How to Start a Business in Michigan
Are you ready to start a business in Michigan? It’s probably easier than you think. All you’ve really got to do is sell a product or service, and you’re in business as a sole proprietor. And if you’ve got your mind set on bigger things, Michigan is a great place to start an LLC or corporation. Compared to other states, entity formation in Michigan is fairly inexpensive. Find out how to register your business, safeguard your assets, and comply with state legal requirements in our guide to starting a business in Michigan.
Ready to Start a Business in Michigan?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Michigan Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File a Michigan Annual Report
Apply for Trademarks
1. Pick a Business Structure
If you’re starting a business as a sole proprietor or as a member of a general partnership, you won’t need to do much more than sell something to establish your business. Neither of these business types will require you to register with the state of Michigan. However, neither will offer you liability protection, either. If your business is sued or owes debts, you are held personally accountable for all legal and financial obligations. This puts your personal assets—properties, vehicles, money in your bank accounts—at risk.
Forming a separate business entity that you register with the state, such as an LLC or a corporation, will protect your personal assets from business damages.
Michigan Limited Liability Company (LLC)
LLCs are flexible and adaptive. This quality makes LLC formation popular with small businesses, but businesses of all sizes can take advantage of this business structure. Forming an LLC will give you more control over your business’s management design and tax designation. If you want to form a Michigan LLC, you’ll need to submit Articles of Organization with the Department of Licensing and Regulatory Affairs.
Corporations must adhere to specific management rules: they must have an elected board of directors, which then appoints officers to run the company. Corporations must also keep detailed records and follow the guidelines set down in their bylaws. However, because of this, investors and donors often view corporations as more trustworthy and stable. To form a Michigan corporation, you’ll have to file Articles of Incorporation with the Department of Licensing and Regulatory Affairs.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about a Michigan nonprofit?
You can form a Michigan nonprofit if none of your members will receive profits from your corporation. Nonprofits are commonly formed for religious, educational, or charitable purposes. To register as a nonprofit corporation in Michigan, submit Articles of Incorporation for use by Domestic Nonprofit Corporations to the Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau. You’ll need to pay a filing fee of $20.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
When naming your business in Michigan, you’ll need to follow a few rules. As the owner of a sole proprietorship, you must use your own name as your legal business name. The same goes for general partnerships, except you’ll need to use your name along with your partner’s names. To avoid this, you’ll have to get a DBA. A DBA will allow you to do business under a name like Great Lakes Consulting instead of Denise Johnson.
If you have an LLC or corporation, you’ll be able to choose your legal business name, but you’ll need to obey Michigan state naming guidelines. Your business name must:
- Be unique among registered business names in Michigan.
- Include an entity identifier, such as “Inc.” for a corporation or “LLC” for an LLC.
- Not contain any language that implies a false business purpose, including a false business identifier, such as using “corp.” in the name of an LLC.
Find out if your desired name is available in Michigan by searching the Department of Licensing and Regulatory Affairs’ Corporations Online Filing System Business Entity Search.
Can I reserve a business name in Michigan?
Yes! You can reserve a business name in Michigan by filing an Application for Reservation of Name with the Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau. You’ll need to pay $25 to reserve a name for an LLC and $10 for a corporation. Name reservations are good for 180 days but can be extended twice for 60 days per extension. To extend your reservation, you’ll need to send a request to Bureau before your reservation expires.
What is a DBA?
A DBA is any name that your business operates under other than its legal name. In Michigan, this is referred to as an assumed name. Sole proprietors often use assumed names to avoid doing business under their own first and last names. LLCs and corporations also frequently use assumed names for branding purposes.
If you want to register an assumed name in Michigan, you can file a Certificate of Assumed Name with the Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau. The filing fee is $25 for LLCs and $10 for corporations. You’ll need to renew your certificate after five years.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
If you’re starting a sole proprietorship or a general partnership, you won’t need to file any paperwork with the state because you won’t be establishing a separate business entity. (You may still need a Michigan business license, though!)
Forming an LLC or corporation will require you to file registration paperwork with the Michigan Department of Licensing and Regulatory Affairs. After your paperwork is accepted, your business is officially registered as a separate business entity in Michigan.
- To form a Michigan LLC, file a Michigan Articles of Organization
- To form a Michigan corporation, file Michigan Articles of Incorporation
As part of filling out your articles, you’ll need to identify your Michigan Registered Agent. You can submit your registration paperwork by mail, in person, or online through the Department’s Corporations Online Filing System. The filing fee for LLCs is $50. For corporations, you’ll need to pay a minimum of $60—a $10 flat fee plus an additional $50 for your first 1-60,000 authorized shares. If your corporation has more than 60,000 authorized shares, you’ll need pay more. For example, with 10,000,000 or more shares, your additional fee will be at least $500.
Note: The information you include on your formation paperwork will go on the public record. The names and addresses you list on these documents will be freely available to the public through Michigan’s Business Entity search.
How can I keep my information off the public record?
To keep your private information off the public record, you’ll need to avoid putting it on public documents. While this isn’t always entirely possible, you can restrict the amount of information you make available on your business registration paperwork. Hire a registered agent so that you can provide their address on registration documents instead of your own. (Hint: We do this!)
