How to Start a Business in Michigan in 11 Easy Steps

There are several compelling reasons why entrepreneurs should seriously consider Michigan as a location to establish a new business. The Wolverine State has no lack of potential customers. In fact, it’s one of the top ten most populous states in the U.S. Major ports make it fast and easy to import raw materials and export products to international customers. There is a rich talent pool available if you need part- or full-time employees, and the state’s lower-than-average cost of living allows you to maximize your profits. Furthermore, Michigan’s state government and organizations, such as the Michigan Small Business Development Center, provide extensive support and assistance to new entrepreneurs and existing business owners seeking to expand into the Great Lakes area. 

Even so, starting a new business is never without challenges. A significant amount of planning, research, and hard work goes into setting up any new venture, and you must stay ahead of market and industry developments to remain relevant and profitable. The following are 11 proven steps to establish a solid foundation for your new business and increase your chances of long-term success.

1. Fine-tune your business idea
2. Create a business plan 
3. Choose a business name
4. Choose a business structure
5. Set up Banking, Credit Cards, & Accounting
6. Get Funding for your Rhode Island business
7. Get Insured
8. Obtain Permits & Licenses
9. Find your team
10. Market & Grow Your Business
11. Open the doors!

1. Fine-tune your business idea

As the owner, you should be excited about your products and/or services. Take a moment to think about your talents, strengths, education, and experience. Your business may be new, but you want potential customers to view you as a trustworthy individual, not a newcomer in your field. You also need to decide if you’re going to offer a product-based or service-based business. The latter option has lower start-up costs, as you don’t have to invest in inventory and pay for storage and shipping. However, you must possess the personality and expertise that potential clients are looking for to make it work. 

It’s also wise to consider the market and see what potential customers want from new businesses. For example, tourism is currently booming in the state, with over 131 million people traveling to the Wolverine State in 2024 alone. As the state has the second-longest coastline in the nation, small businesses offering boat rentals, jet ski rentals, and/or water sports equipment rentals could do well. Alternatively, you could become a private tour guide or set up a campground or resort. Farming is also a potentially profitable venture; after all, everyone needs to eat, and Michigan has fertile land, a moderate climate, right-to-farm laws, low housing costs, and numerous farmers’ markets. 

Your choice of city will also determine which products/services are in demand. In East Lansing, for instance, over 60% of the population is between 18 and 24 years old, so you’ll want to ensure your business caters to a young audience. However, if you decide to start a business in Riverview, where nearly half the population is over the age of 45, you’ll need to cater to the needs of older adults, many of whom have a family and a full-time job. A business selling high-end products/services could do well in Midland, where about a fifth of the population makes at least $100,000 a year. Someone setting up shop in Benton Harbor will want to bear in mind that over 40% of the city’s population makes less than $15,000 a year. 

2. Create a business plan

Once you know what you want to offer, it’s time to draw up a business plan. This includes:

Market research

Identify the target audience. Every business owner should know who’s most likely to purchase the company’s products/services. If you’re setting up a brick-and-mortar business, the location of your audience will play a key role in determining the best venue for your new business.

Financial plan

Where will you get the funding to start your new business? Do your savings cover initial set-up costs, or do you need to borrow money from the bank? Can you lower start-up expenses by starting with a limited product/service line-up? Make a list of potential expenses and determine how you’ll cover each one.

Marketing plan

How do you plan on reaching your audience? Perhaps your target audience is young people, and a social media campaign combined with SEO would be the most effective approach. Maybe you serve mostly seniors, and traditional advertising methods will work best for you. If your audience is multicultural (as it likely would be in diverse cities such as Grand Rapids), you may want to consider translating your marketing materials into multiple languages. Conduct thorough research and develop a marketing plan that effectively supports your business without overstraining your budget.

Choose a location

Your location can make or break your business. This is especially true if you rely on walk-in traffic, but businesses that don’t expect customers to walk through the front door still need to pay close attention to the venue. If you want to ranch or farm, you need to choose a county with the right soil, climate, and plenty of nearby farmers’ markets. If you plan to import or export products, choose a location near a port to minimize transportation costs. Even online businesses have specific needs, such as a good internet connection, a nearby post office, and affordable storage/warehouse facilities. 

Other important points to consider include neighborhood regulations and zoning laws. Townships and sparsely populated areas often lack zoning laws, which gives you the freedom to set up a business without legal hassles. Farming or ranching could be ideal in areas such as Elba Township, Grant Township, Kent County, or Ottawa County; however, these locations may not be suitable if you’re setting up a business that requires a high volume of foot traffic.

