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Michigan LLC CostYou 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.

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.

Bare Minimum Cost to Start an LLC in Michigan

Optional: LLC Name Reservation Fee

    • $25 for online or hard copy submissions

Optional: LLC Formation Service

    • $39 for an LLC service like ZenBusiness and $79 for LegalZoom

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.

To clarify, most states don’t require name reservations, and they’re rarely necessary. If you’re concerned about someone else registering the name you want, you could opt to simply form your LLC instead of reserving the name.

 

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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 $50 that you won’t have to spend in future years.

The information you’ll need to file your Articles of Organization includes the official business name of your LLC, a brief description of your LLC’s business purpose, the dissolution date of your LLC (if applicable), the name and address of your resident agent, the date, and your printed name and signature.

If you would rather get some help for this step, you’re in luck! There are plenty of reputable LLC formation services that will prepare and file your Articles of Organization on your behalf. You have plenty of options for this service, but we prefer ZenBusiness. They offer great low rates and well-rounded services, and with our exclusive discount code, you can get 20% off!

 

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.

What are some of the most commonly required business licenses for Michigan LLCs? If your business operates in a regulated industry, you will probably need some sort of professional license to operate in compliance with state law. On the municipal level, things like alarm permits, building permits, and zoning permits are all very common.

 

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 online incorporation 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 (which are often frequently used LLC alternatives to LegalZoom) 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.

There are many different companies offering LLC formation services these days, and it can be tricky to tell which one is the right choice for your needs. We think ZenBusiness and IncFile are the two best LLC formation companies, and we wouldn’t hesitate to recommend either of them to our families and friends.

 

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, 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.

 

Attorney Fees

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 $500-2,000.

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.

If you don’t want to go digging for your own attorney, we compiled the following list of highly rated business lawyers in Michigan. All of these attorneys are primarily focused on the business world, they all receive five-star ratings from clients, and they all have excellent Avvo ratings.

 

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 statement 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 statement costs $25, so expect to be making this payment every winter.

The information required to file your annual statement includes the official business name of your LLC, your LLC’s principal office address, the name and address of your resident agent, the names and addresses of your LLC’s members, your name, and your signature.

 

Taxes

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. 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 statements — so your business doesn’t fall out of good standing.

 

Key Steps for Starting a Michigan LLC

  1. The first step to forming a Michigan LLC is to come up with a good name for your business. You’ll want to make sure the name you want is still available and hasn’t already been claimed by another business, so you’ll need to search the state’s business database to verify its availability.
  2. Next, you’ll need to choose your resident agent. While you can legally serve as your own resident agent in Michigan, this role can actually be more of a hassle than you might expect. That’s why we always recommend hiring a reputable resident agent service that can handle the responsibility of this position on your behalf.
  3. The third step involves the preparation and filing of your Articles of Organization. You’ll need to fill out the paperwork and pay a $50 fee. Once the state processes this document, your LLC will be officially open for business!
  4. That’s not the end of the road for the startup process though, as you’ll also need to create an operating agreement for your LLC. There is no legal requirement for Michigan LLCs to have written operating agreements, but it’s still an extremely important element of any LLC. The operating agreement is an internal document that outlines how your LLC will operate, and there are several aspects of this document that can prevent messy ownership disputes down the line.
  5. You will also need to acquire a federal tax ID number (also known as an EIN, or employer identification number). This is essentially a Social Security number for your business, as it is a nine-digit code used to file taxes, hire employees, open business banking accounts, and more.
  6. Next, you’ll need to register for any relevant taxes with the Michigan Department of Treasury, and also obtain all licenses and permits that apply to your business type. Keep in mind that, depending on the nature of your business, you might require licenses from the federal, state, county, and municipal governments.

Once you’ve finished all of these steps, you’re ready to operate a compliant business entity with the state of Michigan!

Key Steps for Maintaining a Michigan LLC

After you’ve completed all of the items in the previous section, you’ll need to focus on maintaining your LLC. The first step in this process is to open a business bank account. This will help you keep your business and personal expenses entirely separate, and it will also help immensely with your accounting and taxation responsibilities.

You should also keep detailed records of every financial transaction that takes place with your LLC. This means maintaining a file of invoices for every purchase and sale you make, along with information regarding your employees or contractors and the work they perform for your business.

As we already mentioned, annual reports are a key component of LLC maintenance in this state, and there are harsh financial penalties for delinquent reports. Additionally, you might want to hold an annual meeting to discuss goals and priorities for your LLC, although this is an optional step.

The Top 3 Michigan LLC Services

If you want to hire a reputable LLC formation service to handle the heavy lifting on your behalf, these are the three companies we trust and rely on the most.

  • ZenBusiness ($39) – ZenBusiness offers a well-rounded LLC formation package at a great low rate. Their standard LLC package includes a full year of registered agent service, an accounting assessment, and a customizable operating agreement. ZenBusiness also receives stellar customer feedback.
  • IncFile (FREE) – That’s not a typo! IncFile really does form LLCs for free. Even better, they include 12 months of registered agent service in their free package. IncFile has a ton of experience and more than 500,000 satisfied customers, so they’re always a reliable choice.
  • Northwest Registered Agent ($225) – Northwest offers a bit more of a premium service, but if you have the money, we think it’s worth it. Like ZenBusiness and IncFile, Northwest also includes a year of registered agent service with the purchase of any LLC formation package. They also offer the best customer support in this industry, with knowledgeable representatives who are familiar with the details of business formation processes in every state.

Frequently Asked Questions

Before we wrap things up, let’s take a look at some of the most common questions we hear from readers regarding the LLC formation process in Michigan.

What are the state business tax rates in Michigan?

If your LLC is taxed like a sole proprietorship or general partnership, you’ll need to pay taxes on your business income at the state’s personal income tax rate of 4.25%. If your LLC is taxed like a corporation, you’re required to pay Michigan’s 6% corporate income tax on your business revenue.

How quickly does Michigan process LLC formations?

The Secretary of State should be able to process your LLC’s formation within 2-3 weeks. If you’re in a hurry, the state has expedited options available.

How many small businesses are there in Michigan today?

The state of Michigan is home to nearly 875,000 small businesses. Entrepreneurs of all backgrounds and business types find that Michigan is a great place to own and operate a small business.

What are the top small business resources and websites in Michigan?

The Michigan chapter of the Small Business Development Center is a great place to start, as they offer a wide variety of tools and resources for Michigan LLCs. The U.S. Small Business Administration’s Michigan District Office is another valuable resource, and the state’s Economic Development Corporation also has plenty of good info.

Should I form my LLC in Michigan, or choose a state like Delaware or Wyoming?

Some people like to form their LLCs in states with favorable legal settings. For instance, Delaware is often seen as the most business-friendly state, as it has an entire court system that’s dedicated solely to business matters. As for Wyoming, this state has some of the most generous anonymity laws for LLC ownership.

However, for most people, your best option is to simply form your business in your home state. Forming in a different state can be a tremendous hassle, and it can add some unnecessary complexity to tax issues as well.