An LLC, short for limited liability company, is a type of business entity ideal for many small businesses. It offers legal and financial protection without the strict requirements of an S Corporation or C Corporation. Here’s a closer look at how to start an LLC in Michigan, including its steps, costs and free resources that can help you along the way.
7 steps to start an LLC in Michigan
1. Choose an available LLC name
Picking your business name is an important early step. You can check the availability of a name on the Michigan Department of Licensing and Regulatory Affairs website to see if it’s already in use in your county. Also, it’s a good idea to search the U.S. patent database to ensure another entity does not own it.
Your chosen name must be distinguishable from other LLC names registered with your county. Some ways you can distinguish your name from similar in-use names include changing verb tenses, creatively spelling words or adding “Michigan” to the name.
You should also avoid restricted words if you do not have proof you are authorized to use them based on your business type or credentials, such as:
- Academy.
- Accountant.
- Adjuster.
- Alternative health care financing and delivery systems (or any other name that could be similar to a health maintenance organization or HMO).
- Builder.
- City of.
- Co-op.
- College.
- Counselor.
- Deposit.
- Doctor or Dr.
- Foundation.
- Health center.
- Inc. or incorporated
- Mutual.
For a full list of prohibited words, visit Michigan.gov’s restricted word list.
If you’re not ready to form your LLC, you can reserve your name for six months by submitting an application for reservation of name with the Michigan Department of Licensing and Regulatory Affairs, along with a $25 filing fee. Alternatively, if you are ready to form your LLC, you can also include it in your articles of organization (see step three).
2. Choose a registered agent
A registered agent is a designated person or company where legal notices may be sent if you find yourself on the wrong end of a lawsuit. This address must be a street address, not a P.O. box. A registered agent service receives all legal and compliance notices on your behalf, then forwards them to you, often via a digital portal. It also performs other key services, such as alerting you to upcoming filing deadlines.
You can either choose a person within your business to act as a registered agent, such as a manager, or hire a registered agent service.
In-house registered agents must meet the following requirements:
- Be at least 18 years of age.
- Be present at the listed registered agent address during all local business hours throughout the year.
- Be available to forward received correspondence to responsible business parties who can address them.
Here are some advantages to hiring a registered agent service:
- Reputation protection: You will not have to worry about embarrassing paperwork being delivered to the company office in front of clients or customers.
- Flexibility: If your registered agent is in house, that person must remain at the listed registered agent address during all business hours throughout the year. Hiring an agent allows business managers to legally leave the office for lunch with a client or travel.
- Penalty avoidance: Many registered agent services send one or multiple alerts when documents require immediate attention or when upcoming deadlines are looming, thereby helping you to avoid penalties or worse.
Registered agent services generally range from free to $300 per year, depending on features.
Find a registered agent: Best registered agent services
3: File your articles of organization
Filing your articles of organization is the step that officially forms your LLC. You can provide your information and submit the form online.
The following information should be included in your articles of organization:
- Your LLC name.
- Your registered agent and its address.
- Your business’s purpose.
- The names of all managers or members.
- The LLC’s “effective date” (or start date).
- The timeframe in which the LLC will operate; if no specific time frame is listed, the time frame defaults to “perpetual”.
- The LLC’s address.
- The submitter’s name and contact information.
To file your articles of organization, fill out the Michigan articles of organization form and submit it per the instructions in the form. You must pay a $50 processing fee when you submit your form. For expedited processing, you can pay fees ranging from $100 to $1000, depending on the processing time frame you request.
Some LLC formation companies offer free services to fill out and submit your articles of organization. These include Incfile and ZenBusiness.
4. Obtain an employer identification number (EIN)
An EIN is a tax identification number. It resembles a Social Security number but it identifies a business rather than a person. It is required for business banking, hiring employees, taxes and other key business tasks.
Using the IRS website, you can obtain an EIN instantly. The responsible party (owner or controller of your LLC) can apply online using their personal information, such as their Social Security number. Applying for an EIN is free.
5. Apply for required licenses and permits
The licenses and permits you need will depend on the type of business you are operating. You can find information about the licenses and permits you need on the Michigan Department of Licensing and Regulatory Affairs website.
For example, the following types of LLCs may need licenses or permits to operate their businesses:
- Adult and child care companies, including homes for the aged, adult foster care homes, camps and qualified interpreters.