Unincorporated areas outside city limits likewise have lenient zoning laws. Still, you may not have access to good roads, and there may be stringent regulations in place if you live in a neighborhood with an HOA. If you choose to set up in one of the state’s historic districts, such as Saugatuck-Douglas, Detroit’s Historic District, or the Grand Rapids Historical Hill Historic District, you’ll likely benefit from a lot of foot traffic during tourist seasons, but there are also strict regulations in place to ensure these areas are properly preserved. Other zoning regulations may restrict how you design your business’s sign, how much noise your business can make, and how you dispose of water, waste, and hazardous materials. 

If you’re new to Michigan, consider visiting the city where you plan to establish your new business. Get help from a local real estate agent to find prospective properties and talk to your city’s permit office to find out if you’ll need a permit to start your business and what you need to get approved for a permit if you need one. Careful research is always in order, even if you set up in an area with minimal regulations, as you’ll want to check for competitors or nearby businesses that could ruin your new start-up. For instance, if you plan on running a care home for seniors in a rural town, choosing a property in a noisy area isn’t ideal.

Decide if you’re an online-only business

You can start online and then expand to a brick-and-mortar outlet, or vice versa. Alternatively, there’s nothing wrong with sticking to either an online or physical outlet. You need to decide on a course of action early on and make sure your business plan accounts for future expansion.

It’s more affordable to start an online business than a brick-and-mortar one. You just need a good website, social media platforms, and a supply/distribution plan. The state of Michigan also requires that online businesses purchase certain forms of commercial insurance, including general liability, commercial auto insurance, and workers’ compensation insurance (if you have one or more employees). However, you won’t need property insurance or insurance for natural disasters, as would be the case with a physical store. The downside of starting an online-only business is that it can be challenging to promote your new products/services to people who are unfamiliar with your business and what it offers. Setting up in a location with good foot traffic will help your business gain name recognition. 

3. Choose a business name

Michigan has laws governing the naming of new businesses. You cannot give your business a name that’s the same or similar to the name of another business in the state. You cannot use a misleading name or a name that’s an inaccurate representation of your business. You also can’t use a name that implies association with the government or denotes a professional association you don’t have (for example, you can’t imply you’re a doctor or medical facility unless you are licensed as such). As long as you adhere to these restrictions, you’re free to use whatever name you’d like for your new business.

Michigan naming rules

It’s not easy to change your business’s name later on, as you lose the name recognition and brand marketing you’ve done for your business. Conduct thorough research before registering your new company to ensure your name is a suitable fit. Perform a Michigan business entity search to check domain name availability and ensure you can create a branded website as well as social media pages for your business. Ensure your name is easy for customers to remember and pronounce. You’ll also want to ensure your new name gives you the freedom to expand your business later on. For instance, if you name your new business “Cory’s Catering”, it could be hard to set up a branded restaurant later on. 

4. Choose a business structure

You can set up your new business as a sole proprietorship, copartnership, limited partnership, limited liability company (LLC), or corporation. The rules for setting up each business type in Michigan are the same; however, you would need to file your sole proprietorship or copartnership with the county clerk, while other business structures are filed with the state’s Corporations Division. 

Common business structures

Sole proprietorship is perhaps the simplest type of business. It’s run by a single person, and the requirements for business operation are minimal. If you don’t want to use your personal name, you can file for a DBA (Doing Business As) name for just $10. It’s a risky set-up as your personal assets could be at risk if someone sues your business for any reason. This same point applies to a partnership. 

An LLC, on the other hand, separates your personal and business assets, keeping your personal assets safe if your business declares bankruptcy or someone takes legal action against you. Creating an LLC Michigan builds trust with potential customers, enables you to establish business credit, and facilitates partnerships with one or more individuals or companies.

A corporation also keeps personal and business assets separate, while allowing owners to raise large sums of capital by selling shares to as many people as are willing to buy them. There are numerous regulations you must adhere to when setting up this type of business. However, being able to list “Corp” or “Inc.” after your business name shows potential customers and partners that you’re legitimate, and you can take advantage of tax benefits that will allow you to save extra money for retirement. You can easily retire from or sell the business without legal hassles.

What tax advantages does each structure offer?

Filing taxes for a sole proprietorship isn’t difficult. You would list your profits, losses, expenses, and deductions on your individual tax form. If your business is a partnership, each partner must file a separate informational tax return.

