There are many reasons to start a corporation in Michigan, such as the business-friendly environment, global supply chain assets, and low cost of living.
The following step-by-step guide will show you how to start a corporation in Michigan.
1. Select a name for your corporation
Forming a corporation in Michigan starts with selecting a business name. The business name you decide on must be unique and comply with business naming rules in the state of Michigan.
General corporate name guidelines
Ensure that you adhere to the following Michigan naming requirements:
- There’s a long list of restricted words in the state of Michigan that may require approval for your corporation to use it. The full list of restricted words is found on Michigan’s Department of Licensing and Regulatory Affairs website.
- In Michigan, the corporation name should not use words such as a bank, deposit, industrial bank, surety, trust, security, or trust company. Additionally, your business name should not suggest that the business is formed as a surety, banking, insurance, or trust company unless prior approval has been obtained.
- Your Michigan corporation name should not mislead the public into believing that your business is formed for any other purpose other than what’s outlined in its Articles of Incorporation.
- The Michigan business name should be different from any other business names in the state, including reserved names.
- Your Michigan business name must contain the word, company, corporation, limited, or incorporated or at least an abbreviation of any of the above-mentioned terms.
For additional guidance and direction on deciding on a business name in Michigan, refer to the Michigan state statute.
Trademark
Once you’ve decided on your Michigan corporation name, it’s a good idea to protect your business name with a trademark. Although this step is optional, it will ensure that no one else is able to do business under a similar or the same name as your Michigan corporation name. Ultimately, it sets the legal precedent on your side and is necessary if you’re considering going national. Apply to the US Patent and Trademark Office website to trademark your business name.
Entity name
Your Michigan corporation’s entity name is the legal name under which your business is registered. This is the name that the state will use to identify your business and is also the name that must be put down on all your company’s formation documents.
DBA (Doing-business-as) name
When considering doing business under another name from a legal business name, then you need to file for an assumed name. An assumed name is also known as a DBA in the state of Michigan. DBA stands for “doing business as” name and is one of the easiest ways to operate your business using a different name without the need to change your legal business name.
You need to set up your DBA with the Michigan state’s office or Secretary of State and complete and submit a Certificate of Assumed Name Form. Alternatively, download the Certificate of Assumed Name Form and submit it to the following mailing address:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau
Corporations Division
P.O. Box 30054
Lansing, MI 48909
2. Nominate a registered agent
Choosing a resident agent for your Michigan corporation is a necessary step in the process of forming your corporation. You must nominate a resident agent when you list your corporation with the Department of Licensing and Regulatory Affairs.
A resident agent has a primary role to fulfill and that is to accept compliance documents, service of process, and government correspondence on your corporation’s behalf. You may nominate any individual or person to be your business’s resident agent, however, that individual must meet the following criteria:
- The Michigan resident agent must be at least 18 years old
- The Michigan registered agent must have a physical street address where business activities are conducted
- The resident agent must avail him or herself during usual business hours to ensure that no important legal documents are missed
- The Michigan resident agent must consent to the appointment
3. Appoint initial directors at the organizational meeting
Prior to officially creating your Michigan corporation, you must call an organizational meeting and conclude the below tasks:
- Execute and incorporate a statement
- Decide on your share structure
- Select joint initial directors
- Creating approved bylaws
One of the most important steps in this process is appointing initial corporate directors. Every corporation will need to choose a minimum of one director to oversee the operations of the company pending the first shareholder’s meeting.
The corporate director must supervise the repeal, amendment, and adoption of bylaws, and the removal, supervision, and election of corporate officers. The corporate officers and corporate directors are known as the board of directors.
4. File Articles of Incorporation
After completing the initial steps, you’ll need to file the Articles of Incorporation. The Articles of Incorporation, also known as a Certificate of Incorporation will officially register and establish your business with the state of Michigan. Your articles should contain the below information:
- The signatures of the incorporators
- The addresses and names of all incorporators
- The mailing address, physical address, and name of the corporation’s resident agent
- The number of authorized shares of stock your company will be issuing.
- The purpose of your corporation. You don’t have to get very specific unless this is an educational corporation, as per the instructions on the form.
- The name of your corporation
The Articles of Incorporation form issued by the state of Michigan leaves room for you to stipulate if your corporation will be issuing over and above one authorized share class. You must also stipulate if the share classes are preferred or common. Common stock provides its shareholders with voting rights, and on the other hand, preferred stock does not.
After completing the Articles of Incorporation Form, you can file it Online With LARA Corporations Online Filing System. Alternatively, download the Articles of Incorporation Form and submit it to the following mailing address:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau
Corporations Division
P.O. Box 30054
Lansing, MI 48909
5. Create and approve bylaws
Corporate bylaws are not a legal requirement, nor do you need to file them with the state of Michigan. However, the bylaws make the rules, operating procedures, and priorities clear for everyone involved in the corporation.
