How to Start an LLC in Michigan 2024: Step-by-Step Guide
Updated April 15, 2024 at 12:51 pm
If you’ve decided to start a limited liability company (LLC) in Michigan, but you’re not sure where to begin, you’ve come to the right place. This comprehensive guide walks you through how to start an LLC in Michigan with clear steps. It also covers the basics of LLCs and explains in simple terms the various forms and requirements you’ll need to get your LLC off on the right foot.
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Vault’s Viewpoint
- LLCs provide members with personal liability protection and the flexibility to choose whether they’re taxed as a sole proprietorship, a partnership, an S-corporation or a C-corporation.
- To start an LLC in Michigan, you need to choose a name that abides by Michigan’s guidelines, appoint a resident agent, file your Articles of Organization, obtain an Employer Identification Number (EIN) and file a beneficial ownership information (BOI) report.
- Multi-member LLCs should draft an operating agreement to outline rules, procedures, protections and other expectations for members.
How to Make Sure an LLC Is Right for You
LLCs deliver several benefits to owners, but they aren’t perfect for everyone. Consider the following Michigan LLC pros and cons:
Pros
- Single-member LLCs are taxed as a sole proprietorship, with the option to be taxed as an S-corp or a C-corp.
- Your personal assets are protected through limited liability protection in case your business encounters legal troubles or bankruptcy.
- LLC owners can receive tax incentives from Michigan, such as the small business alternative credit, which offers an alternate tax rate of 1.8% of adjusted business income.
Cons
- The paperwork and filing process to create an LLC is more complex and time-consuming than it is to start a sole proprietorship.
- LLC filing fees are more expensive (especially when expediting) than those for a sole proprietorship.
- Michigan LLCs may not issue shares, so if you plan to do so, you’ll need to start a corporation instead.
How to Start an LLC Business in Michigan in Five Steps
Follow the sequential steps outlined below to start an LLC in Michigan.
Step 1: Choose a Name for Your Michigan LLC
Your LLC’s name must be “distinguishable from the name of other corporations, limited partnerships or limited liability companies” already established in the state, according to Michigan’s Department of Licensing and Regulatory Affairs (LARA). The state’s business entity search tool can show you whether your name ideas are currently being used.
You must include Limited Liability Company, Limited Company or related abbreviations such as L.L.C./LLC or L.C./LC in your business’s name. Your LLC name can’t contain the words “corporation,” “incorporated” or their abbreviations “corp.” or “inc.”
Furthermore, your LLC’s name must not contain words or phrases that indicate that your company “is formed for a purpose other than the purpose or purposes permitted by its articles of organization” according to the Michigan Legislature. So beware of using an LLC name that may be misleading regarding your business’s services.
Reserving a Name
If you have a name in mind and have verified it’s available, but you’re not ready to file the rest of your paperwork, you can reserve the name for up to six months. Reserve your LLC name on the Online Filing System website, where you’ll need to set up a registered account if you haven’t already.
Otherwise, you can fill out the Application for Reservation of Name and either mail it or physically bring the application in person. LARA does not accept applications that have been filled out by hand. There is a $25 fee for each reservation and renewal submission.
Mail your application (along with your $25 fee) to:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities and Commercial Licensing Bureau
Corporations Division
P.O. Box 30054
Lansing, Michigan 48909
If you’re bringing the application in person, bring it to 2407 N. Grand River Ave., Lansing, Michigan, 48906.
Step 2: Appoint a Resident Agent
A resident agent (also called a registered agent) can be either an individual or business entity designated to receive official mail and legal documents on behalf of your LLC. You can serve as your LLC’s resident agent, or you can appoint a family member, friend or employee as long as they are 18 years of age, a legal Michigan resident with a mailing address (no P.O. boxes) and available on-site during business hours to receive documents.
A business that qualifies to be a resident agent in Michigan is a Michigan corporation or LLC. Foreign corporations or LLCs with a certificate of authority to do business in Michigan also qualify.
You can also hire a resident agent service who will receive and hold your LLC’s official mail and documents for a fee, which is a popular choice for the convenience it provides. Resident agent service prices are usually around $100 to $300 per year.
Step 3: File Articles of Organization
Everything you’ve done so far has been in preparation to file your Articles of Organization, which you can do online. If you would rather file by mail, you can fill out and print this form. Remember that LARA does not accept forms that have been filled out by hand.
It will cost $50 to file your Articles of Organization. You can pay more ($100) for same-day service or up to $1,000 to have your documents looked at within one hour of LARA receiving them.
If you’re filing by mail, send your Articles of Organization to:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities and Commercial Licensing Bureau
Corporations Division
P.O. Box 30054
Lansing, Michigan 48909
If you intend to submit your documents in person, bring them to 2407 N Grand River Ave, Lansing, Michigan, 48906.
To make filing your Articles of Organization easier, make sure you have the following information handy:
- Your LLC’s name
- Your business’s purpose
- Resident agent information, including name and address
- The physical address of your business
- Duration of the LLC
Step 4: Get Your Employer Identification Number (EIN)
Your EIN is a nine-digit number that identifies your LLC to the Internal Revenue Service (IRS) when filing taxes. Getting an EIN isn’t technically mandatory to create an LLC in Michigan as long as you are a single-member LLC.
However, you will need an EIN to file a Beneficial Ownership Information (BOI) report, which as of January 1, 2024, is now a requirement for all LLCs.
File for your EIN on the IRS website.
Step 5: File a Beneficial Ownership Information (BOI) Report
As of January 1, 2024, all new LLCs must file a BOI report to the Financial Crimes Enforcement Network within 90 days of their LLC’s formation/registration. LLCs created before January 1, 2024, have until January 1, 2025, to file their BOI report.
This law is meant to impede criminals who use LLCs as shell companies. Filing your BOI report is free. Failure to comply will result in civil fines of $500 per day and can get as serious as criminal penalties of $10,000 and two years in prison.
Optional (But Highly Recommended) Step: Draft an Operating Agreement
It is not a legal requirement for new LLCs in Michigan to draft an operating agreement. However, it’s highly advisable. Operating agreements may contain information ranging from procedures and protocols to the duties and powers of members and managers. Operating agreements are essential for multi-member LLCs as they protect members from personal liability and legitimize what would otherwise just be verbal agreements among business partners.
Frequently Asked Questions
What Is an LLC?
A limited liability company (LLC) is a hybrid business entity (also referred to as a business structure) that combines some of the features of corporations with those of a sole proprietorship or partnership. LLCs provide their members with personal liability protection to shield members’ personal assets from being seized in any company lawsuits or debts. LLC members can also choose to be taxed as a sole proprietorship, a partnership, a C-corporation or an S-corporation as long as they meet the right requirements.
What Are the Types of LLCs?
There are four main types of LLCs: domestic, foreign, series and nonprofit. However, some lesser-known kinds of LLCs include low-profit, anonymous, restricted and professional.
What Documents Do I Need to Start an LLC?
To start an LLC, you need your Articles of Organization (also called certificate of organization or certificate of formation). You also need an EIN to file the required BOI report.
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