Entrepreneurship is exciting—the thrill of developing a winning product or service, bringing that idea to life, and making life better for your clients—it’s fun. But unfortunately, it’s not free. Long story short: starting a business has a price tag. LLCs are no exception.
If you’re hoping to start an LLC in Michigan, you’ll quickly learn that you’ll have a pretty long list of fees for forms, licenses, and applications that you’ll need to get started. Some of those are optional fees, and some are unavoidable. In this guide, we’ll walk you through all the costs you can expect when starting a Michigan LLC. By the end, you’ll have a clear picture of how your new business will impact your wallet.
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What’s the least amount I have to pay to form an LLC in Michigan?
If you’re crunching the numbers before diving right in, good on you! Planning ahead is a surefire way to start your business off on the right foot. But let’s make one thing clear: the phrase “cost to start an LLC” is a bit deceptive. That’s because you don’t want to get stuck focusing on the “day one” expenses of business.
That’s right—when budgeting for start-up costs, you need to account for the costs you’ll pay today and the costs you’ll pay a year or two down the road.
So let’s talk start-up costs and ongoing costs for your Michigan LLC. But to keep things simple, here we’ll cover the non-negotiable costs. Later on, we’ll talk about services that are nice to have (but you can live without if you have to).
MI LLC Start-up costs
There are two primary start-up costs in Michigan. The most important one (but thankfully not the most expensive one) is the Articles of Organization. There’s a $50 fee for this registration. Compared to other states, that’s very affordable. But regardless of whether that sounds like pocket change or an expense you’ll need to budget for, you can’t avoid this cost. After all, the Articles of Organization is what officially forms your business in the state. Without it, you’re not a recognized business.
Then there are licenses to consider. Unlike a lot of states, Michigan doesn’t have a general business license that applies to every entity in the state. Instead, the bulk of Michigan’s licensing requirements come in the form of industry-specific licenses. But there’s a pretty big variety of them, so you’ll have to do some digging to learn if one applies to you. Michigan’s State License Search is a good place to start that research.
Unfortunately, we can’t provide a comprehensive list of price tags for these licenses, but you can reasonably expect to pay an application fee when you get one.
Ongoing costs for an LLC in MI
If your business lasts (and we’re confident it will), then you’ll have several ongoing costs. These include license renewals, annual reports, and taxes. Let’s dig into those prices and fees.
License renewals
Thankfully, you don’t have to worry about renewing a state general business license, but you might have to renew your professional or occupational permits. Each Michigan licensing board has its own policies for renewals, though, so we can’t really list them here. This guide would be tedious if we did. When you obtain your licenses, we recommend taking note of the renewal requirements for your industry so none of the fees surprise you.
Annual taxes
In Michigan (or any state, for that matter), one of the biggest annual costs you’ll have will be taxes. And one of the biggest taxes is income taxes. If you pay taxes as an LLC, you’ll pay a flat rate of 4.25%. But if you’re taxed as a corporation, things are a touch more complicated. The basic corporate income tax (CIT) is 6%, but some businesses will pay the Michigan Business Tax instead. We won’t go into tons of detail here, but we wanted to list them here so you’re aware of them.
If you’re involved in sales (for any qualifying good or service), you’ll need to collect and pay the state sales tax. The current rate is 6%, and you can learn more about the tax here.
There’s also a wide variety of miscellaneous business taxes that might apply to your LLC: motor fuel, tobacco, and marijuana are just a few examples. But we won’t dig into all the nitty-gritty details here. If you think a miscellaneous tax might apply to you, we recommend checking out the Michigan Department of Treasury.
Annual report
Most states require LLCs to file some version of an “annual report,” or a document that informs the state about the current standing of your business. This document is usually required in addition to annual tax reports, since it usually includes information about your business address, members, your registered agent, and so on.
In Michigan, this report is usually called the Annual Statement, but it works similarly to other states’ reporting processes. It’s super simple to file the report online. The due date for LLCs is February 15th, and the filing fee is $25. But unlike a lot of states, Michigan doesn’t assess a late fee if you miss the filing date (only corporations deal with late fees). That said, we recommend filing it on time to ensure that you stay in good standing, 100% of the time.
What are the discretionary costs to form a Michigan LLC?
When you’re starting your business, your budget is usually pretty tight. Prioritizing costs can get tricky. The costs we listed above are unavoidable. Well, technically, you can avoid them, but you’ll be heavily penalized if you do. And there’s not much point to spending all that money on starting a business only to knowingly let it be dissolved because you didn’t pay your ongoing costs.
But if you can help it, doing the “bare minimum” is probably not the best way to start your business. There are plenty of discretionary costs you can pay for certain services that make life easier. Here, we’ll dig into those costs—and why you might consider paying them.
1. Name reservation application
Naming things can be a bit tricky; after all, sometimes inspiration is a little lacking! And since Michigan doesn’t allow you to use a name that someone else has already claimed, you have to work even harder to pick one that’s unique, memorable, and just right for your business.
It’s a multi-step process, really: you have to brainstorm name ideas, choose just the right words, meet state name requirements, and of course, ensure that the name isn’t already in use (you can check using a Name Availability Search).