Therefore your bylaws need to include some pertinent information such as:
- How the corporation will be operated
- The responsibilities and roles of corporate directors and corporate officers
- The process of holding meetings, electing officers or directors, and voting procedures
- How corporate records will be stored and managed
- How company disputes will be handled and resolved
- How the corporate bylaws will be amended or added in the future
- The date of the shareholders’ annual meeting
- The process of negotiating contracts
You may download the following bylaws templates and customize them to suit the requirements of your Michigan corporation.
6. Select a share structure
It’s essential that you issue stock when starting a corporation. The Articles of Incorporation Form that you filed would have declared the number of shares and whether they were preferred or common shares of stock.
Therefore, the number of shares you’re going to issue must always be either lower than or equivalent to this number. Each share of stock is issued only once. But, it can be sold and traded after being issued.
Additionally, a record of all issued shares must be recorded in the company’s annual report, and if your corporation decides to do so, you may issue stock certificates to shareholders indicating their shares.
7. Obtain an EIN
Obtaining an EIN or Employer Identification Number is necessary for tax purposes. This unique nine-digit code is more or less a Social Security number, but for your Michigan corporation or business entity. Essentially, it’s used as a form of identification by the federal government or Internal Revenue Service.
An EIN is also useful and necessary when it comes to opening up a corporate bank account, submitting state and federal taxes, and hiring employees for your company.
The EIN application is of no cost to you when done through the IRS after forming your company.
The quickest way for business owners to obtain an EIN is to complete the online application using the EIN assistant. Alternatively, you may opt to download IRS Form SS-4 and send it to the following mailing address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
8. File Michigan state taxes
Aside from federal tax, and depending on the type of business you’re running or the new business structure you are filing, you may need to register for a few types of corporate tax:
- Michigan corporate income tax: The Michigan corporate income tax imposes a 6% tax on C corporations. Additionally, taxpayers are taxed as corporations federally.
- Michigan sales tax: All Michigan corporations that are selling physical products, must register for a form of tax called a seller’s permit. The seller’s permit may be obtained via the Michigan Department of Treasury’s website. You’ll be issued with a certificate allowing you to deduct sales tax on goods categorized as taxable goods.
- Michigan employer taxes: When hiring employees for your Michigan corporation, you must register for Michigan employer taxes via the Michigan Department of Treasury’s website.
9. Michigan business licenses and permits
You cannot obtain a statewide business license in Michigan for any type of corporation as it doesn’t exist. However, depending on the county or city that you’re operating a business in, one or more licenses and permits may be required prior to legally running a business.
- Michigan sales tax license: Wholesalers and retailers in the state of Michigan selling tangible personal property will need to register for a sales tax license. This also applies to you if you offer certain services or you are a contractor. The sales tax license is also called a sales tax permit and is obtained from the Michigan Department of Treasury.
- Certificate of exemption: If your corporation is planning on purchasing products and services to resell, you’ll need to obtain a Michigan Certificate of Exemption so that you don’t pay sales tax on merchandise that is being resold to customers.
- Professional license: A variety of professions in Michigan are regulated. Therefore, if you offer specific services, you’ll need to register with the Michigan Department of Licensing and Regulatory Affairs. Some of the business types or professional corporations that will need licensing include antique dealers, car washes, bakeries, dog groomers, photographers, and more.
10. Annual report requirements in Michigan
The Michigan annual report needs to be filed by the 15th of May each year ensuing incorporation. You may file online by using Michigan’s LARA website.
11. Costs of starting a corporation in Michigan
The filing fees below apply to all Michigan corporations:
- Name reservation: $25
- DBA name: $10
- Articles of Incorporation: $50
- Annual report: $25
- Michigan Certificate of Good Standing: $12.50
Next steps after forming a corporation
The following steps are essential in maintaining and growing a successful Michigan corporation after formation:
Open business bank account and credit card
Creating a separate financial ecosystem for your business which is also considered a separate legal entity, is one of the most important steps in forming a corporation in Michigan. Additionally, it helps keep your accounting processes simplified and is the key to separating your personal and business finances.
When you open up a business bank account and credit card, all purchases and income will flow through these accounts. When first starting a business in Michigan, it’s recommended that you open up a checking account. You’ll be able to keep some money in the bank later on as your business grows instead of investing it directly back into your business. Consequently, you may opt for a high-yield savings account in order to help your money grow.
If you want to work towards building your company’s credit profile, then a business credit card is an important step to get you there. It can also help you qualify for a loan or other types of business funding in the future.
FAQs
A nonprofit corporation is an organization that generates profits to help society or further its cause. Therefore, they are exempt from paying taxes, whereas other business structures such as limited liability companies and sole proprietorships will need to submit federal and state taxes.
When forming a C corporation or a C Corp., owners are not normally personally liable for the obligations and debts of the business. However, there are some exceptions to this rule. Therefore, it’s advisable to comply with various corporate regulations and also obtain business insurance cover to ensure liability protection.
In order to protect your personal assets, you need to have dedicated business banking and business credit accounts.
Double taxation is basically income taxes paid twice on the same income source. C corporations are the only business entity that experiences double taxation.
S corporation seems to be a common option for business owners because corporate taxes are handled on the owner’s personal tax returns.
