Are you about starting a business in Michigan and want to form an LLC? If YES, here is the legal requirement to start an LLC in Michigan and how much it cost.
Michigan is a perfect place to start a Limited Limited Company. It is affordable, and there is not much paperwork. For starters, to make sure we are on the same page; a limited liability company is a business structure that can be owned by a single person or group of persons. Forming a business as an L.L.C. helps protect the owner(s) against lawsuits, cuts down the expenses of paperwork, makes the company more credible, and prevents it from being taxed twice.
Forming an L.L.C. in Michigan is affordable and simple. However, it comes with a filing different from other states in the United States. Read on to discover the things you need to do.
A Detailed Guide to Starting an LLC in Michigan and the Cost
- Step 1 – Choose a name for your company
It is up to you to come up with a name for your L.L.C. In Michigan , your name ought to be unique and come with the abbreviation L.L.C. or include the words “Limited Liability Company.”Furthermore, the name should not be more than 80 characters and must contain spaces and correct punctuation. To give you a better understanding, here are some of the naming guidelines for Michigan:
Your company name must contain the phrase “Limited Liability Company” or any of its abbreviations (L.L.C. or L.L.C.)
Your company should not include words or phrases that might make the public confuse your company with a government agency such as F.B.I., State Department, NASA, Treasury. Examples of such restricted words include Bank, University, and Attorney.
If you want to make use of restricted words like Attorney, Bank and the rest, you will need more paperwork as well as a licensed individual such as a lawyer or doctor to be a member of your L.L.C.
You can check if the name you intend to use is available by carrying a search. Still on the naming aspect, ensure the name you want to use is not already taken. You can check if the name is unique by searching the name on the State of Michigan Website. Also, make sure your business can use its name as a web domain. Even though creating a business website is not on your plan, it is best you purchase the URL to stop others from using it.
After you have registered a domain name, consider creating a professional email account. A professional email that makes use of your domain name is vital to establishing trust between your business and its customers. In this modern era where scam is on a high, companies need to make use of a professional email address to provide a sense of professionalism and credibility.
- Step 2 – Appoint a registered agent in Michigan
Next, you are required to choose a registered agent for your L.L.C. in Michigan. A registered agent is a business entity or an individual whose duty is to accept legal documents on the company’s behalf if it gets sued. Picture your registered agent as your company representative to the state.
It is important to note that not everyone can be a registered agent. For a person to be eligible to become a registered agent, the person or corporation must be a resident of Michigan. That is to say, the individual or corporation must have a physical address within the state.
If any member knows the ropes of being a registered agent, you may elect him or her rather than hiring one. This will help you save some dollars, especially if you are running a small business. Hiring a seasoned registered agent offers tons of benefits like privacy and peace of mind.
- Step 3 – Prepare and File the Michigan Articles of Organization and Transmittal form
For a successful registration of your L.L.C., you will be required to file articles of organization. These forms will help you to set up your L.L.C. officially. It is compulsory for the articles to include your L.L.C. name, name of the manager(s) and address(es).
The filing fee is only $100, and it is nonrefundable. The Michigan articles of organization can be filed by mail or online. If you choose to file by mail, you will need to submit a completed Transmittal form.
To ensure your form is not rejected, it must include the name of your L.L.C. and address; the name and address of whoever filed the articles; the organizers’ complete name and address and lastly your registered agent name and address. Note: If you want to expand your existing L.L.C. to Georgia, you will be required to form a Foreign L.L.C.
- Step 4 – Create an Operating Agreement
Although an L.L.C. operating agreement is not compulsory in Michigan; it is highly essential. An operating agreement is a legal document that outlines the owners and operating process of an L.L.C. An operating agreement is vital as it ensures every business owner agrees, thus reducing the risk of conflict in the future.
- Step 5 – Acquire an Employer Identification number
An Employer identification number (E.I.N.) also known Federal Tax Identification number is a 9-digit number similar to a social security number. The Employer identification number will be used to identify your business. It is like a social security number for your company.