What is a registered agent?
A registered agent—known as a resident agent in Michigan—is a person or company that you designate to receive legal correspondence on behalf of your business. This includes service of process and your Michigan Annual Report forms. To comply with state law, your registered agent must have a physical address in Michigan, also referred to as a registered office, where they are available to accept documents during regular business hours. Because staying in one place can be inconvenient for business owners, many choose to hire a registered agent service.
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Michigan Department of Licensing and Regulatory Affairs. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Michigan LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Michigan LLC Operating Agreement template that you can use as a solid foundation.
Michigan Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in Michigan (see MCL § 450.1231).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted an Michigan Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about Michigan nonprofit bylaws.
5. Get Michigan Business Licenses
Michigan state doesn’t issue a universal state-level business license. Despite this, it’s very possible that your business will need a license of some type, depending on your industry, whether or not you’ll be collecting sales tax, and where you’re located.
Michigan State Business License
You won’t need to get a general business license in Michigan, but the state does require licenses for specific industries and types of work. For example, if you run a water park, you’ll need a permit from the Department of Environment, Great Lakes, and Energy, Drinking Water, and Environmental Health Division to operate. To find specific state licenses and requirements, you can use Michigan’s online State License Search.
Additionally, if you sell tangible personal property as a retailer, wholesaler, or contractor or if you provide repair or improvement services on tangible goods, your business will need a Sales Tax License to legally collect sales tax on purchases.
Professional Business Licenses
If your line of work is in a field that requires specialized training or education to perform, you and/or those working for you may need to get a professional or occupational business license. A wide range of fields call for professional or occupational licenses in Michigan, including accountancy, medicine, and landscape artistry. You can find licensing information online through the Department of Licensing and Regulatory Affairs’ Occupational Licensing and Health Licensing websites.
Local Business Licenses
In addition to state and professional licenses, you may also need to obtain county- or city-specific licenses and permits. Detroit, for example, requires licenses for certain types of businesses, including carnivals, dance studios, and vending machine operations. To find out if your business will need a local license, contact your local jurisdiction.
Learn more about How to Get a Business License.
How do I get a Michigan business license?
State-level business licenses in Michigan are issued by the state agencies in charge of regulating different industries. For example, as a ginseng grower, you’d need a Ginseng Grower’s License from the Department of Agriculture & Rural Development. License applications and instructions are available through individual issuing agencies and through Michigan’s State License Search.
You can register for a Sales Tax License through the Department of the Treasury’s online portal, Michigan Treasury Online.
How much does it cost to get an Michigan state business license?
State licensing costs and requirements vary by type and issuing agency. To sell boats, for example, you’ll to purchase a Boat Dealer’s License from the Department of Treasury for $30. If your business will be collecting sales tax, you’ll be happy to know that the state doesn’t charge a fee for Sales Tax Licenses.
How do I get a professional license in Michigan?
Professional and occupational licenses are issued by the professional board or agency responsible for regulating your field. Licensing requirements and costs are dependent on license type and board or agency standards. For instance, as a dentist, you must meet strict education and examination requirements in addition to submitting a Dentistry License application and paying the associated fee of $316.20-$336.20. You can discover the specific licensing procedures for your field by contacting your certifying board or agency.
How do I get a local business license?
Local business licenses are available through your local jurisdiction, and costs and requirements will vary. As an example, if you’re a street musician in Lansing, you’ll need to file for a Street Musician’s License with the City Clerk’s office and pay $25 annual fee.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
Do you plan on hiring employees or independent contractors? If so, you’ll need to set up payroll in Michigan. Here’s a overview of the process:
- get an EIN
- determine whether you’re hiring employees or independent contractors
- prepare the forms your employees will fill out
- choose a payroll service or software
- decide on a payroll schedule
- report new hires to the Michigan Office of Child Support through the Michigan New Hires Operation Center Employer Services Portal
- register with the Michigan Department of the Treasury to remit tax withholding using Michigan Treasury Online
- register with the Department of Labor and Opportunity Unemployment Insurance Michigan Web Account Manager (MiWAM) to get your Unemployment Insurance Account (UIA) number and rate
Setting up payroll can be overwhelming. It helps to use a solid payroll service or software that will automatically withhold payroll taxes, file state and federal returns on your behalf, and pay your employees by check or direct deposit.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US. Michigan employees will also need to fill out an MI-W4 for state-level income tax withholding.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn more about hiring independent contractors.
How do I get an Michigan Unemployment Insurance Account Number?
You get your Michigan Unemployment Insurance Account (UIA) Number when you register with the Department of Labor and Opportunity Unemployment Insurance Michigan Web Account Manager (MiWAM). You’ll also be able to find your UI rate, which you’ll need when setting up payroll.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
If your Michigan business has any employees, it’s likely that you’ll be required to purchase workers’ compensation insurance. And, obviously, if you have a company vehicle, you’ll also have to get auto insurance. Otherwise, you won’t need any other business insurance to operate legally in Michigan. That doesn’t mean your business won’t benefit from supplemental insurance, though. Liability insurance can help protect the funds and time you’ve invested into your business by reimbursing you for losses to property and equipment damages or liability claims.
