How to Start an LLC in Michigan

Michigan is situated in the USA, near the Great lakes. This state is revitalizing and becoming a fantastic place for people to start their businesses. Detroit, Lansing, Grand Rapids, such great cities, are located here. Along with the automobile sector, there are military, mining, manufacturing, etc., industries in this state. If you are planning to start your LLC in Michigan, this article will help you with that.

The first thing that comes to mind is what an LLC is?

  • LLC stands for Limited liability structure. It is a private limited company with a business structure that combines the perks of a sole proprietorship and partnership. 
  • The structure offers limited liability and the pass-through tax facility of individual proprietorship and partnership. 

Now, we know what LLC is, let us take a look at the benefits that it offers:

Limited liability

In a standard business structure, your assets and business assets are not separated. That said, if your business is in debt or someone sues your company, then your own money can be used to pay those debts. But this is not the case in a Limited liability company. The LLC separated the business from your expense. If something happens to your business, then your assets will not be held liable. 

The flexible tax structure

Well, most of the people out there hate taxes. Some may find it a hassle to file them. But in LLC, you have the option to decide how you want it to be taxed. You have this much flexibility. You can tax your LLC as an S proprietorship, C proprietorship, partnership, Sole Proprietorship; it is up to you. 

The distribution of income 

The members of the LLC have the choice to decide how the profit is to be distributed. It can depend on many factors, how much each member has contributed. They can choose however they feel appropriate. 

Easy to form

LLC’s are easy to form and operate. Forming a corporation can be costly and even hectic, but creating an LLC is easy. You have to follow some steps, and pretty soon you will be the owner of your company. Now, this is the time for our entry. In this article, we will enlighten you on these steps that will help you move forward. 

Step 1: Pick a Name for your Company

The first step in forming your LLC is to select the name of your company. This step might look trivial, but it is an integral part as your company will be known everywhere by its name. But while selecting it, you have to be sure that it comes under the Michigan laws for naming. Remember that your name should be unique, but it should also be searchable by the customers. 

Let us look at the guidelines that you have to follow while naming your LLC:

  • The Limited liability company or any of its abbreviations such as “LLC” or others must be present in the name. 
  • Your name in any sense should give an idea that it is a government agency such as the Department of State, FBI, Treasury, or any government-related department.
  • There are some restricted words that you cannot put in the name. And if you use the words such as Attorney, bank, etc., then a licensed person, a lawyer, or doctor should be a member of your company, and it will also need additional file work. 

However, there are more rules; for that information, you can check out the Michigan department of licensing and regulatory affairs website (LARA).

The following vital point you have to keep in mind is to check whether the name is available. You can do so by searching it on LARA. If you found your chosen name there, it is not available, so you have to do it with a different name.

After deciding upon a name and that is available, the next step is to register the name. If you don’t want to start your LLC right away, you can reserve the name with the state department. For that, you have to fill a name reservation form. We are going to see that in detail. 

The reservation of your company’s name

Suppose your company will not start soon, and you think that someone might use your name that you have selected after so much thinking and hard work. If that is the case, you don’t have to worry as you can reserve your name for 180 days. You have to pay $25 for that to happen but remember that it can’t be refunded. You can file the request online, or you mail or hand-deliver the hard copy. 

Let us take a look at the three ways: 

Via Online

You can go to the Department of Licensing and Regulatory Affairs and fill the online form there. It is straightforward and efficient. 

Via postal mail

You can download the form from the official website, then fill the form and send the hard copy to: 

Michigan Department of Licensing and Regulatory Affairs

Corporations, Securities & Commercial Licensing Bureau

Corporations Division

P.O. Box 30054

Lansing, MI 48909

Hand-delivery

Same like the postal mail, you have to download the form, print it, and after completing it, you can personally deliver it to: 

2501 Woodlake Circle

Okemos, MI

It will take around 3 to 5 business days for your application to be processed. You can also expedite the process if you want. For a 24 hour service, you have to pay $50; for the same-day processing, you have to shed $100, and if you want it to be swift enough, it will cost you $1000 for a one-hour service. But remember, if you have opted for the expedited process, include the expedite form while submitting your application. 

After reserving the name, you should also secure your domain name. Creating a business website is an integral part of growing your business. Sooner or later, you have to form one. So, it is better to select your URL domain and reserve it now. It will save you time in the future.