If your business is an LLC, on the other hand, you can decide whether you want to be taxed as a C corporation or an S corporation. This gives you the freedom to pick the filing option that will maximize profits for your business. A corporation would have to file a corporate tax return each year, even if the business didn’t turn a profit. If you choose this model, you will likely want to seek professional help with your return to minimize your tax bill as much as possible.

5. Set up banking, credit cards, and accounting

If you’re a sole proprietor or partner and your business doesn’t have a DBA Michigan, you could use a personal bank account and credit card for your business. On the other hand, it’s wise to keep your business and personal assets separate by using separate accounts for personal and business purposes. Keeping finances separate ensures that you’re not overspending on business operations, prevents mistakes when it’s time to file taxes, and maintains organized financial records. 

If you have a DBA or form an LLC or corporation, you’re required to open an account in the name of your business. To do so, you’ll need to show a valid ID, Social Security number, EIN (if you have one), and business information and registration paperwork. If you’re not the sole proprietor, the bank may also request a resolution authorizing you to open the business account. Once you have a checking account, you can apply for a credit card in your business’s name. 

You’ll likely need a minimal initial deposit, no matter what type of account you open for your business. Bank-specific regulations vary depending on which financial institution you work with. Do careful research into banks and credit unions in your area to find one that’s a good fit for your business. Review monthly checking account fees, interest rates on business credit cards, and the processing time for payments to your account. It’s also a good idea to find a bank with a user-friendly website for online banking, which can save you time and hassle. 

6. Get funding for your Michigan business

Create a detailed financial plan for your business before exploring funding options. You need to know how much money you need for each expense. It’s crucial to know how soon you’ll need the money, because some types of financing take longer to obtain than others. Consider how much you can afford to pay back each month, as payment deadlines and interest rates vary depending on the type of financing you choose and the lender you work with.

Funding: the options and the requirements

Banks, credit unions, online lenders, and the SBA offer loans to small business owners. Banks are the most difficult institutions to work with because your business must earn at least $100,000 a year to qualify for a loan. It also requires a high credit score. Credit unions typically offer better terms and conditions, but it can be challenging to find a union that provides business loans. Credit unions that offer business loans typically work exclusively with clients. 

Online lenders often have more relaxed requirements and can be a good option for new business owners who are unable to obtain a loan from a traditional financial institution. Some online lenders will offer a loan with a credit score as low as 625 and may provide cash in hand the same day you file your application. Some may require that you make a certain amount of money per month or year. Others need your business to have been in operation for at least six months. SBA loans, on the other hand, have fewer requirements and low interest rates, but you’ll need a significant amount of collateral to qualify. 

If you don’t need a large lump sum of money at once, and you have a good personal credit score, obtaining a business credit card is likely your best option. You don’t have to show that you’ve been in business for a certain amount of time or meet income requirements, as your credit score is the main determining factor. Once your business has been in operation for some time, you can establish a business line of credit (LOC) that provides access to funds you can use to grow your business and cover expenses. 

Michigan-specific grants and funding options

The Michigan Economic Development Corporation (MEDC) offers various funding options to small business owners who meet specific program requirements. The Collateral Support Program, available to businesses across nearly all industries, deposits a set amount of money with the bank to help business owners meet the minimum collateral requirements for a loan.

The Loan Participation Program enables the MEDC to purchase a portion of a loan and, if necessary, offer a thirty-six-month grace period for repayment on this portion of the loan. The LPP is designed to meet the needs of businesses that have speculative cash flows and/or are looking for a non-competitive participant in the business. The Capital Access Program offers small business owners financing of up to $5 million, and it’s available to small businesses in all industries, except those involved in certain types of construction, development, and passive real estate activities. This source of funding can’t be used for refinancing an existing loan.

Small business grants Michigan are another source of funding. They don’t have to be repaid, which is a massive benefit to any cash-strapped business. In most cases, you’ll have to spend the money and then wait to be reimbursed. There are some restrictions on how grant money can be used, which means you’ll have to document how you spent the funds carefully. The Michigan State Trade Expansion Program grant can reimburse businesses involved in exports up to $15,000 per year, covering costs such as sales trips, trade shows, and compliance testing.

The Michigan Mobility Funding Platform and Early Stage Funding Programs can cover expenses for businesses involved in mobility, electrification, and high-tech industries. The Match on Main grant is designed to meet the needs of small brick-and-mortar businesses and can reimburse up to $25,000 in expenses for existing shops, stores, restaurants, etc. 