Here’s a brief rundown on the most commonly purchased types of business insurance:
Workers’ Compensation Insurance
Workers’ compensation insurance covers medical costs and lost wages for employees who are injured on the job, protecting them from unreasonable financial loss. Almost all employers in Michigan with employees are required to purchase workers’ compensation insurance.
- All public employers
- Private employers with at least one employee who works 35 or more hours a week
- Private employers with three or more employees at the same time
- Agricultural employers with three or more employees working 35 or more hours a week for 13 or more consecutive weeks
- Household employers with one or more domestic servants working 35 or more hours a week for 13 or more consecutive weeks
There are several ways to obtain coverage in Michigan. You can purchase a policy from a licensed and approved insurance carrier or through the Compensation Advisory Organization of Michigan’s assigned risk pool. You can also self-insure, individually or through a group fund with other businesses, if you meet all of the qualifications to do so. The cost of workers’ compensation insurance will vary depending on your industry and the level of risk associated with the work your employees perform.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers’ compensation insurance in Michigan?
No, business owners don’t need to cover themselves under workers’ compensation insurance in Michigan. However, based on the legal definition of who is classified as an employee in Michigan, it’s possible that individuals that you may consider employers are legally employees. Notably, LLC members who are also managers and corporate officers are both classified as employees. There are some exceptions—for example, if all the employees of an LLC are members and also managers and each owns 10% or more interest in the company, the company can receive an exclusion. Because these rules are complicated, contact the Department of Labor and Economic Opportunity if you have an LLC or corporation and are unsure about how qualifies as an employee.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
Doing business in Michigan, you’ll need to pay federal, state, and, in some cases, local taxes. Michigan also charges sales tax on tangible personal property, so depending on what kind of business you’re in, you may need to factor this into your prices. Compared to other states, Michigan’s tax rates run average or a little higher than average.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. For federal income taxes, you’ll need to pay the 15.3% federal self-employment tax rate on all earnings up to $147,000. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate on federal taxes.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Michigan, the corporate tax rate is 6% for most businesses). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
Michigan State Business Taxes
In addition to federal taxes, both LLC owners and corporations are on the hook for Michigan state taxes. Michigan also levies a state sales tax and some additional taxes for certain industries, such as marijuana and tobacco retailers.
LLC owners are responsible for paying Michigan state individual income tax, which is collected at a flat rate of 4.25%. If your tax liability will be more than $500 for the year, you’ll be required to make quarterly estimated tax payments to the Michigan Department of the Treasury.
Corporations need to pay Michigan Corporate Income Tax (CIT), which is imposed at a flat rate of 6%. However, corporations with annual gross receipts that don’t exceed $20 million (and meet several other requirements) can receive the Small Business Alternative Credit and qualify to pay at a rate of 1.8%. Your corporation must make quarterly estimated tax payments to the Michigan Department of the Treasury if you expect to have a tax liability of $800 or more for the tax year. Michigan charges a state sales tax of 6% on sales of tangible personal property.
Local Michigan Business Taxes
You’re not done yet! If your business owns buildings or land, you’ll need to pay property tax at the county level, though tax rates vary from county to county. Many cities in Michigan also charge city income tax. In Detroit, for example, as an LLC owner, you’ll need to pay individual income tax to the city at a rate of 2.4%. Detroit corporate tax at a rate of 2%.
9. Build Your Business Website
If you want Michiganders to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. File an Michigan Annual Report
In Michigan, all LLCs and corporations are required to file Annual Reports with the Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau. Submitting your annual report on time allows your business to remain in good standing with the state. On your annual report, you’ll have the opportunity to update basic information about your company, such as your members’ names and addresses.
The Bureau will pre-printed annual report forms to the office of your registered agent before your filing is due. You can submit this form by mail or use the Department of Licensing and Regulatory Affairs Corporations Online Filing System to file online. Due dates and form issuing vary by business entity type. Filing costs $25.
Read more about How to File a Michigan Annual Report.
What if I don’t file my annual report in Michigan?
LLCs that fail to file annual reports within two years of their due date will fall out of good standing with the state. Once this has occurred, you’ll need to submit all missing annual reports, pay all back fees, and file a Certificate of Restoration of Good Standing with the Corporations, Securities & Commercial Licensing Bureau with its accompanying fee of $50.
Corporations that don’t file annual reports on time are subject to late fees up to $50 per report. If no annual report is submitted within two years of the due date, the state will automatically dissolve the corporation 60 days after this two-year period ends. To renew your corporation’s existence, you’ll need to file all delinquent annual reports and pay all back fees, plus an additional $50 for each late report.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of Michigan or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Michigan is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Michigan.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in Michigan?
To register a trademark in Michigan, file an Application for Registration of Trademark/Service mark with the Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau. On your application, you’ll need to describe how your mark is used and in connection with what products or services. You’ll also need to pay a $50 filing fee.
Remember that registering your trademark in Michigan doesn’t protect it in other states. Your trademark registration will expire in Michigan ten years after your stamped registration date. You can renew your registration during the six-month period leading up to your expiration date.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.