Registering Business in Michigan
If you decided to open a new business that will be based in Michigan you can choose from several options:
- Sole Proprietorship: Sole owners of Michigan-based businesses could opt for sole proprietorship as the easiest form of business organization. Not the most recommended, given the liability a sole proprietor assumes as a result of owning a business. No registration with Michigan Department of Energy, Labor & Economic Growth is necessary, but it is recommended to register an Assumed Name, and if you plan to hire employees then also obtain an EIN.
- Single Member LLC: Limited liability company, as the name suggests, is an entity that allows its owners to limit the liability of the business to the entity itself, shielding the owners' personal assets. This type of entity is recommended for most small businesses.
By default your LLC will be taxed as "disregarded entity", meaning you will file your LLC tax return as part of your personal tax return. Keep in mind though - LLC is a flexible entity, which means you have the option of electing it to be taxed as S-Corp (assuming you are a U.S. person) or C-Corp. Learn more about LLC here, and about the details of forming LLC in Michigan here.
- Corporation: You can also form a corporation and be a sole shareholder with 100% of all shares. Corporations have more formalities than LLCs (for example in Michigan you are required to have bylaws and maintain minutes of meetings in corporate records), but provide similar limited liability protection. That's one of the reasons this entity type is often more suitable for bigger companies, or those who seek major investment.
Corporations can be taxed as S-Corp or C-Corp, with each form of taxation having its pros and cons. Keep in mind, you can elect your corporation to be S-Corp only if you, as the sole shareholder, are a U.S. person.
Learn more about corporations here, and about the details of incorporating in Michigan here.
- General Partnership: Like sole proprietorship, this entity type does not require registration with the Michigan Department of Energy, Labor & Economic Growth, but it also does not protect the owners from business liability, and therefore is usually not recommended. A General Partnership needs to register a Assumed Name, and obtain an EIN.
- Multiple Member LLC: like Single Member LLC for sole owner, Multiple Member LLC is often the entity of choice for small and new businesses with more than one partner.
- Corporation: Since corporation can have many shareholders, and transfering ownership is relatively easy (though share transfer) corporation might be a good choice of entity for business with partners.
Keep in mind though - S Corporations are limited to 100 shareholders who must be physical U.S. persons. That means corporations owned (partially or fully) by non-U.S. persons or legal entities, cannot be elected as S-Corp, and therefore subject to double taxation of an C-Corp. In cases like that it would be recommended to consider choosing LLC instead.
- Limited Partnerships: Limited partnerships come in different forms, depending on the state (LP, LLP, LLLP). Though Limited Partnerships have their own purpose and place, for most cases we believe an LLC would serve its owners well enough, therefore at this point we do not cover Limited Partnerships.
Existing Out-of-State Companies
An existing company registered in another state or country (called "foreign corporation", "foreign LLC", etc) looking to conduct business in Michigan might be required to foreign qualify in Michigan. This rule typically applies to companies looking to open a physical branch in Michigan, lease an office or warehouse, hire employees, etc.
"Foreign" businesses that do not create "strong nexus" by moving physically to Michigan might still be required to obtain Sales Tax License from Michigan Department of Treasury if selling taxable products or services using local dropshippers.
Existing Michigan Companies
Companies registered in Michigan enjoy from a wide spectrum of services provided by the Michigan Department of Energy, Labor & Economic Growth and Michigan Department of Treasury. Such services include but not limited to:
- Certified copies of company documents
- Certificate of Good Standing
Additional InformationIf you have any questions about all of the above and anything else our customer service representatives are here to help. You are invited to contact us via Live Chat, email, or call our customer service at +1 (877) 663-5003.
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Starting a Business in Another State:
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota