No matter what product or service you plan to sell, choosing a business entity structure is a critical action. Now that you’ve decided that an LLC (limited liability company) is right for your business, it’s time to file paperwork with the state of Michigan and make it official.
While necessary, dealing with the legalities of forming an LLC can be overwhelming. You’ll want to make sure you complete the process correctly the first time so that you don’t have any issues later on. Get it done right by following our guide below to create an LLC in Michigan in just six simple, actionable steps.
6 Steps to Start an LLC in Michigan
In Michigan, you form an LLC by registering with the Michigan Department of Licensing and Regulatory Affairs (LARA). This department sets the requirements and regulations for all LLCs in the state.
1. Choose a Business Name
LARA has several rules in place that determine how you can name your LLC. First, your business must have a different name from all other registered businesses in the state. By choosing a unique name, you avoid any confusion later on with customers and other businesses.
Your business name must include “limited liability company” or an abbreviation, like “LLC” or “L.L.C.” The state also prohibits the use of any words that would confuse your business with government agencies, like “state department” or “treasury.”
LARA restricts the use of some words, like “university” or “bank.” If you’re forming one of these organizations, you’ll need additional legal paperwork. On the same note, if you’re looking to form a professional LLC (PLLC) as a dentist, attorney, or physician, your business name will need to include “professional limited liability company” or an abbreviation of the phrase.
2. Reserve the Business Name
Once you’ve chosen a name, you can check that it is available by using Michigan’s business name database. If another LLC has already registered with the name, you’ll need to come up with another.
If your chosen name is free, you may consider reserving the name. This ensures you have the rights to that name for six months while you complete the other steps necessary to form your business. Reserve your name by filing an Application for Reservation of Name, also known as form CSCL/CD-540. There’s a $25 fee and you can file online, via the mail, or in person.
3. Choose a Resident Agent and Registered Office
Michigan requires that you designate a resident agent and registered office. A resident agent (also known as a registered agent) is a person or business entity that will accept official mail on behalf of your business. The physical address where the resident agent receives this mail is the registered office. This must be a physical Michigan address, not a P.O. Box.
You can be your own resident agent, or you can appoint a trusted family member or friend. The only requirements are that the individual is at least 18 and is available to accept mail during business hours. State public records will include the resident agent’s name, so you may want to choose to use a commercial provider if privacy is a concern.
4. File the Articles of Organization
The legal forms that officially create your LLC are the Articles of Organization. In Michigan, this is also called Form CSCL/CD-700 (for PLLCs, it’s Form CSCL/CD-701.) You’ll file the articles online or by mail with LARA. There’s a $50 filing fee.
The Articles of Organization require the following information:
- LLC name
- Resident agent name and address
- LLC duration (if applicable)
- Organizer’s name and signature
Once you submit the form, LARA will review it and file the information in state records. This process typically takes about one week. Once complete, you’ll receive your original articles via the mail to your registered office.
5. Write an Operating Agreement
LARA does not require that you have an operating agreement, but most LLCs opt to create an agreement. This is a document that outlines the rights and responsibilities of each member of the LLC, as well as its daily operations. Even if you have a single-member LLC, an operating agreement can provide guidance in decision-making and some legal protections later on.
Your operating agreement should include:
- A description of your LLC’s services and products
- The names and addresses of each LLC member
- The name and address of the manager (if your LLC has one)
- The ownership stake of each member in the LLC
- Voting rights and profit shares of each member
- Money and property contributions of each member
- The procedure for electing a manager or adding new members
- Meeting schedule and voting procedures
- Dissolution procedures
6. Get Michigan Business Licenses
Aside from your LLC, you may need certain business licenses to operate in Michigan. Regulated industries, like health care or construction, require that you get additional licenses. If you aren’t sure what the requirements are for your industry, you can use the business license search on the state’s website.
You may also need permits and licenses depending on the city or county where you operate your business. Contact your local city or county clerk to get information about requirements.
The Next Steps After Forming an LLC in Michigan
Once the state approves your LLC and returns your articles of organization, there’s still work to do. You can use the following steps to ensure you have everything you need to become an operational business.
1. Get an EIN
An EIN (Employer Identification Number) is a nine-digit number that the IRS (Internal Revenue Service) assigns to you. It’s like a Social Security Number for your business. The IRS requires that all businesses with employees or multiple members get an EIN. If you own a single-member LLC with no employees, you may not need one.
Even if you aren’t legally required to get an EIN, it may still be worthwhile to get one. It can help you file and manage your taxes, open business bank accounts, and, of course, hire employees. If you want the government to tax your business as a corporation, you’ll also need to get an EIN.
It’s free and fairly easy to get an EIN. You can do so by submitting a request online or by mail. For more information, read our guide on how to get an EIN.
2. Open Financial Accounts
Although you can operate your business by using your personal bank accounts, it isn’t advisable. It’s best to separate your business and personal assets, which can help you avoid issues with taxes or even potential lawsuits later on.
Opening a business bank account is a straightforward process that you can do online or in person. Be sure to check out our article that walks you through how to open a business bank account.
This is also a good time to consider opening a business credit card. Just like your bank account, you’ll want to keep business purchases separate from personal purchases. At the same time, you might consider getting accounting software to help you manage your cash flow. QuickBooks and Wave are popular options, but be sure to do your research and choose what’s best for your business.
3. Set Up a Payment System
One of the most important things you’ll do when you set up your business is choose a payment system. It’s important to select one that provides a full payment infrastructure. Pay.com provides all of these elements so that you don’t have to sign up for separate services.
Getting started with Pay.com is easy. After a quick onboarding process, you can customize your checkout page so that it looks and feels like the rest of your website. Then, simply click on the payment methods you want to accept (Pay.com offers a wide variety of options) to add them to your page. Even if you don’t have a website, you can still get paid by sending direct payment requests to your customers via Pay Links.
Plus, Pay.com is extremely secure. It has Level 1 PCI DSS compliance, which is the highest level. You can display the PCI DSS logo on your checkout page to show your customers that their transactions are safe. Pay.com also supports 3D Secure 2.0 (3DS2) which adds another layer of authentication, ensuring that the person making the purchase is the real cardholder.
4. Pay Taxes
When you set up your LLC, LARA automatically makes it a pass-through entity in terms of income tax. In other words, the state doesn’t require the LLC to file a tax return or pay taxes. Instead, each member of the LLC must pay Michigan income tax for their share of the LLC’s profits on their personal tax returns.
You may choose to change your tax status and have the state tax your LLC as a C-corporation. In this scenario, your business will pay the state’s corporate income tax, which could have some advantages. Additionally, you’ll need to collect sales tax, withhold employee income taxes, and pay unemployment insurance taxes.
It’s also important to note that you’ll need to file an annual statement with the state of Michigan which is due on February 15th of each year. The statement allows you to update information about your business and resident agent. LARA mails you the form 90 days before it's due and you’ll need to submit it in addition to a $25 filing fee.
The Bottom Line
Starting an LLC is an exciting step in your business journey. Although it may seem overwhelming at first, the process is actually fairly simple. Once you’ve assigned a registered agent and reserved your name, you just need to fill out a simple form. However, it’s important that you complete other steps to create a functioning business, like getting an EIN.
You’ll also want to set up a payment system right away. Pay.com makes accepting online payments simple and easy. Get everything you need to start, choose from a variety of payment methods, and start getting paid. Click here to create your account now!