- Health professionals, including dental, pharmacy, counseling, chiropractic, physical therapy and veterinarian medicine businesses.
- Occupation professionals, such as accountants, barbers, architects, real estate brokers or salespeople and appraisers.
- Those requiring commercial licenses, including security guards, professional investigators, funeral directors and polygraph examiners.
- Cannabis LLCs, including hemp processing and medical facility LLCs.
- Skilled tradespeople, including electricians, plumbers and mechanics.
- Fire safety professionals, including fireworks companies.
- Unarmed combat professionals, such as boxers and mixed martial artists.
- Liquor control LLCs.
- Construction companies, such as those that build elevators.
Filing for required permits and licenses often come with fees. For example, a one-year veterinarian controlled substance license is $91.90. And, to apply for a two-year accounting firm license, the fee is $300. Fees are payable by debit or credit card when filling out online applications.
7. File your annual report with the Secretary of State
You must file an annual report with the Michigan Secretary of State each year. The annual report includes information about your LLC’s officers, directors and registered agent. Michigan sends out a pre-printed form to your registered agent 90 days before your annual report due date each year. When you receive this form, check it over to ensure all details are correct and report any changes.
You can file online using the LARA Corporations Online Filing System. Before filing, you must create a Customer ID Number and PIN. You can do so by visiting the Michigan state CIN/PIN Recovery Page, which also allows you to apply for an ID number and PIN. When you file your annual report online, you must pay a $25 filing fee using a credit or debit card.
Cost to start an LLC in Michigan
Michigan LLCs have two required fees during the formation process. The first fee is $50 and it is for filing your articles of organization. You also have to pay $25 each time you file an annual report.
Some other fees that may apply to starting your LLC include:
- Registered agent services: You may pay for professional registered agent services, which can range from free to $300 yearly.
- Licenses and permits: Some businesses must pay for industry or occupational-specific licenses and permits. Fees for these vary significantly.
- Name reservation: If you have chosen a name but have not yet filed your articles of organization, you can reserve the name for up to six months for $25.
Find the best LLC services for Michigan: Best LLC services of 2023
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Michigan requirements for LLCs
Starting and maintaining an LLC in Michigan involves several steps. First, you must choose a unique name for your LLC that complies with Michigan’s naming requirements. Next, you must appoint a registered agent with a physical street address in Michigan. Then, file your LLC’s articles of organization with the Michigan Department of Licensing and Regulatory Affairs and pay the required fee.
To maintain your LLC, you must file an annual report with the state and pay the associated fee. Remember to comply with tax and regulatory requirements, including obtaining any required business licenses and permits.
Resources for Michigan LLCs
If you have more questions about starting a limited liability company in Michigan, these resources may be helpful:
Frequently asked questions (FAQs)
A Michigan limited liability company (LLC) is a type of business entity that is separate from its members and limits the liability of each member to his or her financial contribution only. With a registered LLC, your business can open a bank account, file taxes, hire employees and engage in other business activities.
Starting an LLC in Michigan is not free. Businesses must pay a $50 fee when registering their companies and an annual $25 fee to maintain the LLC. This is in addition to any taxes and fees for licenses or permits. If you need help starting your LLC, here’s a look at the best LLC services. For example, Incfile and ZenBusiness can help you establish an LLC for free.
Single-member Michigan LLCs generally pay taxes on their personal tax returns. This is known as a pass-through entity by the IRS and a flow-through entity in Michigan. LLCs with two or more members are taxed based on their share of partnership on their personal tax returns.
Yes, you are required to designate a registered agent for an LLC in Michigan. You can act as your own registered agent. However, this makes your personal contact information public and you must remain at the listed registered agent address during all regular business hours throughout the year. For more flexibility and privacy, you can hire a registered agent service to act in this capacity on your behalf.
LLCs in Michigan must file an annual report with the state. A $25 fee is required when filing this report. The easiest way to submit your annual report for a Michigan LLC is online using the LARA Corporations Online Filing System.
An LLC in Michigan can be dissolved through a unanimous member vote, a predetermined event or time, or a judicial decree. A certificate of dissolution must be filed post-dissolution and tax clearance must be obtained from the Michigan Department of Treasury within 60 days. If the LLC isn’t in good standing, it must be restored before dissolution.
