A limited liability company is the most common structure for small businesses in Michigan. Filing the paperwork takes minutes. Setting the company up so it actually protects you takes a little more care.
The checklist
- Choose and check your name. The name must include "Limited Liability Company," "L.L.C.," or "LLC" and must be distinguishable from other businesses registered in Michigan. Search the state's business entity database first.
- Name a resident agent. Every Michigan LLC needs a resident agent with a Michigan address to receive legal papers.
- File Articles of Organization with the Michigan Department of Licensing and Regulatory Affairs (LARA). The standard filing fee is $50.
- Sign an operating agreement. Michigan does not require one to be filed, but it is the most important document the company will have. It should cover ownership percentages, capital contributions, who makes decisions, how profits are paid, and what happens when an owner wants out, becomes disabled, or dies.
- Get an EIN from the IRS. It is free and required to open a business bank account and hire employees.
- Open a separate bank account. Mixing personal and business money is one of the most common ways owners lose liability protection.
- Register an assumed name if you will do business under a name other than the LLC's legal name.
- Get licenses and permits. Depending on the business, you may need city, state, or industry licenses, and a sales tax license from the Michigan Department of Treasury.
- File the annual statement. Michigan LLCs must file an annual statement with LARA by February 15 each year. Missing it can eventually cost the company its good standing.
Mistakes we see
- Using a free online operating agreement that does not match how the owners actually plan to run the business
- Two or more owners with no written agreement about what happens if they disagree
- Signing leases and loans personally instead of in the company's name
- Transferring real estate into an LLC without checking the mortgage, insurance, and tax consequences
Ten minutes of paperwork creates an LLC. A good operating agreement protects the owners from each other.
Ayad Law helps Michigan owners form companies, draft operating agreements, and review contracts, in English and Arabic. If you are starting a business, request a consultation.
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This article is general information about Michigan and federal law as of its publication date. It is not legal advice, and reading it does not create an attorney-client relationship. Laws change and every situation is different; talk to an attorney about your facts.