Start Your Michigan LLC: A Complete Step by Step Guide

Quick facts about forming an Michigan LLC

Filing Fee	$50 (online or by mail)
Processing Time	2-5 business days (online), up to 3 weeks by mail
Annual Report Fee	$25, due by February 15 each year
Registered/Resident Agent Required	Yes, they are called Resident Agents and must have a Registered Office in Michigan
State Franchise Tax	None for LLCs
Business License	No statewide license, but local or industry-specific permits may be required
Managing Authority	Michigan Department of Licensing and Regulatory Affairs (LARA)

How to start a Michigan LLC in 5 steps

Starting an LLC in Michigan or any other state can seem daunting, especially if you are diving to it head first for the first time. Our guide breaks down the process into simple and clear steps, so that you can feel like a pro even if you’re doing it for the first time.

Here Are the 5 Steps to Take to Start an LLC in Michigan:

1. Name your Michigan LLC
2. Choose a resident agent and registered office
3. File articles of organization
4. Create an operating agreement
5. Apply for an EIN

Below, you’ll find both a detailed explanation and a video to walk you through each step.

Step 1: Name your Michigan LLC

Before you file, ensure the name you want to use is available by performing a Michigan business entity search. The recommended ways to find out if another business uses the name are to call 517-241-6470 or use the LARA online search for a business entity.

Reserve a business name

The reservation of a name for an LLC is possible for 6 months following the month of filing the reservation form. This reservation is accomplished by filing a name reservation form and paying $25. If you are ready to file the LLC immediately, there is no need to reserve the name; however, name reservations are first-come, first-served.

File a DBA or ‘assumed name’ (if opting for one)

Doing business as (DBA) is a way to have a different legal entity name for the LLC while operating under another name as the business. For example, Alphabet Inc. is the parent company doing business as Google.

In Michigan, a DBA is called an “assumed name.” To apply for an assumed name for an LLC, use the form CSCL/CD-541 and pay the $25 fee.

The name chosen for the assumed name cannot be so materially similar to another business name in the state that it causes confusion, so follow the state’s rules when choosing a business name.

Filing an assumed name can be useful in many cases, usually for branding purposes. If you’re not sure whether or not you need a DBA (or assumed name), learn more on what is a DBA, and how to file a DBA in Michigan.

Registering your name for trademark

Note that this step is also optional. You may want to protect your business name rights using a state or federal trademark. The filing fee for registering a trademark or a service mark, only for use in Michigan, is $50.

Suppose the business already has a registered trademark or service mark on file with the U.S. Patent and Trademark Office (USPTO). In that case, that filing extends the registration to all of the United States, including Michigan.

Step 2: Choose a resident agent

A registered agent for your Michigan LLC is a person or a corporation that serves as the address for all legal and formal inquiries. In Michigan, a registered agent is called a resident agent but operates the same way as registered agents in other states.

Under Michigan law, an LLC may serve as its own resident agent if it maintains a physical office in the state, called a Registered Office, that is open during regular business hours and has at least one staff member who is a person over the age of eighteen to accept process service and mail. A postal box does not suffice to meet this requirement.

Most businesses prefer to use the services of an authorized resident agent for a small annual fee. Be sure the resident agent is in good standing with Michigan state. The LLC will authorize this resident agent to accept process service and mail for the company. The registered office address and the resident agent will be part of the public records in Michigan. 

Step 3: File articles of organization

Filing articles of organization is one of the very first steps of officially forming your Michigan LLC.  You can think of it as the birth certificate of your new LLC! 

The Articles of Organization form contains basic information about your LLC. Details like:

• The name of your LLC
• The purpose of the company
• Name and address of the registered agent
• The name of the organizer of the LLC (that would be you!)

State fees

Starting a new LLC in Michigan costs $50.

Forming a new professional LLC costs $50. Any additional licensing fee depends on the profession.

A foreign LLC transacting business in Michigan must obtain a Certificate of Authority for $50.