Step 2: Assign a Resident Agent for your Michigan LLC

The next is to appoint a resident agent for your LLC. Like the other states in the United States of America, Michigan must appoint an LLC agent. The state mandates the appointment of a resident agent. You can nominate a person as an agent or even a business entity. Suppose the business entity is based out of the state; it can be a resident agent if their business office is in the state. 

What does a resident agent do? A resident agent receives all the legal documents and correspondence on behalf of the state. Any legal notice, tax reminders go through the resident agent. It is a medium of contact between the company and the Michigan state department. That is why it is mandated by the state, as the state wants a medium of communication. 

Who can be a resident agent?

Any person or a corporation can be a resident agent; there’s one condition that they should be a Michigan resident. If the agent is a business entity, then they should be authorized to do business in Michigan. You can also be your resident agent if you want to. So to summarise who can be the resident agent:

  • If your company’s resident agent is a person, they should be living in Michigan.
  • If your company’s resident agent is a corporation or a business, they must be authorized to do business here
  • This point is valid for both the person and entity that they should have a street address in Michigan
  • The most crucial point is that as the work of the agent is to take care of the legal correspondence so the agent should b present in the office during the business hours 

Why is the resident agent necessary?

Now we know what resident agents do, it is easier to understand their importance. A resident agent will make sure that all the essential correspondence gets to its owner. And someone is always there to take care of them. So, you don’t have to worry about whether you skipped an important notice or something like that. A resident is there to take care of all of it. The name of the resident agent is mentioned in the Articles of the organization to make it official. Here comes the question: what is an article of the organization? We are going to look into that in the next step.

Step 3: Submit the Articles of the Organization.

This step marks the official formation of your LLC. With the submission of your Articles of organization, your LLC is legally formed. You have to file the document with the Michigan Department of Licensing and Regulatory Affairs. So, after naming your company and appointing a resident agent, this step certifies your company. You can submit the articles of the organization online, or you can submit the hard copy. But make sure that all the essential details are mentioned in the document. 

You will need the following details in your articles of organization: 

  • The name of your company 
  • The name of the resident agent and the address
  • The date at which you file the reports of the organization
  • The type of business you run
  • The general purpose of the LLC
  • Whether the LLC is member-managed or manager-managed
  • The phone number and signature of the organizer 

You can get all the information on the official website of the state department. So, there are three methods by which you can file the articles of the organization.

Filing via online 

For the online submission, go to the Department of Licensing and Regulatory Affairs official website. There you will find the online form, fill and submit. This method is quick and efficient. 

Filing via mail

You have to download the form, print it, and then fill it. After that, you can send the completed form to: 

Michigan Department of Licensing and Regulatory Affairs

Corporations, Securities & Commercial Licensing Bureau

Corporations Division

P.O. Box 30054

Lansing, MI 48909

Filing via hand-delivery

You can download the form and print the hard copy. After filling it, you can hand-deliver the form to:

Michigan Department of Licensing and Regulatory Affairs

2501 Woodlake Cir.

Okemos, MI 48864

You have to pay a fee of 50 dollars; it doesn’t matter whichever method you chose. If you want to accelerate the processing time, then there is an option for that too. If you want your application to be processed in 24 hours, you have to pay 50 dollars. For the same-day service, you have to shed $100. If you want the process to be swift, then there is an option for two hours and one hour service too, and for that, you have to pay $500 and $1000 respectively. 

Step 4: Draft an Operating Agreement for your Michigan LLC

This agreement is significant. However, the operating agreement is not officially mandated by the state, but it is a must for its smooth running. 

What is an operating agreement? 

It is an agreement that outlines the rules and guidelines by which your company should run. It will entail how the duties are divided, what role each member should play, how the profits will be divided, how the voting will be done, what will happen in the event of a loss or if someone leaves the company, and many more. If these things are already cleared, then there will be less chance of having a conflict. One might think if it is not necessary, then it might not be significant. But that is not the case; without a functional operating agreement that specifies all the essential guidelines, your company might face some operational difficulties. It protects against these difficulties. 

Now, you know the value of the operating agreement, and you want to draft one; there are two ways for that. Suppose you wish to write your company’s operating agreement. Keep in mind that all the details should be there. If you’re worried that it might need some professional to do so, then you are wrong here. Nowadays, there are several online templates available online to help you. With these templates’ help, you can create an efficient and fantastic operating agreement for your LLC. Or you can also appoint a lawyer to that for you. The Attorney or lawyer will ensure that not a single detail is missed and will provide you with a flawless operating agreement. 

