Michigan LLC Formation Essentials

Before beginning your journey as a business owner, you should form a legal entity. Legal entities offer business owners liability protection to facilitate responsible risk taking in the marketplace. They also establish statutory and contractual guidelines that define your relationship with partners, employees, and customers. Entity selection is complicated and must be tailored to the specifics of your business. In most cases, I advise entrepreneurs and small business owners to organize as Limited Liability Companies (“LLCs”) because of their flexible legal and tax structure. Here are some Michigan LLC Formation Essentials to consider when organizing your company.

Is the business name available?

There is always a possibility that another company is using the business name that you want to use. In Michigan, the easiest way to confirm name availability is to do a business entity search or contact the Department of Licensing & Regulatory Affairs (“LARA”). Your business’s name should include Limited Liability Company or LLC. If you are unsure about the name, consider filing an application to reserve the name with LARA, which is good for six months. If you intend to operate the business under another name (commonly known as DBAs), then you should file a Certificate of Assumed Name with LARA, which is good for five years.

File the Articles of Organization

The Articles of Organization officially register your business with the State of Michigan. The Articles require the duration of time you intend to operate, the LLC’s registered agent & address, the LLC’s management structure, and authorization from one of the LLC’s members or counsel. LARA offers an easy-to-use online filing system to submit the Articles, which requires a $50 filing fee or additional fees for expedited review times. You can also send the Articles and filings fees to LARA via mail or in person. These other methods may require more time to get started.

Draft an Operating Agreement

While Operating Agreements aren’t required for LLC formation, you should still have one in place. Operating Agreements help define expectations, relationships, and processes in your business. Common considerations in Operating Agreements include LLC capitalization, LLC member admissions/withdrawals/expulsions, LLC tax and accounting procedures, LLC management structure, LLC decision-making processes, LLC buy/sell provisions, LLC indemnities, and LLC dissolution. Not all Operating Agreements are created equally, so it is always best to consult an attorney to draft yours accordingly.

Get an Employer Identification Number

The IRS uses Employer Identification Numbers (“EINs”) to identify your business for federal tax purposes. Single member LLCs without employees don’t require an EIN and allow the use of the member’s social security number for tax filings. To get an EIN, you or an authorized representative must file form SS-4 online or by mail. If filed online and approved, you will receive your EIN immediately. Also note that if an authorized representative is not a member of the business, they will not receive your EIN immediately. Rather, the EIN is mailed to the address of the business owner or registered agent.

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