If these financing or grant options don’t quite meet your needs, or you want to find more information on funding, the Michigan Small Business Development Center can offer personalized advice and assistance. It has nearly a dozen offices throughout the state. It offers free advice, assistance, and training to existing small businesses and entrepreneurs who are starting a venture in the Great Lakes State. The federal government also provides Michigan-specific grants to businesses that meet specific industry and other requirements. Funding options range from hundreds of thousands to millions of dollars.

7. Get insured

If your business has at least three employees or one or two employees who work more than 35 hours a week, you’ll need to purchase workers’ compensation insurance. This type of insurance covers medical bills and lost wages for employees who are injured and/or exposed to harmful substances while on the job. If you use a vehicle for your business, you’ll need to buy a commercial auto insurance policy. This applies if you use any vehicle for commercial purposes because a personal auto insurance policy won’t cover accidents that occur while you’re using the car for business. Michigan law requires that commercial auto insurance include a PIP policy unless your health insurance policy covers vehicle accidents.

Workers’ compensation and commercial auto insurance are the only forms of commercial insurance required by Michigan law. However, these aren’t the only policies you’ll need to buy to run a business in the state. If you took out a mortgage loan to purchase a physical location, your lender will likely require you to carry general liability and property insurance. If you took out a loan to buy one or more business vehicles, you’ll probably have to purchase comprehensive commercial auto insurance in addition to the basic policy required by state law. If you sell items on Amazon, you’ll need to buy seller’s insurance once your sales reach $10,000 (in gross income) per month. 

It’s also wise to consider insurance coverage options that aren’t legally required but are a good investment for your business. For example, if you run an online business and store customers’ personal and financial information, you may want a cyber insurance policy to protect your business in the event of a data breach.  Business interruption insurance provides financial support if you need to shut down operations due to equipment malfunctions or a natural disaster. Umbrella insurance increases the liability limits of your general liability coverage and is a smart choice for those who are working in an industry with a high incidence of lawsuits. Consult with a local insurance agency to explore additional coverage options.

8. Obtain permits & licenses 

If you provide services in the adult care, childcare, construction, healthcare, and real estate industries, you’ll likely need a state-approved license. Anyone selling food/drinks, liquor, and/or cannabis will need a license, although the exact type of license you need will vary depending on the type of food you sell, where and how you sell it, and your geographic location in the state. Michigan’s license requirements apply even if you have a license for your occupation in another state. Check requirements for your specific job and industry to ensure you’re able to meet testing and licensing qualifications, as these can vary depending on where you’re moving from and the type of work you plan on doing.

If you’re setting up a physical business, you’ll need to look into Michigan business license laws in the city where you plan to live and work. In Detroit, for instance, you’ll need a license to start an amusement park, sports center, dance studio, dry cleaning service, junk collection business, or tattoo parlor. In Lansing, businesses that require a local license to operate include peddlers, health clubs, waste haulers, sign erectors, street musicians, auctioneers, and people selling secondhand goods. In addition to applying for a license, you’ll also need to look into zoning laws to ensure your new location is allowed to operate in the spot of your choice. 

If you sell products in the state, you’ll need a Michigan sales tax license. This license allows you to charge sales tax (which is 6% of a purchase) and then remit this money to the state. Wholesalers aren’t legally required to charge sales tax. Still, they must provide the state with a written statement that clearly indicates the goods they purchase are intended for resale to other retailers and not end consumers. Bear in mind that the state will look at the buyer’s details, not the total sale amount, to determine whether you’re a retailer or wholesaler. 

If you’re building a new structure on a vacant lot or doing significant repairs or improvements on an existing property, you’ll need a permit before you start work. If your chosen spot is a historic district, additional paperwork and requirements will be in place to ensure your new business aligns with the area’s character and doesn’t harm other historic structures. Once construction is complete, your new building will need to be inspected to ensure it’s up to code. Any business that prepares, handles, and sells food and beverages must meet local health code standards. If you sell hazardous materials or your business could be classified as a public assembly area, you’ll need a fire department permit. 

Federal income tax and Michigan local tax requirements

You need to file a federal income tax return each year, no matter how much (or little) money your business makes. Michigan businesses with gross receipts equal to or more than $350,000 per year will need to file a Michigan business tax return (MBT). If your business is a corporation, financial institution, or insurance company, and you expect to pay more than $800 in taxes for the year, you’ll need to file quarterly returns and make an estimated payment along with each return. There are also instances when a Michigan business owner who isn’t legally required to file a state tax return may choose to do so. In some instances, filing a return even if your gross income was under the state threshold can help you to preserve a credit, claim a refundable tax credit, and/or carry forward an available business loss. Talk to a local accountant about your business’s financial details to determine the best course of action for your enterprise. 