Step 5: Apply for EIN- Employer identification Number

All the LLCs that are newly formed have to apply for an EIN. EIN is known as the employer identification number, which you can get from the IRS- internal revenue service. Just like you have a social security number, EIN is identical for the business. It is a nine-digit number used to open a bank account, file taxes, hire employees, and many more. It is a way through which the IRS keeps a record for your tax. Obtaining one is also very easy. There are three ways through which you can get the EIN. 

Via Online

The online method is the most efficient and the quickest way. You have to go to the IRS website and from 7 am to 10 pm, Monday to Friday, you can apply for the EIN. After applying, you will instantly receive the employer identification number. 

Via Fax

For the fax method, you have to download the Form SS-4 and print a hard copy. After that, fill the form, and you can fax it to the office at 855-641-6935. You can fax the form any time you want, and in four working days, you will receive your EIN. 

Via mail

There is a third method that is postal mail. It might not be the favorite because it is the slowest. But if you want to send your application via postal mail, then you can easily do so. For that, download Form SS-4. After that, print the hard-copy complete the form, and then mail it to:

Internal Revenue Service Operation

Attn: EIN Operation

Cincinnati, OH 45999

It will take four weeks for your application to get processed.

Congratulations! Your LLC is officially formed. All the necessary steps that are required to create an LLC are over. Now, you are the owner of your company. However, even after forming the LLC, there are some essential steps that you should be aware of before opening the doors of your business. 

Step 6: Federal, State, and Local tax

Tax is an essential aspect that you should never fail to file. There are taxes that you have to pay at the Federal, state, and local levels. 

LLCs are pass-through entities. It means that the taxes are passed through the owner’s income tax returns. They have to mention the profits and losses in their returns. The LLC does not directly pay to the federal government. And we have learned in the introduction that the LLC has a flexible tax structure. It can choose to pay tax like a corporation too. If that is the case, then you have to pay a separate corporate tax. 

State taxes are not different from federal tax. Here also, the profits and losses are passed through the owner’s tax returns. The only exception is that if you select yourself to be a corporation. 

In addition to that, there are local taxes also that you might have to file. These solely depend on your location and what business you run. Suppose you sell goods and stuff you have to pay Sales tax and Use tax. If you hire employees, then you have to pay Unemployment insurance tax and withholding tax. So, it is always better to be informed before commencing your business. Besides, some local governments also have their criteria for taxes. So, contact your local government of the city, county, or municipality to get all the details. 

Step 7: Obtaining the License and Permits

Before commencing the business operation, check out all the license and permit requirements for your business. Working without a permit is illegal so never do that. You want to maintain good status with the state, so it is better to comply with all the laws. Several occupations require the permit; if you want more details on that, you can check out the LARA regulated licensed professional page. The requirements vary depending on your business types. If you run a restaurant, you will need a food sales permit license, building permit, health permit, and so on. If you sell liquor, you will require a liquor permit.

Similarly, for different businesses, there is an additional license requirement. It can even differ from state to state. So, it is better to get all the information. Do check the local and state website for more details. 

Step 8: Submitting the Annual Report

After your LLC is fully formed and is on the floor, you have to file an annual report every year. You have to file this report with the Secretary of State. The due date is February 15 every year. One important point to remember if you formed your LLC on September 30, you don’t have to file the annual report for that year. Ninety days before the due date, you will get a form delivered to your resident agent. You have to fill the form and send it to: 

Michigan Department of Licensing and Regulatory Affairs

Corporations, Securities & Commercial Licensing Bureau

Corporations Division

P.O. Box 30768

Lansing, MI 48909

If you want, you can also hand-deliver the form to: 

2501 Woodlake Circle

Okeanos, MI

If you want a more comfortable option, then you can also submit the form online. Go to the official website of the state and submit your form. It will take around 3 to 5 days for your document to be processed for all the methods. There are also expedited options that you can look for. 

Remember to file the annual report in time because it will impact your position with the state if you fail to do so.

Finally, we have reached the end of the article. If you follow all these steps, you will be ready to open your business—all the best in your ventures. 

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