How to select a name for a Michigan LLC? The first step to starting your business is generating a good name. You likely have some ideas floating around, but it’s crucial to ensure it meets Michigan laws.
All Michigan LLC names must include one of the following:
You’ll also need to verify that the name you want isn’t already registered. You can use the Business Entity Search to see what’s available. Avoid names that are already taken, as well as closely related names that may confuse people.
You also can’t hold your business out as something it isn’t. This applies to highly-regulated industries like legal, financial, or healthcare services. Don’t use terms indicating you are involved in these activities unless authorized.
Many owners use doing business as (DBA) names. These allow you to operate under a name different from the LLC’s name. For example, “Detroit Music Services LLC” could use “Detroit Instrument Repair.”
Now is also an excellent time to look into registering a domain name. Even if you don’t want to start a website, you should consider getting the rights to matching domains.
What is a resident agent? All businesses must appoint a central contact to receive important documents. Some states call this a registered agent, but in Michigan, it’s known as the resident agent.
Under Michigan Consolidated Laws section 450.4207, all LLCs need to provide a registered office and a resident agent. The registered office can be your principal place of business, but it doesn’t have to be.
The resident agent’s primary purpose is to receive service of process. If your Michigan LLC gets sued, the paperwork goes to the resident agent. This role should be taken seriously.
You may appoint yourself as the resident agent. But many seasoned business owners hire a registered agent service instead.
Choosing to use yourself as the resident agent comes with some advantages, such as:
But there are also many disadvantages to appointing yourself as a resident agent. These include:
To set yourself up for success, we recommend hiring a resident agent service. These are also known as registered agent services.
By doing so, your address and contact information remain confidential. The registered agent service will sort your mail and inform you of all critical notices. They cost around $100-$150 per year. Attorneys can charge up to $500 per year for this service.
If you choose to start your LLC by using a business formation company, they often include a registered agent service in their packages. Feel free to take a look at our registered agent recommendations article for more information.
Do I need to file Articles of Organization? Take a moment to compose yourself if you’re dozing off. This is the most important step in forming an LLC. Filing the Articles of Organization creates the legal entity.
Without filing the Articles of Organization, the LLC does not exist. Once they are filed and processed, your LLC will be a real legal entity, capable of signing contracts, owning assets and doing business.
Some people believe that filing the Articles is burdensome and attorneys must do it. In reality, Michigan only needs basic information to file. The process is likely much easier than you think.
Review section 450.4203 to see what needs to be in the Articles of Organization. The information includes:
There are a couple of other optional points to include, if applicable. If you intend to dissolve the LLC at a specific time, you’ll need to provide such duration. And if you bring in managers to run the LLC, you need to include a statement indicating so.
That can be a long time to wait to start your business. For faster service, you can choose an expedited processing option, including:
To save time and avoid the hassle of LLC filings, all seasoned entrepreneurs use LLC formation services. For recommendations, check out our article on the best LLC services.
What is an operating agreement? Operating agreements are private contracts between LLC members. They specify how the LLC operates and handles many situations.
Michigan does not require an LLC to have an operating agreement. But we recommend executing one to protect your business and interests. Without one, your LLC will fall back to state law when disputes arise.
The best operating agreements cover any situation the LLC may encounter. You can customize them according to your desires, including:
You can put operating rules in the Articles of Organization instead of a separate operating agreement. But this comes with two downsides.
First, you must pay a fee to change the Articles of Organization if you need to amend the operating rules. Second, Michigan law follows the Articles of Organization if an operating agreement has conflicting language.
We recommend using a separate operating agreement to specify how your LLC operates. You can change them as needed without paying the state a fee. And any concerns about conflicting documents are absent.
Putting in the effort to execute a well-rounded operating agreement is beneficial. The best LLC formation services include templates for as little as $50.
Do I need to get an EIN? The Internal Revenue Service uses Employer Identification Numbers (EIN or FEIN) to track the tax information of businesses for federal tax purposes. These numbers are essentially like Social Security Numbers, but for businesses instead of individuals.
The IRS requires certain businesses to get an EIN. These include any of the following cases:
Even if you don’t fall under one of these qualifications, getting an EIN is beneficial for your business. For example, some states require having an EIN for state tax purposes, and banks often require them to open a business bank account for your LLC.
The IRS has made the process easy through its online EIN application. It only takes about five minutes to complete and is entirely free of charge. It’s not worth hiring someone to do this unless it’s part of a wider LLC formation package.
