The LLC’s business name must be different from all other business entity names registered or reserved with the Michigan Bureau of Commercial Services, Corporations Division. The name must include, at the end of the name, the words “Limited Liability Company,” or it must include either the abbreviation “LLC” or “L.L.C.” It may not, however, include the words “corporation” or “incorporated,” or the abbreviations “inc.” or “corp.” It is also not allowed to include a word or phrase that states or implies that it is organized for some purpose other than a legal business purpose, nor can it contain a word, phrase, abbreviation, or derivative whose use is prohibited by any other state statute. You can reserve an available LLC name for up to six months for a fee of $25.
The state filing time is 3 weeks and can be expedited in 8 business days.
State Filing Fees
The filing fee is $50, and can be expedited for $50.
Articles of Organization and Operating Agreement
Forming your Michigan LLC means that you have to file articles of organization. The certificate must be executed (signed) by at least two of the organizers and delivered, along with a copy and the $50 nonrefundable filing fee, to the Bureau of Commercial Services, Corporations Division, of the Michigan Department of State. The articles must include:
- The LLC’s name
- The purpose for which the LLC is being organized
- The title or capacity of the signers
- Whether the LLC will be of limited duration or perpetual
- The street address, including county, of the LLC’s initial registered office
- The name of the LLC’s registered agent at the LLC’s registered office
- Whether the LLC will be member-managed or manager-managed
It can also list other items-even ones that are included in the operating agreement-if the members so desire, as long as they don’t conflict with state law.
An organizer is allowed to be any natural person, or it may be a legal or commercial entity. The organizer is not required to be a member of the LLC, but there must be at least two organizers of some type.
The operating agreement is an important document which can be changed by the members as set forth by the agreement itself or applicable state law. Having an operating agreement is not legally required by the state, but it’s a vitally important internal document that sets forth how the LLC will run.
The operating agreement needs to:
- list the LLC’s members
- how much each one has invested
- how any profits will be distributed
- how much relative weight each member has when voting.
In addition, the operating agreement may also include requirements for meetings (notice, quorum, voting rules, etc.) and similar functions, but it doesn’t have to. Usually, though, it does include operating constraints and allowances already contained in state law and policy. It also may contain constraints on the members’ authority to change or repeal the operating agreement or a provision thereof. If there is more than one member, the operating agreement must initially be unanimously approved in writing.
A LLC in the state of Michigan must have at least one member, and each member must be a natural person. Someone may be admitted as a member of an LLC either when it is formed (by signing the initial operating agreement) or, after the LLC is formed, by complying with the operating agreement. Unless the operating agreement specifies differently, a unanimous vote of all the members is required to admit a new member. If the operating agreement does not address this situation, a unanimous vote of all members who are entitled to vote can also bring in someone new.
A member can acquire an interest in proportion to their contribution, or in some other manner set forth in the LLC’s operating agreement. Becoming a member usually requires a contribution of cash, property, services rendered to the LLC, or a promissory note or obligation to contribute one of these. However, an LLC in Michigan is allowed to admit a member who does not make a contribution or take on an obligation to make a contribution if the members decide to do so.
An LLC member can only resign as permitted in the certificate of organization or operating agreement, which usually specify a minimum membership time before a member may resign.
A Michigan LLC must at all times have a designated registered agent in the state-someone to receive official state legal and administrative correspondence on behalf of the LLC. A registered agent in Michigan may be an individual state resident whose business office or residence is the same as the registered office, or a corporation or LLC having a business office that is the same as the registered office:
The registered office may be-but does not have to be-the LLC’s place of business. However, the registered agent must maintain a registered office that is identical with the business office.
Ongoing Filing and Compliance
Michigan LLCs need to keep the following types of records open to inspection at its office:
- Names and addresses of all members and managers.
- A copy of the articles of organization, together with any amendments to the articles that were filed with the Michigan Secretary of State.
- Copies of the LLC’s federal, state, and local tax returns and reports, if any, for the most recent three years.
- Copies of any LLC financial statements for the most recent three years.
- Copies of operating agreements.
- Copies of records that would help a member determine the members’ relative` shares of the limited liability company’s distributions and the members’ relative voting rights.
A Michigan LLC is dissolved when any one of the following events occurs:
- Event(s) or a time specified in the articles of organization or operating agreement
- Unanimous written agreement to dissolve
- Event that makes it illegal for the LLC to continue
- Judicial decree ordering dissolution
An LLC has the availability of more deductions compared to corporations. Additionally, an LLC is not required to be a separate tax entity like a corporation. Instead, it can be a “pass-through” entity so that the LLC owners report business losses or profits on their personal tax returns, like a partnership.
The IRS treats single-member LLCs as sole proprietorships for tax purposes. This means the LLC itself does not pay taxes and does not have to file a tax return. Unless you decide to have the LLC taxed as a corporation, the IRS treats multi-owned LLCs as partnerships for tax purposes. This means that LLC owners each pay taxes on their lawful share of the profits on their personal income tax returns, not the LLC itself. The LLC tax rate for Michigan is variable and is based on Michigan taxable net income.