When starting a new company, choosing a business entity is the most important decision that the founders must make. For most businesses with more than one founding member, forming as an LLC is often the best option for a number of reasons.
An LLC is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Moreover, LLCs often enjoy a lower tax rate than corporations. Nevertheless, creating an LLC can get complicated depending on where you are based, with the formation process, filing fees, and continuing legal obligations differing from state to state.
The process of creating an LLC in Michigan is pretty straight forward: the state does not impose unusual requirements on LLC founders and its document filing fees are reasonable.
To avoid a misstep in the filing process, follow these steps to start an LLC in Michigan, and refer to the checklist at the bottom of the post to familiarize yourself with the legal and financial requirements for LLCs in the state.
Starting an LLC in Michigan step-by-step
1. Select a name for your Michigan LLC
Follow naming requirements
There are 2 major guidelines to follow when naming your LLC in the state of Michigan:
- An LLC’s name must be distinguishable from the names of existing businesses on file with the Michigan Department of Licensing and Regulatory Affairs.
- An LLC’s name must contain one of the following phrases or abbreviations: “Limited Liability Company”, “L.L.C.”, or “LLC.”
Check the name’s availability
After deciding upon a name for your LLC, confirm that it’s available for use in Michigan with the Department of Licensing and Regulatory Affairs Search for a Business Entity tool.
Reserve your LLC name with the Michigan Department of Licensing and Regulatory Affairs
Reserving your LLC name with the Michigan Department of Licensing and Regulatory Affairs is a good idea because it protects the name from being used by another business before you legally form your LLC.
File an Application for Reservation of Name with the Department of Licensing and Regulatory Affairs online or by mail in order to reserve the name for up to six months. The reservation application filing fee is $25.
2. Designate a registered agent
As in every U.S. state, forming an LLC in Michigan requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf.
The registered agent must either be a state resident or business entity with a street address in Michigan OR if the individual or business is based out-of-state, they must have a business office in Michigan.
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3. File Articles of Organization
An LLC is formed in Michigan with the filing of Articles of Organization with the Michigan Department of Licensing and Regulatory Affairs. The articles can be filed online using the Corporations Online Filing System or by mail. The filing fee is $50, although you can pay an additional fee for expedited processing.
Your Michigan LLC’s Articles of Organization must provide the following details:
- LLC’s name
- Registered agent name and address
- LLC’s registered office
- Articles of Organization effective filing date
- The LLC’s general purpose
- A statement clarifying whether the LLC is perpetual or temporary
- LLC organizer’s signature and contact information
Foreign LLCs doing business in Michigan
LLCs formed outside of Michigan intending to do business in the state must first register with the Michigan Department of Licensing and Regulatory Affairs.
Follow these steps to do business in Michigan as a foreign LLC:
- Comply with Michigan LLC naming guidelines and confirm that the LLC’s name is available for use in the state by searching the Michigan business name database.
- Appoint a Michigan registered agent to handle service of process in the state.
- File an Application for Certificate of Authority to Transact Business in Michigan and pay the $50 filing fee. The certificate can be filed online using the Corporations Online Filing System or by mail.
- Along with the application, you must provide a Certificate of Good Standing or Certificate of Existence from the LLC’s home state. The certificate must be dated from 30 days or less of its filing with the Department of Licensing and Regulatory Affairs.
4. Draft an operating agreement
Although not a legally mandated step for forming an LLC in Michigan, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies.
The operating agreement should do the following:
- Describe the LLC’s business structure
- Establish the individual responsibilities and obligations of LLC members
- Detail how the LLC will be run
Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.
5. Obtain an IRS Employer Identification Number (EIN)
All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs).
The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform many other important functions.
You can apply for an EIN online on the IRS website without paying a filing fee.
6. Fulfill your Michigan LLC’s additional legal obligations
Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.
File Annual Statements
Every year, LLCs active in Michigan are required to file an annual statement with the Department of Licensing and Regulatory Affairs. The statement must be filed by February 15 in the year after the LLC’s formation, unless the LLC was created after September 30. Additional reports are due each year by February 15. A failure to file an annual statement will result in the eventual loss of “good standing” status
The annual statement can be filed online or by postal mail. The filing fee is $25.
Register with the Michigan Department of Treasury
Some LLCs doing business in Michigan must register with the Michigan Department of Treasury to satisfy various state tax obligations, such as LLCs that have employees and those that collect sales tax.
You can register with the Michigan Department of Treasury online with the e-Registration tool or register through the mail.
Obtain business licenses and permits
A Michigan LLC may be required to acquire one or more state or local business licenses or permits depending on its location and its business type.
The State of Michigan has a helpful State License Search that you can use to determine which licenses you’ll need to obtain and how to apply for them. For information on local business license requirements, get in touch with a clerk or local government representative in the city or county where your LLC is based.
Michigan LLC checklist
A Michigan LLC’s name must obey the following guidelines:
- Must be distinguishable from the names of existing businesses on file with the Michigan Department of Licensing and Regulatory Affairs.
- Must contain one of the following three phrases or abbreviations: “Limited Liability Company”, “L.L.C.”, or “LLC.”
Formational documents and filing fees:
- Application for Reservation of Name – $25 filing fee
- Articles of Organization – $50 filing fee
- Application for Certificate of Authority to Transact Business in Michigan – $50 filing fee (foreign LLCs only)
- An LLC is formed in Michigan through the filing of Articles of Organization with the Michigan Department of Licensing and Regulatory Affairs.
Additional legal obligations:
- File annual statements– Required of all LLCs doing business in Michigan
- Obtain state and local business licenses/permits – Required for certain LLCs depending on their business and location
- Register with the Michigan DOT – Required for LLCs in certain categories