How to Start a Business in Michigan
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Updated 5:23 a.m. UTC March 9, 2024
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You can start a business in Michigan by following these steps:
- Start with a business plan.
- Select a business entity.
- Choose a business name that’s available in Michigan.
- Register your business entity.
- Apply for an employer identification number (EIN) from the IRS.
- Open business finance accounts.
- Apply for required licenses or permits.
- Register to pay taxes.
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8 steps to start a business in Michigan
Now that you know some of the ins and outs of starting a business in Michigan, have your business plan done and know the type of business entity you want, it’s time to register and officially start your business.
1. Start with a business plan
A business plan outlines how you plan to run your business and make money. A business plan should start with market research. Research your industry, market size, customers and competition to understand the demand for your products or services, gaps that occur in the market (that you can fill) and how to best reach your customers.
Some tools you can use to conduct market research include:
- Surveys.
- In-person visits to competitors’ stores.
- The Bureau of Labor Statistics.
- The U.S. Census Bureau.
As you create your business plan, remember that most business plans have the following components:
- An executive summary: This section tells readers about what your company does, what makes it successful, its products and services, its leadership, its current financial standing and its growth plans.
- Market analysis: This is where you put your market research to work by spelling out your industry outlook and pertinent information about your target markets. You should also overview how you plan to compete in the industry based on your strengths, weaknesses and unique value in the industry.
- Organization and management: Provide an overview of your business’s management structure and the people who will serve in key roles. Offer information about why each person was selected for their role. In addition, offer an explanation of your business’s legal structure and why you chose that structure.
- Funding requirements: Outline the funding requirements your business will need over the next five years. Remember that this plan can be used to approach investors. So, include an outline of what that funding will cover and how you plan on covering those requirements (by taking on debt, for example).
- Financial projections: With the funding information you’ve gathered, create an income and cash flow forecast and expenditure budget. While you want to create a five-year projection, go into more detail about the first year, breaking it down by quarter or month with requirements to cover each.
- Appendix: Use this section to provide supporting documents that highlight your company’s strengths and fill in gaps in your business plan, such as executives’ or managers’ resumes, product images, credit reports and legal documents.
In addition, as you plan for your business’s operations, consider the tools you will use to run your business smoothly. If you sell items or services, for example, you may need a credit card processor and a payroll software. You may also want to plan ahead by researching business checking accounts in Michigan and the best business credit cards.
2.Select a business entity
Before moving forward and completing any forms, research and choose the best Michigan business entity for your needs. Entities supported by the Michigan government include sole proprietorships, corporations, limited liability companies (LLCs), limited partnerships, low-profit limited liability companies and professional limited liability companies (PLCs).
The type of entity you choose can have significant legal and tax implications, so choose carefully. If you’re unsure how to move forward, consider consulting with a trusted business attorney or tax expert.
Your business structure will be a sole proprietorship by default if you don’t register a business entity. In that case, all business finances and legal liability falls to you personally. Even with some other entities, taxes pass through to your personal income tax return instead of the business paying its own income taxes. These are known as pass-through entities.
| BUSINESS ENTITY TYPE | PASS-THROUGH TAXATION | DEFINITION | FORMATION PAPERWORK | LEGAL LIABILITY PROTECTION |
|---|---|---|---|---|
Sole proprietorship
| Yes
| Default business structure if you do not file formation paperwork. Has one member
| None
| No
|
General partnership
| Yes
| Operates like a sole proprietorship but with two members
| None
| Yes
|
Limited liability company (LLC)
| Yes
| An entity that offers limited liability protection for its owner(s)
| Articles of organization
| Yes
|
Limited partnership
| Yes
| A two-member limited liability entity
| Certificate of limited partnership
| Yes
|
Low-profit limited liability company (L3C)
| Yes
| A for-profit LLC with a charitable mission and in which earning profit is not the primary concern
| Articles of organization
| Yes
|
Professional limited liability company
| Yes
| An LLC formed by only licensed professionals within one profession (such as a law firm)
| Articles of organization
| Yes
|
S corporation
| Yes
| A pass-through entity in which stock can be issued to shareholders
| Articles of organization or articles or incorporation, then IRS form 2253
| Yes
|
C corporation
| No
| A corporation that has unlimited shareholders, issues stock. and is subject to double taxation at the corporate and shareholder level
| Articles of incorporation
| Yes
|
3. Choose a business name available in Michigan
Your business name should be unique and in line with Michigan guidelines. To learn how to choose a name that incorporates state rules, refer to Michigan’s business naming guidelines. In addition, to ensure your name is memorable and marketable, read our guide on how to name a business.
Once you’ve chosen an appropriate name, you must ensure it is not already in use by another Michigan business. The Department of Licensing and Regulatory Affairs offers a business search tool you can use to search your business name. If the name appears in this database, it is already in use by another business and you must make the name distinguishable or choose another name. To learn how to appropriately distinguish the name, refer back to Michigan’s naming guidelines.
