How To Start An Llc In Michigan

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Starting an LLC in Michigan can be one of the first steps into a new career that allows you to become financially free from an employer, independent, and earn more than you could in a regular job. You can also become your boss, doing the tasks that you want. And starting an LLC in Michigan can be a great way to get the best of both corporate and personal business aspects. So in this article, we will discuss how to start an LLC in Michigan with all the steps that you need to do.

How to Start An LLC In Michigan

Why Start a Business in Michigan?

There are numerous reasons why you would want to start a business in Michigan. The first thing to consider is that you have a large labor market with a high level of education and skills. A talented workforce can help businesses to succeed and therefore, you can grow your business quickly and fast with the help of these people.

The state is also known as being one of the best for costs. Not only are business costs lower than they are in other states, but personal costs like food, housing, and other amenities can also be 10% lower than they are on the national average. Therefore, living in the state can be excellent.

Even the cost of starting an LLC is lower than the national average, with the filing fee fixed at $50 compared to the national average which is $130.38.

Another reason why Michigan is a perfect state for business is because of the logistical network that is part of the state. The state is known to be a good connector to the larger, international market. Allowing you to have more potential customers and improved profits while keeping shipping costs lower.

Here are some statistics comparing Michigan to the local neighboring states.

State LLC Filing Fee LLC Annual/Biennial Fee Corporate Tax Rate Nominal GDP per capita
Michigan $50 $25 (every year) 6.00% $56,554
Indiana $95 $30 (every 2 years) 4.90% $61,760
Ohio $99 $0 (no fee and no information report) 0%* $62,517
Illinois $150 $75 (every year) 9.50% $74,052
US Average $130.38 $89.34 (every year) 5.60% $64,773.08

Why Start an LLC?

There are numerous reasons why you would want to start an LLC in any state. For one, starting an LLC allows you to formalize your business. You, therefore, have a business that typically has a larger prestigious status compared to sole proprietorships which can sometimes be seen as lower-class businesses.

But there are practical reasons too. For one, LLCs are afforded more protection, or your personal property is. As a sole proprietorship, all your assets are considered part of the business. If the business runs up a debt, creditors can claim anything that you own as part of the debt recovery.

However, if you own an LLC, this is changed. Your business and you are separate entities. Therefore, the business has its own assets that are separate from you. So if the company runs up some debts and the creditors want to claim it back, they can only do that against the property and assets owned by the business. So your home, car, clothes, and other valuables are safe.

At the same time, business banks, creditors, and investors are more likely to invest in you if you’re an LLC. They see it as a safer bet rather than a sole proprietorship. Therefore, you can get better funding at a more reasonable rate of return. Which is going to help you in the long term.

Suppliers are also going to offer you better credit terms as an LLC than if you’re a sole proprietorship. And you’ll be able to open a business bank account, which is going to help with business cash flow.

How to Start an LLC in Michigan?

Several steps are necessary for starting an LLC in Michigan. So here are the steps that you need to follow when you want to know how to start an LLC in Michigan.

Step 1 – Choose A Business Name

The first thing that you need to do is to select a business name for your new venture. There are several rules when it comes to choosing a business name. For instance, you will need to have a name that includes the words Limited Liability Company or an abbreviation of the words.

You will also need to have a name that cannot be associated with any government agency or can you have a name that includes words like University, bank, or something.

Choosing a name can be challenging. You can use a company name generator to help you. These are free tools that can help you generate lots of potential names for your business. And from these take about 10-20 names that you like and then run some checks on them.

Start with a Michigan business name search and then run Google, social media, Etsy, eBay, and other checks for businesses with a similar name. You want to ensure that you have a unique name because you don’t want audiences to be confused and there can be legal protections in place.

As a final part of the process, you should do a domain check and buy the domain.

Step 2 – Reserve a Business Name

Now you need to reserve a business name. This can be done through the Secretary of State website online. The name reservation is about $25, and it lasts for six months. This is longer than it is for other states, so you’ve got plenty of time to ensure that you’ve got all your paperwork together and can file it within plenty of time.

Step 3 – Find a Registered Agent

Now you need to find a registered agent. A registered agent is an entity (person or company) that can represent your business with the local authorities for paperwork and tax purposes. They can be either someone working inside the company or hired out. There are businesses like ZenBusiness and Bizee that can help you here. They can also do a lot of the work for registering your business for you, therefore, they can be a great benefit.

How to Start An LLC In Michigan

A registered agent needs to be an individual that is living in the state, over the age of 18, and can represent your business. They should also be available during normal business hours during the week, like those hours that are maintained by the secretary of state.

Step 4 – Articles of Organization

Now you need to submit your articles of organization. These are the legal documents that form your business and have several details on the organizational structure of the business, who to contact, and the purpose of the business. The documents do not take long at all to create.
At the same time, ensure that you’ve got all other permits and licenses that you need to operate your business.

The articles of organization can take up to 15 business days to complete (although most are done within 10 days). However, there are options to expedite the process. For example, you can pay an additional $50 for the documents to be ready in 24 hours, $100 for the same day, $500 for two hours, and $1000 for one-hour processing times.

Step 5 – Operating Agreement

Now is a good time to write the operating agreement. The operating agreement is a document that is not mandatory but can be useful. It details the decision-making process within the business, the processes for work, and more. If there is a disagreement, the operating agreement should be used to determine the course of action.

While not necessary, some banks and investors might want to see the operating agreement before investing in your business.

Step 6- EIN Number

Get yourself an EIN number from the IRS. This is a free number that is required for LLC
businesses with more than one owner or businesses that employ staff. You can get the free number from the IRS website.

How to Start An LLC In Michigan

How Much is it to Start an LLC in Michigan?

There are various costs when it comes to starting an LLC in Michigan. The cost for filing the documents is $50, though there are additional costs if you want the process to go faster, reaching up to $1000 if you want the process to be done within one hour.

Another cost is the name reservation which will cost $25.

There are other costs like domain ($10 per year), licenses, and permits that you will need to pay for as well. Therefore, the cost of starting an LLC in Michigan can be as high as $200 to $500 depending on your business.

How to Start An LLC In Michigan

Taxes in Michigan?

There are numerous taxes that you will need to pay in Michigan. The sales tax, for instance, is 6%, but there is no additional local sales tax in the state. The corporation tax is at the same, 6%. The personal tax rate is set at 4.25%. Self-employment tax is set at 15.3% and employer tax is 7.65%.

How to Start An LLC In Michigan

Final Word: How to Start An LLC In Michigan

Above are the instructions that you need to know when you want to find out how to start an LLC in Michigan. These are simple instructions that allow you to create your business within just a few days, or just a few hours if you have the investment money. Good luck with your venture.

For $1050, you can register your LLC in Michigan within one hour. Otherwise, you can wait up to 15 business days to complete the process.
The business name is reserved for about 6 months. This is one of the most generous periods in the United States, with some only providing you with 30 days.

There are numerous benefits to the LLC business model. However, that doesn’t mean it is the best. Every business could or could not benefit from the process.

The business naming part of the process can take a couple of hours to a few days. It is important to get the name right to begin with.
The sales tax rate in the state is set at 6%. Unlike other states, there is no other sales tax imposed at the local level.