Start an LLC in Michigan, Steps and Costs Explained
Structuring a limited liability company (LLC) in Michigan is a relatively simple and straightforward process.
At the same time, though, there are a very distinct set of specific steps business owners will have to take to get this done right the first time around.
In this detailed guide we cover pretty much everything you need to know about how to form an LLC in Michigan.
We cover details like:
- How to choose the right name for your Michigan LLC;
- How to select a registered agent for your new business;
- How to file your articles of organization;
- The importance of creating an operating agreement;
Pick a Name for Your Michigan Based LLC
The very first thing you'll need to do when learning how to form an LLC in Michigan is choose a name for your business entity.
According to Michigan state law, all limited liability companies must be registered with the words “Limited liability Company” or the LLC abbreviation contained within.
For example, let's say that you wanted to start a business called Hometown Bakery. That name would work perfectly on your signage and your business cards. But if you wanted to register that as an LLC in Michigan you'd need to register that business as “Hometown Bakery, LLC”.
Every registered business name in Michigan needs to be unique, too. You can search the Michigan business name database (available through the Secretary of State Office) to find a name that fits your needs.
You can also reserve a name for six months at a time by filing the Application for Reservation of Name. This has to be done through the Michigan Department of Licensing and Regulatory Affairs. The price is $25 (as of 2021).
Choose a Registered Agent
The next piece of the puzzle in setting up your Michigan LLC is choosing a registered agent for your business.
Your registered agent is going to be either the individual or the business that you are registering with the state to receive legal papers and documents on behalf of your new LLC.
Michigan state laws say that official registered agents need to either be residents of the state, corporations that already exist in the state, or foreign corporations that have Certificates of Authority to transact business throughout the state of Michigan.
File Your Michigan LLC Articles of Organization
These documents must include very specific details, including (but not limited to):
- The new name of the Michigan LLC
- The purpose of the new Michigan LLC
- Whether or not this LLC is being created for a specific duration of time or in perpetuity
- The name and contact information for the registered agent of the LLC
- The specific effective filing date for the Articles of Organization
- The signature and contact information of the LLC organizer
On top of that, these articles need to be filed with a payment of $50 to be active in the state database.
Create your Operating Agreement
Michigan does not require all new businesses (or LLCs, specifically) to create Operating Agreements by law – though they do very strongly recommend it.
Operating agreements are internal documents intended to be used by businesses to set rules and guidelines about how those operations are to be governed.
These kinds of documents outline specific rights as well as responsibilities of all LLC members. It sets up the hierarchy for the LLC, breaks down how the LLC should be managed, and can even be used to preserve the limited liability protections that LLCs bring to the table in the first place.
Be sure to have this taken care of before you move deeper into the LLC creation process. This is a hugely important document that all new LLCs in Michigan certainly need to have drafted.
Square Away Michigan Tax and Regulatory Details
After all those details have been wrapped up it's time to square away Michigan tax and business regulation details (when applicable).
For starters, it's a good idea to apply for a free federal Employer Identification Number (EIN) from the IRS.
Why you need an EIN
This EIN allows you to hire people, allows you to establish business banking, and even makes it easier to facilitate your accounting and tax time processes. EIN information is good to have even if you do not intend to have any employees whatsoever. There's a lot of benefits to having this squared away.
Get a license
The next thing you want to make sure you have taking care of are all business license needs. Depending on the specifics of your operation you may or may not need to have local or state (and possibly even federal) business licenses to operate.
Local license information can be found by contacting the city or town clerk where your LLC is going to operate primarily. State license information can be found directly on the Secretary of State website for Michigan.
Finally, it's not a bad idea to start planning for tax time even before you sign up your first customer.
Speak to accountants about how to establish your banking system, your accounting system, and your tax preparation system even before you start generating cash flow. This will pay off significantly later down the line, that's for sure.
File Annual Statements with the State of Michigan
According to the Department of Licensing and Regulatory Affairs in the state of Michigan, every single business – LLCs included – need to file annual statements with the state.
All statements need to be filed by February 15 of each calendar year. You can file your annual LLC statement online. These annual statements need to include a $25 filing fee, too. Be sure to fill out all of the preprinted annual statement information sent to every LLC registered agent about three months ahead of the annual filing date.
At the end of the day, so long as you follow through with the step-by-step breakdown above, you'll have no trouble figuring out how to form an LLC in Michigan going forward!