If you find a name you like, check to see if the name is federally trademarked through the US Patent and Trademark Office’s trademark database. If a name is trademarked, you can’t use it even if it’s not taken in Michigan.
Once you have a name that is available on a state and national level, if you are not ready to file your business formation paperwork, you can reserve the name. Limited liability companies can reserve the name for four months (with an extension option of two additional months) and corporations can reserve their business name for six months. You can do so by filling out an application for reservation of name and submitting it along with the filing fee. For corporations, the filing fee is $10 while LLCs must pay $25.
4. Register your business entity
Depending on the type of business you are starting (a corporation, LLC or sole proprietorship, for example), there are different filing requirements. However, once you have a name selected for your business and have designated a registered agent, you are ready to file the appropriate paperwork. In Michigan, here are the primary paperwork filing requirements to form the most common types of business entities:
- Corporation: Fill out an articles of incorporation form and submit the $10 filing fee.
- Limited liability company: Fill out an articles of organization form and submit a $50 filing fee.
- Professional limited liability company (PLLC): Fill out an articles of organization form for professional services limited liability companies and submit a $50 filing fee.
- Sole proprietorship or partnership: No paperwork is required to form this type of company and no filing fee applies.
- S corporation: To form an S corporation, either form a corporation or an LLC, then elect S corporation tax treatment by filing IRS form 2253.
5. Apply for an EIN from the IRS
An employer identification number (EIN) is like a Social Security number for your business. You’ll use your EIN to file business tax returns, open a bank account, hire employees and seek business funding.
You can obtain an EIN for free on the IRS website. The EIN registration tool is available Monday through Friday from 7 a.m. to 10 p.m. EST. In most cases, once you’ve submitted the online form to obtain an EIN, you’ll receive an EIN instantly via a confirmation page.
Learn more about how to obtain and use an EIN in our EIN guide.
6. Open business finance accounts
To maintain your business’s limited liability protection, it’s vital to keep your personal and business finances separate. Using a dedicated business bank account can help you do so. Depending on your business needs and personal preferences, you can choose a local bank, nationwide bank, credit union or online bank. Some fees may apply, such as a required initial deposit.
Opening a business credit card can help you manage your cash flow while earning valuable cash back or travel rewards, plus other perks, depending on the card. If you pay your card balance in full by the monthly due date, you won’t owe interest, but be aware of annual fees and other less-common transaction fees.
To find the right business checking account and credit card for your business, read our best business checking accounts and best business credit cards lists.
7. Apply for required licenses and permits
Depending on the nature of your business, you may be required to obtain a business license to operate your new entity. For example, in Michigan, accountants, engineers, real estate brokers or salespeople and electricians must have a license or permit to operate. You can learn about the professional licensing requirements in Michigan by visiting the Michigan Licensing and Regulatory Affairs licensing and permits page.
Depending on your business’s industry and activities, you may also need local and federal licenses or permits to operate your business. To learn more about how to find out the types of licenses or permits your business may need and how to apply for them, read our business licensing guide.
8. Register to pay taxes
Depending on the type of business you operate, you may have to pay business taxes. For example, if you operate a corporation, you will have to pay corporate income taxes. If you hire employees, you will have to pay withholding taxes on their wages.
The best way for most business owners to register to pay business taxes is through the Michigan treasury online (MTO) system. Follow these steps to register:
- Set up your personal MTO account: Each user needs their own username and password to log into MTO. If you don’t have them set up, create your account.
- Complete the business registration application: Once logged in, complete the application for your business entity. Make sure to enter every detail accurately so you don’t have trouble with your business down the road.
- Verify your successful registration: Business registrations typically appear in the Michigan business database in about 15 minutes but can take 48 hours. Log into MTO to verify that your business registration was completed successfully.
You can now use this portal to file and pay most types of applicable business taxes applicable. You can also use the portal to update your business information with the Michigan Treasury.
Find the best company formation services for Michigan: Best LLC services of 2023
Our top recommended company formation service for Michigan
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Northwest Registered Agent
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Frequently asked questions (FAQs)
Depending on your business type, registering a new business in Michigan costs $0 to $50. Some business types require additional fees, such as costs to hire a registered agent, pay applicable taxes and obtain licenses or permits.
Once you have submitted your business formation paperwork, it can take up to two weeks for the Michigan Department of Licensing and Regulatory Affairs to process your paperwork. However, if you pay an additional expedition fee, your documents may be reviewed in as little as one hour from its receipt by the department.
You don’t need a physical storefront to open a business in Michigan, but you do need a Michigan registered agent address. To obtain this address without a physical business address, consider hiring a registered agent service.
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