Requirements

Articles of organization

For a new LLC, the CSCL/CD-700 filing form contains only the minimum information required for the Articles of Organization, which may not meet the full needs of your new LLC.

You may want to file more comprehensive Articles of Organization instead. This filing is fine as long as it meets the minimum requirements.

For a professional LLC, which requires a professional license, use the form BCS/CD 701 instead. This is only applicable if you practice a trade that requires a professional license, such as a medical doctor or a law practitioner.

Resident agent

As mentioned in step 2, You must have either a physical office for the LLC in Michigan that is open during regular business hours or a resident agent to accept process service. A resident agent is authorized to accept process service on behalf of the LLC and maintains a physical office in Michigan, which is open during regular business hours.

Entity name

The LLC name must contain the words Limited Liability Company or the abbreviation LLC, LLC, LC, or LC.

How to file

An LLC is officially formed in Michigan by filing Articles of Organization (form CSCL/CD-700) with the proper LARA bureau and paying the $50 filing fee. Make this filing and fee payment online (preferred), by mail, or in person at the Corporations Division bureau office.

Filing for LLC in Michigan

Filings may be done online, by mail, or in person.

It is safer and more efficient to use the available online services than going to the office in person.

Expedited services are available by submitting the form CSCL/CD-272 and paying extra fees depending on how fast you need the filing done, which are:

• $1,000 for one-hour service
• $500 for a two-hour service
• $200 for same-day service for existing entities
• $100 for same-day service for new entities
• $100 for service within 24 hours for existing entities
• $50 for service within 24 hours for new entities

Here is contact information for the Department of Licensing and Regulatory Affairs (LARA) Corporations Division.

Hours of operation and office location – Okemos Building

Monday to Friday, 8:00 a.m. to 5:00 p.m. (Eastern time)

• Cashier’s office (first floor), Monday to Friday, 8:00 a.m. to 4:30 p.m. (Eastern time)
• The Corporations, Securities & Commercial Licensing Bureau
• 2407 N. Grand River Ave.
• Lansing, MI 48906
• Email: [email protected]
• Tel.: 517-241-6470
• Fax: 517-763-0039

Postal mailing address (for USPS delivery only):

• P.O. Box 30018
• Lansing, MI 48909

Step 4: Create an operating agreement

A written Operating Agreement defines how the business will run. It’s important to cover everything that might arise in the future that may cause a conflict, especially if you have a multi-member LLC.

Is an operating agreement a must?

Michigan has no legal requirement for an LLC to have an Operating Agreement. If you are a single-member LLC, it is unnecessary to have an Operating Agreement, although it’s still permitted under Michigan law. Nevertheless, it is good business practice for an LLC with more than one owner to have a written Michigan Operating Agreement. If questions come up about operations in the future, the owners can refer back to the written Operating Agreement. 

It’s also recommended for a single-member LLC to have an operating agreement. Since this document lays out the details of operation of your LLC, it’s a key element in keeping your liability protection intact, in case of any legal woes. An operating agreement is so essential, we consider it a must! 

The critical elements of an operating agreement are as follows:

