Michigan offers several advantages for entrepreneurs looking to start a small business. With a diverse, modern, and educated workforce, the state has caught the attention of many small business owners. In 2018, 99.6% of local businesses were classified as small businesses, providing nearly 2 million jobs.
How to Start a Business in Michigan (Checklist) – Free Download
This checklist serves as a primary source of information to help get your new Michigan business up and running.
How to Start a Business in Michigan:
1. Decide on a business structure.
The most popular legal business structures for small businesses are:
A Sole Proprietorship is the simplest business structure. The business is owned and operated by one individual, with no legal distinction between the owner and the business entity.
A Limited Liability Company (LLC) is the most common business structure. It separates the owner/s and the company from a business and liability perspective.
A Corporation is a very formal business structure. The business is authorized to act as a single entity and recognized as such in law. Includes unlimited shareholders.
A Partnership is run by two or more individuals who share management and profits. There are a variety of partnerships including general and limited partnerships.
It's vital that you select the most suitable business structure for your business. Your business structure should provide you with the best liability protection, as well as financial and tax benefits.
An LLC is the best option for a small business. It's easy to set up, flexible and requires minimal paperwork. In addition, this structure is beneficial during tax season, as LLC owners don't have to file a corporate tax return. You can set up an LLC in the state of Michigan for $50.00.
2. Register a business name.
By law, your business name needs to be registered with the Michigan Department of Licensing and Regulatory Affairs (LARA). However, you will first need to check if your business name is free. To check for available business names, you can use the LARA name availability search webpage.
To reserve a name, you can file an Application for Reservation of Name with LARA online, by mail, or in person. Business owners are able to reserve a name for 6 months.
Learn more about naming your business.
Michigan Business Filing Fees:
Limited Liability Company
3. Get an Employer Identification Number.
If your business has employees, you must obtain a federal Employer Identification Number (EIN) from the IRS. Also known as Federal Tax ID Number, the number is used to identify taxpayers who are required to file different business tax returns.
To get an EIN, you need to complete an online application on the IRS website. There is no filing fee. If you are unable to apply online, you can also get an EIN by mail or fax.
4. Open a bank account.
Using a separate bank account for your business activities will simplify your accounting processes. Consult with local banks and find out about the different business bank accounts on offer.
5. Register with the Michigan Department of Treasury.
If you plan on selling taxable goods and services in Michigan, you will need to register for a Sales Tax License with the Department of Treasury (DOT). In addition, if you hire employees, you will need to register with DOT for employee withholding tax.
To verify if your business requires sales tax or any additional taxes, visit the state's primary website. You can either do an online search for a particular kind of license or view the alphabetical list.
You can register for a sales tax license online, by mail, or in person. However, the e-Registration process is much faster than registering by mail. You can receive your sales tax license within 7 business days.
6. Hire employees and report them to the State.
Federal law requires employers to report newly hired and returning employees to the Michigan New Hires Operation Center. Any new hires have to be reported within 20 days of their hire date. This process has to be repeated every time you hire a new employee. Returning employees who have been separated from your business for 60 consecutive days must be reported as a new hire.
The easiest and most efficient way to report a new employee is by reporting online. You also have the option of applying via mail or by fax. Simply download the form and fill in the proper details. The mailing address is available on the form.
7. Obtain appropriate state licenses and permits.
To legally operate your new business, you will need to comply with federal, state, and local government laws and regulations. In Michigan, not every business is required to obtain a business license. However, licenses are issued by various state agencies for specific types of business, activities, and services.
For example, a food service license is required if you plan on starting a restaurant.
To view the full list of licenses and permits from the State of Michigan, visit michigan.gov. For some professions, there are special licenses required. To get information about professional and occupational licenses, go to the Bureau of Professional Licensing's (BPL) website.
8. Get insurance.
There are many different types of insurance that you may want to purchase for your business, including:
- Liability insurance.
- Health insurance.
- Business interruption insurance.
- Cyber insurance.
- Property insurance.
- Automobile insurance.
By law, all business owners who employ 3 or more people, whether full-time or part-time, must carry workers' compensation insurance. Members of LLCs, LLPs, partners, corporate offices and independent contractors are usually exempt. Other exemptions may apply.
To determine if your business is exempt, contact the Michigan Department of Licensing and Regulatory Affairs Workers’ Compensation Agency for more information.
In addition, Michigan law dictates that all employee drivers carry minimum automobile insurance.
9. Keep up with on-going requirements.
To ensure your business complies with applicable laws, remain informed with the various state, federal, and local regulations affecting your specific industry and/or business entity.
In Michigan, all LLCs must file an annual statement with the Department of Licensing and Regulatory Affairs. A pre-printed annual statement, BCS/CD-2700, will be mailed to the LLC’s registered agent at the registered office approximately three months prior to the due date. You can file the report online or by mail. There is a $25.00 filing fee.
All corporations doing business in Michigan are also required to file an annual report with the Department of Licensing and Regulatory Affairs. A pre-printed annual report, BCS/CD-2500, will be mailed to the corporation's registered agent at the registered office approximately three months prior to the due date. The annual report can be filed online or by mail. There is a $25.00 filing fee.
Fees for Starting a Business in Michigan:
Filing Articles of Organization
How much does it cost to start an LLC in Michigan?
The filing fee for LLCs is $50.00. In order to register your LLC, you must file the Articles of Organization with the State of Michigan. This can be done online, by mail, or in person. Operating agreements are not mandatory in the state of Michigan.
How do I get a business license in Michigan?
You can apply for the licenses and permits that you need to do business in Michigan on the michigan.gov website. To get information about professional and occupational licenses, go to the Bureau of Professional Licensing's website (BPL).
How do I start an LLC in Michigan?
Do I need to register my business in Michigan?
Yes. It costs between $10.00 and $60.00 to register a business with the Michigan Secretary of State. If you plan on selling taxable goods and services in Michigan, you will need to register for a Sales Tax License with the Department of Treasury (DOT). In addition, if you hire employees, you will need to register with DOT for employee withholding tax.
How are LLCs taxed in Michigan?
Federal income taxes must be paid by the individual LLC members since LLCs themselves do not pay income taxes but their members are required to do so. If the LLC is taxed as a corporation, the LLC must pay a corporate income tax (CIT) that is 6% of the taxable income.
Do I need workers' compensation?
Yes. In Michigan, it's mandatory to carry workers' compensation in case of injuries.
How do I register a business name in Michigan?
You can register your business name with the Michigan Secretary of State. Visit the SOS website for the proper documentation