If you’re like a lot of people, you probably want to ensure that your hard work doesn’t go to waste once you’ve created the perfect name. So you have to lay claim to your new business name. You can do so either by filing your Articles of Organization, or by filing an Application for Reservation of Name. You should only file this form if you’re not yet ready to file your Articles. Otherwise, you’d be wasting your hard-earned cash. Michigan requires a $25 fee for this filing, but it protects your name for a whopping 6 months. And if you need even more time than that, you can re-reserve it for another $25 and get another 6 months.
2. Obtaining an Assumed Name
Wait—didn’t we just cover business names? Yes. But there’s a distinction: your business name, which you’ll write in on your Articles of Organization, is the legal name of your business. An assumed name, sometimes called a DBA or trade name, is like a nickname for your business. For example, your legal name might Joseph Smith, but your friends call you Joe for short. Joe is a perfectly valid name, but you can’t put it on legal paperwork. You’d have to legally change your name to do so.
An Assumed Name acts kind of like a nickname for your business; some LLCs and corporations also use Assumed Names to establish new product lines or new “businesses” under the LLC “parent company.” But regardless of why you use an Assumed Name, if it differs from your legal name, you need to register it before you can use it.
Quick note: to register an Assumed Name in Michigan, you must ensure that your name is “distinguishable on the record” from all other entity names registered with the state. But that standard actually gives you a lot of room to work, since a single letter’s difference makes it distinguishable (some states are more strict).
Once you’ve determined that your name is available for use, you should register it with the Department of Licensing and Regulatory Affairs. Filling out the Certificate of Assumed Name will do the trick. There’s a $25 fee for this registration.
An Assumed Name Certificate is perpetual; you won’t have to worry about renewing it. That said, if you ever intend to stop using it, you need to file a termination, which has a $25 fee, too.
3. LLC formation services
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Paperwork is a massive hassle. And unless you’re starting an LLC to help other Michiganders with their paperwork, odds are you don’t want to deal with much paperwork yourself.
The bad news? Paperwork is an unavoidable part of starting a Michigan LLC: the Articles of Organization, the annual statement, license applications—the list goes on and on. The good news? You can hire an LLC formation service to do the pesky paperwork for you.
Of course, there’s some cost involved. And while there are a lot of great LLC formation services, they aren’t all created equal. And they all have different price points.
Many LLC formation services offer a wide variety of options, with ZenBusiness offering packages starting at $0 + state fee. You can also take a look at other well known services like LegalZoom, Northwest, and Incfile that have other types of pros.
These services are completely optional; you can DIY your Michigan LLC formation. But many entrepreneurs find the time saved is worth the money. If you do opt to hire a service, please make sure you take the time to understand what you’re buying.
4. MI Registered agent services
Michigan law clearly states that every LLC must designate a registered agent to act as a middleman between your business and the state. Long story short, the registered agent accepts service of process (and any other official communication from the state) on your behalf.
Technically, this is another thing you can DIY; Michigan allows you to serve as your own registered agent. However, in our opinion, it’s worth the expense to hire a registered agent.
Why? For starters, a registered agent’s address becomes part of the public record; anyone in the state can find that address. That leads to spam mail (sometimes worse). Plus, a registered agent must be present at the registered address during all standard business hours. If you serve as your own, you’d be tied down to your location constantly. A registered agent service prevents those annoyances. A service will also help you keep track of annual filing requirements, license renewals, and more.
These services typically charge an annual fee. For example, annual fees for our top 4 Michigan registered agent services range from $99 to $299 per year depending on the service you choose. That said, some offer the first year free if you use them as an LLC formation service.
Quick Note: If you need to later down the line, you can always change your registered agent.
5. Expedited filing fees
In Michigan, the processing speed for your Articles of Organization (or any document, for that matter) depends on how you choose to file. Online documents are usually processed within 24 hours. But mail-in filings usually take 3-5 business days.
If that’s too long to wait, Michigan offers some expedited filing options…for a price. Fees fall between $50 for 24-hour processing ($100 if you’re filing something for an existing entity) and $1,000 for one-hour processing. There are a few options in between, too. It’s a huge range of fees, so you can let your budget and timetable be the deciding factors. You can let your budget and your timetable be the deciding factors.
6. Business attorneys
Starting a business is a complicated process. And it’s a legal one. We do our best to make the process seem less daunting with guides like this one. But at the end of the day, we can’t write a guide that would cover every single question every business will ever face. That’s because your business is unique.
Business attorneys, however, can talk you through all the nuances of forming and running your business. In many cases, the advice of an attorney can save you thousands by helping you avoid expensive legal mistakes.
However, the upfront costs of hiring a business attorney can be pretty pricey. For example, many attorneys charge per hour, with rates ranging between $150-$350. Others offer “LLC formation packages” for flat rates that fall between $500-$2000. And of course, those fees vary based on the attorney’s experience, location, and so on.
If you’d like to hire one, we recommend checking out sites like Avvo.com. Their database is nearly comprehensive, so it’s a great way to search Michigan business lawyers. You can also narrow results by location, cost, overall satisfaction rating, and more. It’s the best place to look to find the right legal consultation for your business.
Conclusion
Long story short: starting a Michigan LLC can be a pretty pricey endeavor. If you look at each cost separately, it doesn’t seem too bad (perhaps with the exception of some of the expediting fees). But when you add them all up or tack on some additional services, the total price tag grows pretty quickly.
Thankfully, since you’ve read this guide, you know what you’re up against. And sometimes, knowing is half the battle—and now you’re armed with all the information you need to budget the start-up costs so you can start your Michigan LLC off on the right foot. We wish you and your new business the best!