• Business Purpose: This is the intended business purpose at inception and usually allows for any other lawful business purpose to cover any future changes and opportunities
• Term: This is the length of the LLC’s operating timeframe or in perpetuity if it continues forever
• Tax Treatment: This declaration is whether the LLC is a pass-through entity or if it will elect to be treated as a C-corporation by the Internal Revenue Service (IRS) for federal tax purposes
• Owners: Ownership is determined by being a member of the LLC and expressed in units. Each unit equals a certain percentage of the company
• Ownership Interests: The description of ownership interests in the Operating Agreement outlines how profits, assets, and losses are divided among the LLC’s members
• Members’ Investments: This is a list of the initial capital contributions invested by each member in the LLC
• Additional Capital Contributions: This is an optional provision that may require members to contribute additional capital
• Members’ Rights and Responsibilities: The Operating Agreement covers how the company makes business decisions, who has management responsibility and voting rights, and what happens if there is a dispute
• Members’ Duties and Compensation: If members have specific duties to perform for the LLC, this provision covers their duties and if they will receive any compensation for work done for the LLC
• Management Structure: If the managers are not all of the members of the LLC, then they are identified, and the management structure is described, including who has the authority to bind the LLC by contract
• Accounting and Auditing: This describes where the accounting records are and the right of each member to audit them during regular business hours at the member’s expense
• Adding New Members and Withdrawals: This section covers what happens when the LLC adds a new member or if one of the existing members withdraws
• Expulsion of a Member: This covers the reasons and process for the expulsion of a member. The reasons should be serious, such as fraud, criminal acts, and negligence that harms the LLC or its members
• Transfer of a Member’s Interests: This provision covers any rights that members have to transfer their ownership interest to another party and the right of first refusal of the existing members to buy the member’s interest instead of allowing the member to sell to a third party
• Dissolution: This section covers what may happen to cause the dissolution of the LLC
• Sudden Death Buy-Sell: This provision allows for the sale of a member’s ownership interest in the LLC to the remaining member(s) in the case of a member’s death or permanent legal incapacity, so the LLC continues to operate
• Non-Compete: This optional provision prevents a member from leaving the LLC and then directly competing with it for a particular time after leaving
• Meetings: This covers when and how meetings of the members will be held, what consists of a quorum required for voting, and the number of membership units that represents a majority ownership interest
• Disputes: This optional provision covers the use of arbitration and mediation as alternative dispute resolution compared to potentially more-costly litigation
• Law: This provision states that the LLC operates under Michigan laws. More details about creating an Operating Agreement for an LLC are in our separate, in-depth explanation of that topic

More details about creating an Operating Agreement for an LLC are in our separate, in-depth explanation of that topic.

State requirements

Suppose you do not have an Operating Agreement for your LLC. In that case, the business must run according to the default provisions in the Michigan Limited Liability Company Act of 1993 and the amendments signed into law by Governor John Engler as Public Act 686 on December 2002.

Step 5: Apply for an EIN

When forming a new entity, the IRS requires the company to have an employer identification number (EIN) for tax records, payments, refunds, and filing tax returns. There is no cost for an EIN, and it is very straightforward to apply for an EIN online. Please note that the IRS website operates only from Monday to Friday, 7 a.m. to 10 p.m. (Eastern time).

We provide this service and will apply for an EIN for our clients, if they opt for it as part of our automated LLC formation process.

What to do after you’ve opened an LLC in Michigan

Next steps after opening your Michigan LLC

Comply with the Michigan’s tax requirements

If your LLC is a pass-through entity, Michigan has no annual state LLC tax. However, if you elect to be a C-corporation for tax purposes with the IRS, the company will pay a 6% flat fee for Michigan’s state corporate tax rate.

After you get your federal EIN for a new business in Michigan, you must register with the Michigan Treasury Online (MTO) for business taxes.

How your LLC will be taxed

You will pay federal, state, and perhaps local taxes for your business operations. Learn more about LLC taxation here.

Federal income tax

The LLC can be either a C-corporation that pays federal taxes or a pass-through entity for federal tax purposes. If the owners of the LLC elect to be treated as a C-corporation for federal tax purposes, they file a Form 8832 Entity Classification Election with the IRS.

Treatment as a C-corporation means that the LLC pays federal income taxes on its net income.

The advantages of this entity classification are the possibility of more deductions being allowed and that dividends paid by the LLC to its owners are subject to the long-term capital gain tax rate, which is usually lower than a taxpayer’s individual tax rate.

The disadvantages are double taxation and the added expense of maintaining a C-corporation.

A pass-through entity is one in which members report their portion of the LLC’s net income on their personal federal income tax returns. However, a disadvantage is that LLC members have to report this income as self-employment income and pay federal taxes on it, including withholdings for Medicare and Social Security.

