives you standards to make sure everyone is pulling their weight.
A unique feature of Michigan law is that you cannot have an operating agreement if your LLC only has one member.
Under Michigan Compiled Laws 450.4102(r), an operating agreement must be in writing. The statutes do not list specific things that an operating agreement may do, but they make it clear that these contracts cover a wide variety of topics.
Here are some common matters covered by operating agreements:
- They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
- They say whether a manager is in charge and what they have the right to do. Managers have special duties to the company and the members. The operating agreement should state these in detail. If you need to hire or fire a manager, the contract should state those rules too.
- They outline what the LLC is allowed to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- They say how new members can join the company. They also have rules about how exiting members can leave.
- They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
- They say how and under what circumstances the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
- They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.
Finally, unlike your articles of organization, the operating agreement is a private contract that does not need to be filed with the state. This is yet another important reason to make your operating agreement a separate document. Otherwise, you’ll have to amend your articles (with a $50 filing fee) every time you want to make a change.
Step 5: Get an EIN (Employer Identification Number) for Your Michigan LLC
You file your personal taxes every year using your social security number as a unique identifier. LLCs aren’t people and thus don’t have social security numbers. The government still needs to keep track of them, though, so it uses EINs as ID numbers for companies.
Not all LLCs must have an EIN. To see whether your LLC needs an EIN, ask yourself these three questions:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of the above questions is yes, you will need an EIN. Also, note that most banks will need an EIN to open a bank account for your LLC, so it is usually a good idea to get one.
It’s not hard to get an EIN. The IRS has a detailed website on the topic and allows you to apply online. An application takes about five minutes. If you don’t want to go online, you can also file IRS form SS-4 via mail or fax.
Because it’s so simple, you should never pay anyone to get an EIN for you unless they are throwing it in as part of a bigger service package.
First Tasks After Registering your Michigan LLC
Now that you officially have your company, you’re nearly ready to start. But you have a couple more things to do first.
Open a Business Bank Account
Go to the bank now and open up an account for your LLC. There are three solid reasons:
- Accounting: You’re in business to make money. You can’t tell if you’re making money unless you know how much your company spends and deposits every month.
- Credit: Even successful companies need to borrow money. You don’t want to use your personal credit, though, for a business expense. Keeping LLC money separate helps it build up credit that it can use for its own needs.
- Personal Asset Protection: Keeping your company’s money separate from your own is the whole point of even forming an LLC instead of operating as a sole proprietorship. Without a business bank account, you risk losing that protection.
Accounting is a huge part of being a business owner. Running a business means keeping detailed financial records about expenses and income. You can’t do that if you don’t keep your business and personal finances separate. The easiest way to do that is to use different accounts.
You also have to think about how to get credit for your business, even if you don’t need it now. In the future, you might need to make improvements, sign a new lease, or invest in new technology. When that time comes, the LLC should do the borrowing, not you.
The legal protection of an LLC is perhaps the most important reason to get a new bank account. If someone sues your LLC, your own assets are not at risk, and you won’t be liable for business debts. This company/individual separation is called the corporate veil. (Even though an LLC is not a corporation, it’s still called a “corporate” veil.)
If you treat your company’s assets like your own, the veil can be pierced, and you’d lose the legal personal liability protection you worked so hard to set up. So, for example, if you are taking the company’s money and using it to pay your household bills, you could lose a key benefit of your LLC!
In summary, don’t mix the LLC’s assets with your own. Get an LLC bank account now, and it will be one less thing you have to worry about.
Get Business Insurance For Your Michigan LLC
Insurance is one of those things we all hate spending money on. But we need it to make sure our homes and cars are protected. We also need it to stay healthy. The same is true of your business. Like your body, it only takes one serious accident to destroy its health and prosperity.
There are lots of types of insurance you should think about. Here are some common policies that you might need.
- General liability insurance: You’ll need this if there’s an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers company drivers and vehicles.
- Workers compensation insurance: The vast majority of employers in Michigan must have workers’ comp insurance to protect against on-the-job injuries. LLC members who own at least 10% of the company or more (in a company of fewer than 10 members) may be excluded from the coverage requirement.
- Commercial property insurance: This protects from losses due to property damage. Flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know what kinds of losses will be covered.
Keep Your Michigan Company Compliant
Once you have the basics covered, you can get started with your business. Keep in mind, though, that your LLC will have other legal obligations that it has to satisfy from time to time.
Michigan Business Permits and Licenses
There is no general statewide requirement for a business license. Keep in mind, though, that your city or county government may need you to register for one.
Also, if you are in a line of business that is regulated by the state, you will likely need a professional license. Visit the Bureau of Professional Licensing page for more details.
Michigan Tax Requirements
Unless you elect to have your LLC treated differently, it will be considered a pass-through entity by the state. That means that the LLC isn’t taxed directly on its income. Rather, each member pays taxes on the income when it passes through to them.
Your business will likely be making sales of some kind. So, you’ll have to collect sales tax and pay it to the state. To get more information on this, visit the website for the Michigan Department of Treasury.
Also, if your LLC will have employees, you’ll have to register with the Department of Treasury for withholding taxes.
Federal LLC Tax Filing Requirements
Your LLC is considered a pass-through business entity for federal tax purposes. Profits or losses from your LLC should be on Schedule C of your personal income tax return.
Annual Report and other Filing Requirements
Michigan Compiled Laws section 450.4207 requires you LLC to file an annual statement no later than February 15 of each year. That annual statement should contain the name of your LLC’s resident/registered agent and the address of its registered office in Michigan.
Note that if you formed your LLC after September 30, you won’t have an annual report due on the following February 15 that first year.
The filing fee for the annual report is $25.
Michigan Business Formation Quick Links
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Michigan Bureau of Workers’ Disability Compensation — An Overview of Workers’ Compensation in Michigan
- Michigan Department of Treasury — New Business Registration
- Michigan Department of Treasury — Withholding Tax
- Michigan LARA — Bureau of Professional Licensing
- Michigan LARA — Business Entity Search
- Michigan LARA — Fee Schedule
- Michigan LARA — Form Articles of Organization
- Michigan LARA — Form Certificate of Assumed Name (DBA)
- Michigan LARA — Online Filing System
- Michigan Limited Liability Company Act
Michigan LLC FAQs
How much does it cost to start a Michigan LLC?
The filing fee for your articles of organization is $50.
What is the processing time to form my Michigan LLC?
The normal processing time is 10-15 business days. You can get expedited processing for an extra state fee (between $50 and $1000, depending on how fast you need your filing completed).
What are the benefits of a Michigan LLC?
A Michigan LLC protects your personal assets while giving you favorable tax treatment. You can also use an operating agreement to customize your business structure so it best serves the needs of you and the other LLC members.
Where do I check if my Michigan LLC name is available?
Use the free business entity search provided by the Michigan LARA. Make sure you check multiple words and phrases from your proposed name to distinguish it from the names of other entities doing business in Michigan.