Think about your LLC a year from now: raking in profits and taking Michigan by storm. You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees – before you sell a single product, there are startup costs associated with launching an LLC in Michigan.
While you’re making plans and dreaming big, make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Michigan startup fees here.
Quick Note: If you’d like to keep your costs of starting an LLC as simple and low as possible, consider hiring ZenBusiness – a reliable business formation service. To get a better idea of the value they offer and how it works, we compared them to the two most well known services:
Bare Minimum Cost to Start an LLC in Michigan
- Optional: LLC Name Reservation Fee
- $25 for online or hard copy submissions
- Required: Articles of Organization Fee
- $50 for online or hard copy submissions
Overall Michigan LLC Formation Costs
LLC Name Reservation Fee
Since reserving a name is not a required part of the LLC formation process, this step is optional. That said, in certain circumstances, it can be extremely helpful. If you don’t quite things lined up to start your business, but you want to protect your name, reserving it is a good idea. You’ll pay $25 to place a 180-day hold on your desired name, during which no one else can register or reserve it. After it expires, you may renew your hold for 180 more days by paying another $25 fee. Filing your Articles of Organization will automatically register your name, so if you’re ready for that step, it’s best to just start there.
Articles of Organization Fee
This is the big one, the most important form that you’ll file to start your Michigan LLC. Without the Articles of Organization on file, your business won’t be recognized by the state, so this is the very first form you want to file (aside from the optional name reservation). It’s available online and as a hard copy, and it costs $50, which is quite a bit less than the formation documents in some other states. You only file the Articles of Organization once, so it’s a $50 that you won’t have to spend in future years.
Business and Professional Licenses
After filing your Articles of Organization, you might be itching to start doing business in Michigan, but before you do, check to see if your LLC requires any additional licensure. Certain business types need to obtain a license from the state before conducting business. Like Athletic Trainers, who must be licensed by the Department of Licensing and Regulatory Affairs, or restaurants, which need to apply for a Food Service license. See all license requirements here. Local city and/or county licenses might be necessary too, so be sure to check with your local government.
LLC Formation Service
Starting an LLC can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for an LLC formation service. These services take care of the registration process for you, so you don’t have to spend the time on research, paperwork, and filings.
Most of these services (like ZenBusiness and Northwest) offer basic LLC formation service like Articles of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, Operating Agreements, and expedited filing.
Resident Agent Service
Appointing a resident agent is an important part of your LLC formation process. Your resident agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with Michigan business law. In short, you need an agent you can trust.
While you can be the resident agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional. A resident agent service ensures that your annual reports and other forms are filed efficiently and on-time, saving you from the penalties of delinquent filings and the stress of having to do it yourself.
Not all resident agent services are equal, so you’ll need to be careful in choosing one. Fortunately, we’ve done some research for you, and we recommend Northwest Registered Agent. In addition to resident agent services, Northwest also handles LLC formation — and they’ll include a resident agent free for one year when you form your business with them. We think they’re the most reliable choice, but if you’d like to evaluate all your options, check out our Best Resident Agent Services guide.
If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind.
Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that. On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2000.
Cost variations depend on the experience and location of the lawyer. Surveying the sheer number of business lawyers out there, you may be wondering: how do I find the right one? Sites like Avvo, which offer access to databases of Michigan business attorneys, let you compare and contrast, narrowing down your choices until you’ve found that perfect fit.
Foreign Qualification Fee
This only applies if your LLC was formed in another state and is now expanding into Michigan. Foreign business entities don’t file the Articles of Organization. Instead, they must submit an “Application for Certificate of Authority.”
All foreign business entities are required to foreign qualify in Michigan, or they could incur some pretty severe penalties. Avoid them by submitting your Application for Certificate of Authority by mail or in person. The one-time filing fee is $50.
LLC Annual Fees
Unfortunately, your LLC fees don’t end after you submit your Articles of Organization or Application for Certificate of Authority. All Michigan LLCs must submit an Annual Report by Feb. 15 every year to ensure that the state has the most updated information on file. You will receive a paper form in the mail, or you can file online. Each report costs $25, so expect to be making this payment every winter.
Your LLC will only need to pay taxes in Michigan if it meets certain conditions. This is because, as a “pass-through” entity, it doesn’t file a separate corporate tax return with the federal government, and the state of Michigan doesn’t impose franchise or privilege taxes on its businesses.
However, you may need to pay specific taxes, such as a withholding and unemployment tax if you hire employees, or a sales tax if you sell merchandise. For taxes like these, you will need to register with the Michigan Unemployment Insurance Agency online or by mail. Visit the Michigan Department of Treasury website for more details.
If you have deliberately structured your LLC to be taxed as a corporation, it will be subject to the 6% corporate income tax.
What If I Don’t Pay?
Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
Let’s say you forget to file your Annual Report by Feb. 15. Your LLC will fall out of good standing with the state. This means that you will be unable to foreign qualify in most other states, apply for business loans, renew licenses, and make other business filings. Getting back into good standing is as easy as submitting all outstanding filings and fees, but if you don’t, the state can administratively dissolve your LLC and you’ll no longer be allowed to do business in Michigan.
Fail to pay your business taxes and you might be in for some hefty fines along with a loss of good standing. Tax penalties can range from 25-500% of the amount owed, depending on the tax, so it’s incredibly important to pay them on time.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Michigan.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees – like Annual Reports – so your business doesn’t fall out of good standing.