Federal self-Employment tax

If your LLC operates as a pass-through entity, you will pay self-employment taxes on the income from the LLC. The federal self-employment tax rate for 2020 and 2021 was 15.3%. Social Security was 12.4% of that amount, and Medicare was 2.9%.

After reaching the income threshold of $137,700 for 2020 or $142,800 for 2021, there are no further Social Security taxes for any income above the threshold.

State income tax

There is no Michigan state tax on an LLC that operates as a pass-through entity.

The Michigan corporate income tax (CIT) rate is 6% of taxable income. This rate applies to all corporations transacting business in the state and any LLC that elects for taxation as a C-corporation.

Small business alternative credit

Michigan has only one credit in the CIT, which is for any business entity that is a state taxpayer with gross receipts less than $20 million and with adjusted business income (minus the loss adjustment) that does not exceed $1.3 million each year adjusted for inflation.

There is a disqualification of the taxpayer if any officer or owner of the business receives more than $180,000 in annual compensation.

A qualifying business under the small business alternative credit pays only 1.8% of adjusted business income, subject to recapture provisions if the company fails in the future to qualify by moving out of the state within five years after claiming the first credit.

Sales tax

The Michigan sales tax rate is 6%. Goods subject to sales taxes include furniture, appliances, vehicles, prepared food, and many other items. Some items such as machinery, raw materials, groceries, gasoline, utilities, medical devices, prescription medication, and others are tax exempt.

If you are buying goods for re-sale, you should apply online for a sales tax license to get a sales tax license number. Then, when claiming a sales tax exemption, you use the form 3372 Michigan Sales and Use Tax Certificate of Exemption.

Payroll tax

For the calendar year 2020, payroll tax in Michigan had a withholding rate of 4.25%, with a personal exemption of $4,750. See the Michigan payroll tax withholding rules for more information and due dates.

Other state taxes

When an out-of-state business sells or leases tangible personal property to a Michigan resident, they must register to pay a 6% use tax.

Licensed marijuana retailers pay a 10% Marihuana Retailers Excise (MRE) tax on sales and collect 6% sales tax from customers.

Other tax laws include the Bottle Deposit, 9-1-1 Surcharge, and the Insurance Provider Assessment Act (IPAA).

Understand your ongoing annual Michigan LLC fees

Michigan requires all owners of LLCs operating in the state to file a Michigan annual report.

The annual form and payment of the fees can be filed online using your Customer Identification Number (CID) and PIN that you get when you first register.

Each year, for a regular LLC, you will pay an annual fee of $25. For a professional LLC, the annual fee is $75. The form is due before February 15th of each year.

If filed late, the penalty fee is $50.

Failure to pay your annual filing fee and file the report for two years after it is due will cause an automatic revocation of good standing. To reinstate good standing requires the payment of past-due fees and total penalties for all the years they are due.

Learn more about ongoing Michigan LLC costs here.

Obtain relevant business licenses and permits

There is no generic business license in Michigan. However, you may also need a certificate, license, or permit to operate, depending on your business type. Learn more about getting a Michigan business license.

See Michigan’s official website to determine if your new business needs a certificate, license, or permit. Search by business type or read through the alphabetical list to find your business type. For every kind of business, you will see the certificate, permit, and business license requirements, if any.

Also, note that the local rules of the county, city, village, or township may differ from the state rules. Home-based businesses are subject to the same laws.

Open a separate business bank account

Once you have a federal EIN and your LLC is registered in Michigan, you should open a separate business bank account for the LLC. Do not commingle business funds with your personal monies.

Having a business bank account establishes the company and may help limiting liability to the amount invested in the company. This benefit is one the main advantages of having an LLC to help protect your personal assets. In any case, it’s advised to consult a lawyer once your LLC is set-up to understand the legal requirements and how to maintain your LLC properly.

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