The path from a business idea to a legal business in Michigan starts with registration. From picking your company’s legal structure to filing the right forms with various agencies, there’s plenty to tackle. But don’t worry – we’ve broken down the Michigan business registration process into clear, manageable steps so you can get your business up and running without unnecessary delays.
Related: Starting A Business In Michigan Checklist
Step 1: Choose a Business Structure
The first step in registering a new business in Michigan is selecting a business structure. Also called a business entity, a business structure is how a business is legally set up to operate. This isn’t a decision to make lightly, as it impacts things like raising funds, taxes, personal asset protection, and more.
In Michigan, there are four common types of business entities: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).
Related: Comparison of Business Structures
A sole proprietorship is an unincorporated business owned by one individual. This type of entity offers simplicity in starting and running but does not provide any personal liability protection for its owner. The profits of a sole proprietorship are taxed directly on the owner’s personal income tax return.
Sole proprietorships are typically best suited for small businesses with low-risk levels, such as freelance work or consulting services.
How to Start a Sole Proprietorship in Michigan
General Partnerships involve two or more individuals who share ownership and management responsibilities for a business. Each partner has unlimited personal liability for debts incurred by the partnership, which can be a major disadvantage compared to other entities. Profits from general partnerships are reported on each partner’s individual tax returns, and no special filing requirements exist at the state level, but a partnership will need to register a business name, like the sole proprietor.
Corporations are separate legal entities from their owners, which provide limited liability protection to shareholders but also require more paperwork and administrative requirements than the first two entities. Corporations tend to be best suited for larger companies with multiple investors who desire protection from creditors or lawsuits.
How to Form a Michigan Corporation
Finally, Limited Liability Companies (LLCs) combine features from both corporations and sole proprietorships & partnerships. LLCs provide limited liability protection to members, like a corporation, while having fewer formalities than corporations, such as having annual meetings, taking minutes, etc.
Step 2: Select a Business Name
After choosing a business structure, registering a business name is a common step when setting up a company in Michigan.
For sole proprietors and general partnerships, using the owner(s) personal name as the business name is an option. However, if you plan to operate under a different name, you’ll need to file an Assumed Name Registration (often referred to as Doing Business As or DBA) with the county clerk’s office where your business is located.
For example, if Maria Rodriguez wants to start a freelance graphic design business called “Vibrant Designs” as a sole proprietorship, she would need to register this assumed name with her local county clerk’s office. This registration allows her to legally operate her business under the “Vibrant Designs” name.
In Michigan, these names must be unique. To check availability, you can do a Michigan business name search with the Michigan Department of Licensing and Regulatory Affairs.
Corporations and Limited Liability Companies (LLCs) select their names during the formation process. These names must be unique within Michigan.
Step 3: Federal Employer Identification Number (FEIN)
The next phase for many Michigan businesses involves obtaining a Federal Employer Identification Number (FEIN). A FEIN is a unique nine-digit number the Internal Revenue Service (IRS) assigns to identify a business. Many businesses require this number.
You need an EIN if:
- Your business has employees
- Your business is structured as a corporation, partnership, or multi-member LLC
A sole proprietorship or single-member LLC without employees can use the owner’s social security number for tax purposes. However, these entities may still obtain an EIN if desired.
Obtaining an EIN is a straightforward process that doesn’t involve any fees. You can complete an application on the IRS website in a matter of minutes. Alternatively, you can submit Form SS-4 by mail or fax, though this method takes more time to process.
Step 4: Professional Licensing
In addition to business licensing, professional licenses are required for certain occupations in Michigan. The Michigan Department of Licensing and Regulatory Affairs (LARA) oversees licensing for most regulated professions, including medicine, law, accounting, architecture, and engineering. For specific requirements, fees, and application processes, visit the LARA website or contact the relevant professional licensing board.
Step 5: Michigan Sales Tax License
Businesses selling goods or certain services in Michigan often need to register for a Michigan Sales Tax License (also known as a Sales Tax Permit) with the Michigan Department of Treasury. This license allows businesses to collect and remit sales tax to the state. More specifically, this applies to:
- Retailers selling tangible personal property
- Wholesalers selling tangible personal property
- Some contractors
- Providers of specific taxable services
Michigan Sales Tax License Registration
Step 6: Resale Certificate
Businesses that purchase merchandise for resale often benefit from obtaining a Michigan Certificate of Exemption. This certificate allows these businesses to buy inventory without paying sales tax, as they will later collect sales tax from the end customer during the final sale.
Who needs one:
- Retailers purchasing products to resell
- Wholesalers acquiring goods for redistribution
- Manufacturers buying materials for products they’ll sell
To obtain a Certificate of Exemption, businesses must first register for a Sales Tax License with the Michigan Department of Treasury. Once registered, they can generate exemption certificates through their online account or by contacting the Department of Treasury directly.
Step 7: Local Business Licenses
While Michigan doesn’t have a general statewide business license requirement, many local jurisdictions mandate local licensing for businesses operating within their boundaries. These local licenses help municipalities regulate commerce and ensure compliance with local ordinances. The specific requirements vary based on the location and nature of the business.
Some common local licenses include food handling certifications for food service establishments. These are typically required for restaurants, cafes, and other businesses that prepare or serve food to ensure proper food safety practices.
Other examples of local business licensing requirements in Michigan:
- Detroit: The Buildings, Safety Engineering and Environmental Department oversees business licensing. Businesses must obtain a Certificate of Occupancy from the Zoning Division and a Business License from the Business License Center before commencing operations.
- Grand Rapids: The City Clerk’s Office manages business licensing. Certain businesses, including dance halls, home-based enterprises, and mobile food vendors, are required to obtain specific licenses.
- Warren: The City Clerk’s Office administers business licensing. Various businesses, such as bowling alleys, self-serve car washes, caterers, and tattoo parlors, must obtain licenses to operate within city limits.
- Ann Arbor: The City Clerk’s Office handles business licensing. Certain businesses, including those selling food or alcohol, operating sidewalk cafes, or providing transportation services, need to acquire specific licenses.
- Lansing: The City Clerk’s Office oversees business licensing. Businesses such as secondhand dealers, pawnbrokers, and those involved in entertainment or recreational activities often require special licenses.
Step 8: Local Building & Zoning Permits
Addressing building and zoning requirements is important before finalizing property agreements when establishing a business location in Michigan. Some items to research in the step include:
Zoning Regulations: These rules dictate how specific areas can be used for business purposes, and local zoning departments can confirm whether your intended business activities are permitted at your chosen location. This may also be relevant for home-based businesses, as some residential areas may have limitations on commercial activities.
Building Permits: Local building departments typically handle these. They are necessary for new construction or significant renovations to ensure compliance with safety standards and building codes.
Certificate of Occupancy: Many municipalities in Michigan require a Certificate of Occupancy before allowing a business to operate from a building. This document, usually issued after final inspection, confirms that the structure is safe and compliant with local regulations.
Sign Permits: Many areas regulate business signage. Local planning or zoning departments can provide information about size restrictions, placement rules, and permit requirements for exterior signs.
Before committing to a location, it’s advisable to contact your local city or county offices to understand the specific requirements for your business type and chosen location.
For only $99, you can save a lot of time and know your business complies with local, state, and federal requirements.