How to form an LLC in Michigan in 6 easy steps
Before you open up shop in Michigan, there are a few matters to have lined up. This includes structuring your business in a way that makes the most sense to you. You may decide that a Limited Liability Company (LLC) is the best structure for your business.
Here are 6 steps to help you get your Michigan Limited Liability Company started on a strong note.
1. Check if your business name is available
The first item on your checklist should be finding out whether or not your business name is available to use by conducting a name search. There are a few additional points to consider when naming your business, according to the Michigan Department of Licensing and Regulatory Affairs:
- The business must not contain any words or phrases that indicate the business is organized for any purpose other than that which is stated in the Articles of Organization.
- An LLC name must not include the words “corporation,” “incorporated,” or the abbreviations “corp” or “inc.”
If you wish to reserve your name, you must file an Application for Reservation of Name with LARA. It is also important to note that you must file a Certificate of Assumed Name if an LLC is to operate under an additional name.
If you choose to reserve your business name, remember that it is not the same as a trade name or Doing Business As (DBA) name. A name reservation gives you time to submit paperwork to form a business entity, whereas a trade name may give you other rights to that name.
2. Claim your name
So, you’ve chosen your business name–now what? Next, you must claim your name by filing Articles of Organization. Just to provide a little refresher: The Articles of Organization are a part of the legal documentation required to register an LLC with the state.
For the Articles of Organization, you will need to include a few critical pieces of information:
- Entity name
- Duration of LLC
- Registered agent service
- Registered office
- Purpose of business (professional service, food service, etc.)
Bear in mind that if managers instead of members are managing your LLC, you will need to submit a statement that highlights this structure under Article 5. Additionally, if you have an LLC already in another state, you must register as a Foreign Limited Liability Company. To do this, you will need to obtain a Certificate of Authority from the Michigan Department of Licensing and Regulatory Affairs. A Certificate of Authority shows that you can transact business in a state other than your original state of formation. So, say you need to do business in Florida–you would need a Certificate of Authority.
If you are a sole proprietor in the State of Michigan, you do not have to register your business as an LLC if you do not want to. In Michigan, this is called an “assumed name.” You can find the requirements for this process on the LARA website.
Processing the Articles of Organization in the State of Michigan ranges from 10 to 15 business days. However, if you are a foreign LLC, processing time will be cut in half to approximately 5 to 7 business days.
3. Write your operating agreement
While you are not required to possess an Operating Agreement, having one is not a bad idea. Without it, you could open your business up to litigation. No one wants that.
The LLC Operating Agreement consists of the following sections:
- Organization: Date of LLC formation, members, and details of how ownership stake is divided. Also be sure to add what type of LLC your business is organized as Single-Member LLC, limited partnership, or Multi-Member LLC.
- Voting Power: List of LLC owners (members) and how decisions are voted on.
- Distribution of Finances: How profits and losses are distributed amongst members.
- Dissolution: How the business will be dissolved if members leave the business.
- Modifications: How one can modify the agreement and structure as the business grows.
- Severability: Description of how unenforceable aspects can void the rest of the agreement and the procedure for this action.
4. File your Annual Statement
Every business must file an Annual Report, or “Annual Statement,” as it’s called in Michigan. You must do this each year you are in business, and it should include your company name and address, as well as the name and address of the resident agent. This report can be filed with the Corporations Division, just like the Articles of Organization.
There are a couple of reasons you should have a resident agent. Reason number one is, a resident agent will ensure your reports are accurate and filed on time, which will help you avoid late penalties and costly mistakes. Also, using a resident agent will allow you to keep your personal address private because all reports or legal documents will be forwarded to the agent’s office address.
5. Pay your taxes
In Michigan, LLCs have “pass-through” status for paying state taxes. This means that LLCs do not have to pay corporate federal income tax to the Internal Revenue Service (IRS). Instead, income tax becomes the owner’s responsibility, and the owner will receive all tax returns. Ahead of getting your business taxes in order, you will need to obtain an Employer Identification Number (EIN). The EIN is easy to obtain; just apply on the IRS website!
6. Wrap up other regulation and sales tax requirements
Now, rules and regulations can vary depending on your business. For example, you may need to obtain industry-specific business licenses. If you are selling consumer goods, you will most likely be required to have a sales tax license. In the State of Michigan, retailers, wholesalers, contractors, service businesses, and out-of-state businesses selling to Michigan residents must possess a sales tax license. You can find the application for this on the Michigan Department of Treasury website.
There is a complete list of license types on the Michigan Commercial Licensing Bureau website. Let’s paint a quick scenario: you have just opened a salon business in Detroit. You and your staff will most likely be required to have individual cosmetology licenses, a cosmetology establishment license, a sales tax license, a tanning salon license (if this is a service you offer), and a liquor license if you plan to offer customers beer and wine.
Any forms and applications you fill out will likely require a filing fee. For example, an LLC Annual Statement fee, also known as form CSCL, is $25. You can contact the Michigan LARA office to find out state fees ahead of time.
Now, should you wish to apply for bank loans, a business bank account, credit cards, or permits, it may not hurt for you to obtain a Certificate of Good Standing from the Secretary of State. The Certificate of Good Standing serves as proof that you are legally allowed to conduct business in the state.
Get LLC insurance in minutes by following these steps
So, you know how to start an LLC. Now, you need to know how to best protect it with LLC insurance. Huckleberry offers several options to help you get the right coverage for your business.
Here’s how to get started:
- Visit Huckleberry.com and click on the “Instant Estimate” button. Here, you can get quotes for various insurance coverage types.
- Type in your industry so Huckleberry knows what insurance coverages are right for you.
- Answer a few questions about your LLC, including payroll estimates, revenue projections, and more.
In less time than it takes to drive through the Motor City, Huckleberry will provide you with quotes for multiple small business insurance options.
Check out our quick rate estimator for a ballpark figure of what you’d pay for business insurance. In need of workers’ comp coverage? Use our quick workers’ comp rate estimator to get a free, no-commitment cost estimate.
Setting up your Michigan LLC is relatively simple, and the state has provided new entrepreneurs with plenty of helpful resources to get through the process. Most people choose to establish their company as an LLC for excellent liability protection, so it’s wise to continue to protect your new venture with small business insurance. Hopefully, we have answered any and all looming questions you may have, and we wish you the best of luck as you begin your next chapter as a business owner!
Whether you’re looking to enroll in workers’ comp coverage online or you need a general liability policy for your company, Huckleberry can help. And within just 5 minutes! Now that your LLC is off the ground, it’s time to offer yourself peace of mind and enroll in the small business insurance policy that works best for you and your business.