A critical part of many businesses is getting the necessary approval. This can come from state or city-level authorities. Failing to get needed licenses and permits can be a recipe for disaster.
The state of Michigan does not offer general business licenses. But many specific business activities require approval.
Review the Bureau of Professional Licensing to see if anything applies to your business. It’s vital to get any required license before starting operations.
Now it’s time to review the City of Detroit licenses and permits. Not every business needs one, but Detroit offers many licenses and permits. These apply to specific activities, such as:
The City also has many business license guides to clarify what you need to do.
For extra help with approval, reach out to the City of Detroit officials. They can help you navigate the process so you get what your business needs before starting up.
Knowing when to reach out for help is an important part of owning a business. To receive valuable tips, connect with the local business community. Experienced leaders can help you uncover the road to sustainable success.
Here is a list of local organizations dedicated to helping businesses thrive:
Once you get to this point, take a moment to celebrate. You’ve founded your LLC and are on your way to running your new business. But don’t let the momentum fade. These extra steps are worth taking care of right away.
It’s hard to overstate the importance of an online presence in today’s world. Even if you don’t want to launch a website, it is wise to register a matching domain name (URL).
If you don’t, domain squatters can get it before you. They buy domain names with the intent to resell them at inflated prices. Competitors may also get domain names to hurt new rivals.
Registering a domain name is fairly straightforward and affordable. You can usually get the rights to matching domain names for about $20-$50 per year. Doing this now can help avoid future headaches.
Many businesses operate under a name different from the LLC’s name. This common technique opens up a world of possibilities. For example, “Detroit Electronics LLC” can use “Detroit Computers and Phones.”
You’ll also need to register the assumed name with Wayne County. A $16 fee applies.
Like many things in life, your business will have ongoing needs to ensure compliance. Michigan requires all LLCs to file an annual report no later than February 15 of each year. Set a reminder to avoid neglecting this critical filing.
Now is also a great time to consider tax obligations. Most LLCs have pass-through taxation. This means the income flows through to the individual tax returns of each member.
It’s also a good idea to open a business bank account. By keeping the finances separate, you can avoid problems of intermixing assets. It’s also helpful for record-keeping purposes.
You could consider buying insurance policies, such as general liability or workers’ compensation. These can help you avoid many headaches down the line.
Most importantly, having an LLC will ensure your personal assets are protected if your business cannot pay its debts. Running your business through an LLC can also provide you with better tax treatment. In addition, LLCs have fewer and less complicated reporting requirements compared to other types of businesses, making them particularly suitable for smaller businesses.
It is not strictly necessary to form an LLC in order to start a business. You can engage in business as a sole proprietorship instead. However, in that case, your personal assets may be at risk if your business takes on too much debt or loses a lawsuit in court.
It doesn’t cost much to set up an LLC for your business. In most states, you will need to pay less than $150 to register your new LLC with the local state authorities. In some states, you may need to pay some additional costs later on, for example, when filing an annual report or filing for a DBA.
The time it takes to have your LLC approved can vary wildly depending on the state, the filing method you used and if you opted for expedited filing. In some states, you can have your LLC approved in as little as one day, while in others, it may take weeks or even months.
If you want the fastest possible turnaround time, you should consider using online filing and pay for expedited service, if available.
The IRS and most state tax authorities treat LLCs as “pass-through” entities. This means that your LLC does not pay taxes directly (as corporations do). Instead, the tax burden is passed through to the members of your LLC. The members will then include profits and losses from the LLC’s business on their personal income tax returns.
It is generally best to form your LLC in your home state, where you will actually carry out your business. Some people believe that it is advantageous to form your LLC in Delaware or Nevada. In reality, you would then have to register with the authorities in your home state as a foreign LLC and pay additional fees – without much benefit in return.
You are not generally required to file for a DBA (“Doing-Business-As”). However, most business owners choose to do so anyway. Getting a DBA will allow you to omit the letters LLC from your customer-facing business name. You can also have multiple names for your LLC if you want to run more than one business through your LLC.
Yes, you can form an LLC for your business in any US state. There is no requirement for you to be a US citizen in order to form an LLC, nor do you need the right to reside in the US. If your business is going to own physical property in a given state, you may want to form your LLC in that state.
No, you don’t need to hire an attorney to form an LLC for you. It is generally much cheaper and straightforward to file the necessary paperwork yourself or to hire an affordable LLC formation service to handle the work on your behalf. However, you may want to consider hiring an attorney if your business is very complex.