This article gives a step-by-step guide on creating a limited liability company (LLC) in Michigan as well as helping answer questions closely related to LLC creation such as insurance and EIN. This assumes the person applying is the business owner, that they have an address in Michigan, and are a citizen of the United States. I am not a legal expert nor is this professional legal advice.
Why you should create an LLC
The main benefits of creating an LLC are:
Limited Liability
As the name implies, an LLC creates a legal distinction between the business and its owners. This means that in the event of lawsuits or debts, your personal assets (like your home, car, personal bank accounts) would typically be protected. Only the assets owned by the business would be at risk. This is typically the biggest reason someone starting out would want to form an LLC.
Ownership Flexibility
LLCs have no restrictions on the number and type of owners they can have. This can provide more flexibility when it comes to management and profit distribution.
Ease of Transfer
Ownership in an LLC can often be more easily transferred than in a sole proprietorship or partnership.
The following steps guide you on creating an LLC in Michigan.
Step 1: Make sure your business name is not already taken
Make sure that the name of your business is not already taken in the state of Michigan. If it is, you will need to find an alternate name. You can search to see if there are any existing matches at https://cofs.lara.state.mi.us/SearchApi/Search/Search.
Step 2: Fill out the online form and pay $50 to create your LLC
Assuming your desired name is available, you can fill out an online form to register your LLC. Technically what you are doing here is creating your “Articles of Incorporation” which you submit to obtain your LLC.
There is a $50 fee associated with filing for the LLC. There should not be any additional fees unless you choose to expedite your application.
You can find the form to submit here. From this list you likely want the Domestic Limited Liability Company option titled “700 - ARTICLES OF ORGANIZATION”: https://cofs.lara.state.mi.us/corpweb/LoginSystem/ListNewFilings.aspx?FilingMethod=I.
Step 3: Wait 10 business days for confirmation
Unless you have opted to expedite the review of your submission, LLCs take 10 business days to complete.
Step 4: Apply for an EIN
After you have received your LLC confirmation, you can apply for your EIN. Please wait until you receive your confirmation, otherwise you may have to redo the EIN application. Your EIN allows you to:
- Identify your LLC for tax purposes
- Open a business bank account, credit card, or loan
- Process employee payroll
- Apply for business licenses and permits (if applicable)
When you apply for an EIN online, you receive an instant response with your EIN number. You can apply at https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
free; get it immediately
Step 5: Get a bank account for your business
It’s important to keep your personal and business finances separate. To do so, you should have a bank account designated for your business. This does not necessarily have to be an official “business” account as you may not need the bells and whistles the bank offers. I recommend using a free account that you only use for business use - regardless of whether the bnak classifies the account as business or personal.
Step 6: Create an operating agreement
An operating agreement is not legally required in Michigan nor does it, if you create it, need to be sent to the government.
However, if you have more than one founder, it’s a helpful document to ensure everyone is on the same page about ownership percentages, how profit is handled, and more.
If you choose to create an operating agreement, you can find many templates online or just use this one from Forbes.
Step 7: Pay your LLC annual fee by each February 15
LLCs in Michigan have an annual charge of $25. Create that recurring calendar reminder and pay through LARA at https://cofs.lara.state.mi.us/corpweb/LoginSystem/ExternalLogin.aspx.
Related Questions
Following are questions that often go hand-in-hand with the creation of an LLC.
Do I need an EIN?
Technically, if you are the only member of your LLC and you elect to not be taxed as a corporation, you can use your SSN in place of the EIN for tax purposes. That said, it is free and fast to get an EIN and you should do it to keep your options open.
Can I register in Michigan if it’s not my home state?
Yes, you just need an address where mail can be sent to you in Michigan.
Do I need insurance?
Most of the startups I work with are very early stage and the company has minimal assets. While there are scenarios where insurance can still be helpful at this stage, generally I advise companies to not worry about it in this early stage and revisit insurance when there is something more substantial to protect.
That said, each situation is different and if you have any questions, you should consult legal expertise.