A limited liability company (LLC) is one of the many ways to structure and create a business entity. LLCs are designed to protect business owners from direct legal and financial responsibility. Thankfully, Michigan law provides for a relatively short and easy process to create an LLC.
Here are 5 steps to follow when creating and maintaining an LLC in Michigan.
Step 1: Select a Name
The first step in creating your LLC is to select a name for it. Check with the Corporations Division of Michigan’s Department of Licensing and Regulatory Affairs (“LARA”) to make sure the name is available. This is an easy step that can be completed online by visiting LARA’s business entity search—simply search for the name you wish to use.
If you have selected a name but plan on waiting a little while before filing the articles of organization for the LLC, you may consider filing an application to reserve that name for 6 months. The cost is $25, but doing so will ensure that your desired name is temporarily reserved.
Additionally, there are certain requirements that must be followed when selecting the name of the LLC. The name must contain the words “Limited Liability Company” or an abbreviation such as “LLC” or “LC.” The name cannot imply that the LLC is actually a business corporation, or that the LLC is formed for purposes other than what it is authorized to do.
Lastly, you may decide when forming the LLC or at any subsequent time to adopt an assumed name to conduct business under by filing a certificate of assumed name with LARA. The cost is $25 per an assumed name, which lasts for 5 years and can be extended for additional calendar years by filing another certificate before expiration.
Step 2: File Articles of Organization
Once a name is selected, the next step to officially create an LLC is to file articles of organization with LARA.
Pursuant to MCL 450.4203, the articles of organization must include all of the following information:
- The name of the LLC, as discussed above.
- The purpose of the LLC. The LLC’s purpose may be limited to comply with the certain enumerated purposes, or the LLC may have the broad purpose to engage in any activity for which LLCs may be formed under Michigan law.
- The duration of the LLC. This is how long the LLC will be in existence for, which can either be perpetually or for a specific period of time.
- The name and address of the registered agent for the LLC. Each LLC in Michigan must have both a registered office and a registered agent. The party that will receive documents, demands, or notices on behalf of the LLC, such as service of process for legal documents, is both the registered office and the registered agent. This party must be a Michigan resident or Michigan business entity that is located at the LLC’s registered office.
There are also optional provisions that may be included in the articles of organization. Specifically, the articles of organization must state if the LLC will be managed by managers instead of by the members (owners) of the LLC. Additionally, these articles may provide for a later effective date if the LLC will become effective later than the date of filing.
The articles may be filed online or via mail with LARA, and the fee depends on the desired filing timeline. There are expedited filings available for an extra fee, including one-hour and same-day serve.
Step 3: Prepare an Operating Agreement
The operating agreement is the governing document that controls the LLC’s business operations. While an operating agreement is not required, it is an important document that outlines the rights and responsibilities of the LLC’s members.
Having an operating agreement in place is essential for LLCs with multiple members, as the agreement covers contributions, voting rights, distributions, and dissolution. If no operating agreement is executed, then the default provisions of the Michigan Limited Liability Company Act will apply.
Step 4: Register for Michigan Taxes, and Apply for an EIN
The LLC must register with the Michigan Department of Treasury by using Form 518. This allows LLC members to register for state taxes, income tax withholding, and unemployment tax.
If the LLC does not have any employees, it is not required to obtain an employer identification number (EIN) with the IRS. However, if the LLC will have one or more employees or more than one member, the LLC is required to obtain an EIN from the IRS.
Step 5: File Annual Statements
By February 15th of each year, the LLC must file an annual statement with LARA. (If the LLC is formed after September 30th, it is not required to file an annual statement for the next calendar year.) The annual statement is a pre-printed form that will be mailed to the LLC’s registered agent at the registered office each year. It must be returned online or by mail.
While the creation of an LLC is a relatively simple process, the drafting of the operating agreement is an imperative business decision that may have subsequent legal consequences. If you are looking to form an LLC or other Michigan business, contact our seasoned attorneys online for help. Grewal Law PLLC offers free consultations to all prospective clients.