What Do Michigan Laws Require for Opening a New Business?
With the ninth lowest sales tax in America, alongside the fifth lowest standard of living there, Michigan is an ideal place for anyone planning to set up a business. With this in mind, this article looks at some Michigan Laws for opening a new business.
Decide on a Legal Structure
- Sole Proprietorship
No organizational filing is required by Michigan for this type of business.
In Michigan, you have to file a Certificate of partnership with the county clerk in every county your partnership is to do business.
- Limited Liability Company (LLC)
You have to file articles of organization with the Michigan Department of Licensing and Regulatory Affairs (LARA) and need to appoint a resident agent in Michigan for service process.
You must file articles of incorporation with LARA. A resident agent in Michigan must be appointed for service of process. If you’re planning to open an S Organization, you need to file IRS Form 2553.
Choose a Name
- Sole Proprietor and Partnership
If your business name is different from the surname(s) of the business owner(s), a notarized assumed name certificate with the county clerk where your business will be in Michigan must be filed. This must be renewed every five years, thereafter.
- LLCs and Corporations
If you’re thinking of creating an LLC in Michigan, ‘LLC’ has to be added at the end of your chosen name. If you’re forming a corporation you have to add ‘Company’ at the end. Using LARA, can determine if your business name is already taken. You can reserve a name for six months by filing an Application for Reservation of Name with LARA.
One other thing to consider is registering your business name as a domain name. A federal and state trademark search will ensure you do not use one already taken or similar to another that’s already being used. Businesses and their employees should also be mindful of the content they upload. This is to avoid bringing the business into disrepute.
Every business entity has to pay taxes in Michigan.
- Sole Proprietor
Use Form MI-1040 to pay taxes on business income as part of their personal state income tax returns.
All partners pay taxes on their partnership income on personal tax returns.
An Annual Statement must be filed with LARA in Michigan. All members must pay taxes based on their share of income from the LLC on their personal tax returns.
An Annual Report must be filed with LARA in Michigan by the corporation. It must also pay corporation taxes. Shareholders pay taxes based on their dividends received from the corporation. Any shareholder-employees that are in receipt of a salary from the corporation must also pay state income tax on their personal state tax return.
Licenses and Permits
If you’re planning to work in different states, there are different things you are required to do. In Michigan:
- A sales tax license is required if you’re selling goods in Michigan with their Department of Treasury. (DOT).
- If you have employees, you need to apply to DOT for employer withholding tax.
- If your business is a separate entity to you and therefore has taxes to pay and if you have employees, you need to obtain an Employer Identification Number (EIN) from the IRS.
- You may require various licenses and permits as proof that you meet the requirements in different areas such as health and safety.
Always do your research to ensure you will not inadvertently break any laws when you start a business in Michigan. Being well informed will put you on a positive path to experience the same satisfaction other small business owners feel when opening their business. This is much better than being ill prepared because you could be punished for any oversight.