9. Find your team

All Michigan business owners must adhere to federal laws governing the fair and safe treatment of workers. These included OSHA, the ADA, the Fair Labor Standards Act, and the Age Discrimination in Employment Act. Full-time employees must be paid at least the state’s minimum wage, currently $12.48 per hour, plus $18.72 for overtime. Salaries must be paid twice a month for the previous 15 days’ work. Be sure to find reliable payroll software to help you track work hours, payments, and other relevant information.

People are the backbone of the business

Your employees are a reflection of your business, especially if they interact with customers and the public. Those who work for you should have the training, experience, and tools necessary to perform their jobs effectively. They should have a professional work environment that encourages career growth, innovation, and long-term success. Never hire a full-time employee in a hurry, even if you need help right away. Hiring temp workers or contractors can provide you with the assistance you need until you find the people who are the best fit for your new venture. 

Employees vs. contractors: what’s the difference?

Contractors aren’t legally entitled to a minimum wage, and you don’t have to pay them insurance or offer employment benefits. However, they have rights that your employees don’t necessarily have. Contractors can choose when and where they work for you. If, for instance, they want to complete a job for you from home or work in the evenings (rather than during the day), they can do so as long as they meet agreed-upon deadlines. Contractors can also choose to take on work for other companies in addition to working for you. They don’t need to file reports or work a set number of hours per week or month. If you want to require a contractor to receive training from your company, file reports, or work a set number of hours at your office, state law stipulates that you will need to hire the person as an employee. 

Alternatively, you may want to partner with some professional experts even if you don’t need employees. Retaining a good accountant, for instance, can help you keep your finances in order and avoid costly mistakes that could ruin your business. Hiring a professional when it’s time to file your taxes will ensure you’re adhering to all relevant state and federal laws and enable you to claim exemptions that could boost your bottom line. Retaining a lawyer to help you with complex legal paperwork is a smart decision if you work in real estate, exports/imports, or another industry with ever-changing regulations. These experts, like contractors, are paid when they finish a job for your business. 

10. Market and grow your business

Building a strong foundation for your business is essential to success. Once you’ve set up shop, filed for needed permits and licenses, and found the right people to work with, it’s time to market your business and start making sales.

Create unique, helpful content to showcase your activity

Blogs, social media platforms, and newsletters are great ways to showcase your unique, helpful content. Make it easy for people to see what you’re offering and why they should buy it. 

Consider making special offers to attract your first customers

People who’ve never bought products/services from you won’t know how great you are until they try out your business for the first time. Make it easy for them to do so with special offers. You could consider offering freebies, a BOGO deal, or a discount coupon to the first [x] number of customers. 

Invite people to stay in touch

When you connect with interested people online or in person, invite them to sign up for your mailing list or newsletter. A pop-up on your website works well for this purpose, as does a QR code on your printed materials (if you have a physical location). 

Look for local businesses or brands to collaborate with

Local companies that aren’t direct competitors may be happy to partner with you to generate traffic to both businesses. A toy store, for instance, could do well partnering with a local ice cream vendor. A liquor store may want to partner with a local bar or restaurant.

11. Open the doors! 

A successful launch event for your business can spur sales, build brand awareness, and attract your first loyal customers. Your launch event doesn’t have to be expensive or complicated to plan, but it does need to meet your audience’s needs. Consider what your target demographic may like or enjoy, and choose a day/time when potential customers are most likely to be available to meet. This will allow you to enjoy meeting your new clients. When the day’s over, take a moment to kick back and celebrate your first sale (or sales), knowing that your business is on the path to long-term success. 

Conclusion

Starting a business in Michigan is an exciting opportunity to bring your ideas to life in one of America’s most resource-rich states. With its strong infrastructure, thriving industries, and supportive business ecosystem, the Wolverine State offers everything entrepreneurs need to build lasting success.

By following these 11 steps, from shaping your business idea and securing funding to meeting Michigan’s licensing requirement, you’ll be well on your way to turning your vision into reality. Take advantage of the many local programs and grants available through organizations like the Michigan Economic Development Corporation and the Small Business Development Center to give your venture an extra boost.

If you’re ready to start your journey, our full guide on how to start a business can help you navigate each stage with confidence and ease.

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