An Employer Identification number is essential because you will need it to open a business account for your company, to hire employees as well as tax purposes. You can obtain your E.I.N. from the I.R.S. after creating your company. You can do it via mail or online. Note: It won’t cost you a dime to get an E.I.N. from the I.R.S.
- Step 6 – File annual Registrations
It is mandatory for every L.L.C. operating in Michigan to file a yearly registration with the secretary of state as well as pay a filing fee of $50. The first registration is to be paid on the 1st of January and 1st of April of the year the L.L.C. was formed. It is important to note that an L.L.C. may be slapped with a hefty fine or may face automatic dissolution if they miss their state filing.
When an L.L.C. misses its state filings, the owners stand the risk of losing their limited liability protection. To prevent such an ugly scenario, it is best you hire a quality registered agent. A seasoned registered agent will notify you of the next filing deadline and may help you submit reports on your behalf. However, that will cost an additional fee
Additional Requirements for Forming an LLC in Michigan
In addition to the above-listed requirements, an L.L.C. may have to acquire other local or state business licenses. However, this depends on the nature of the business and its location. Also, you may have to register with the Michigan Department of revenue, especially if your business involves the selling of good and collecting sales tax.
Registration for the Michigan Department of revenue can be done via mail or online. Furthermore, you might be asked to obtain general liability insurance and workers insurance. Getting insurance solely depends on the nature of your business.
- Obtain a business bank account and credit card
Opening a business account for your L.L.C. makes things easy like financial record keeping as well helping you keep your liability protection. An L.L.C. bank account is a bank account meant only for your limited liability company. When business and personal account are together, your assets like your car, home, and other valuables stand at risk if your L.L.C. is being sued.
- Get insurance
Business insurance will help you control risks and focus on building your business. There are several types of business insurance, but the most popular ones include:
- General liability insurance – General liability insurance protects a business from lawsuits. Most small businesses in obtain general liability insurance
- Professional liability insurance – Professional liability insurance is a type of business insurance meant only for professional services providers. This kind of insurance protects against claims of business errors like malpractice and the rest.
- Workers compensation insurance – This is business insurance that covers employees job-related, injuries, illnesses, or death. In Michigan, any business with one or more employers is required by law to get workers compensation insurance.
L.L.C. Tax Requirements in Michigan
Depending on your type of business, you may be asked to register for single or multiple forms of state tax:
- Sales Tax
Selling of physical product requires you to register for a sellers permit via the Michigan Department of Revenue website. You will be issued a certificate from there, which will give you the green light to collect tax on any taxable sales. If this is your first time seeing the term “Sales tax,” this is what it means: A sales tax is a tax issued by states, municipalities on any business transaction that involves the exchange of specific goods or services
- Employer Taxes
Those that have employees in Michigan will have to register for Unemployment insurance tax. Registration of this tax is done with the Michigan Department of labor. Also, employers who are asked to pay Employee withholding tax will have to visit the Georgia Tax center for registration.
What is the Difference Between Foreign L.L.C. and Domestic Michigan L.L.C?
An L.L.C. is referred to as domestic when it operates in the state it was formed. On the other hand, a foreign L.L.C. must be created when an existing L.L.C. intends to spread its operation to another State.
How Can I Get an EIN If I Don’t Have an SSN? – A social security number is not needed to obtain an E.I.N. Leave the section blank when filling the form
What Tax Structure is Best for My L.L.C.?
After obtaining your E.I.N., you will be informed of the several tax structures that are available. Many L.L.Cs in Michigan choose the default tax status. It is best you consult your local accountant to advise you on the options that will be perfect for you.
How Much Will It Cost Me to Form an L.L.C. in Michigan
The cost of establishing a limited liability company varies from State to State. Generally, creating an L.L.C. in Michigan will cost you between $100-$500 and around $50 to maintain it yearly. However, hiring a lawyer or using a professional service provider will increase the cost.