A limited liability company (LLC for short) is a way to legally structure a business. It combines the limited liability of a corporation with the flexibility and lack of formalities provided by a partnership or sole proprietorship. Any business owner who seeks to limit his or her personal liability for business debts and lawsuits should consider forming an LLC.

Here are the steps to start an LLC in Michigan:

1. Choose a name for your Michigan LLC
2. Appoint a registered agent
3. File Articles of Organization
4. Prepare an Operating Agreement
5. Get an EIN & comply with other tax & regulatory requirements
6. File annual statements

1. Choose a Name for Your Michigan LLC

Your LLC's name must be distinguishable from the names of other business entities already on file with the Michigan Department of Licensing and Regulatory Affairs. You can check names for availability by searching the Michigan business database. You can reserve a name for six months by filing an Application for Reservation of Name with the Michigan Department of Licensing and Regulatory Affairs. You can mail the application or file online. The filing fee is $25.

Under Michigan law, an LLC name must contain the words:

• Limited Liability Company
• L.L.C., or
• LLC.

Using an Assumed Name

You don't have to use your LLC's official legal name registered in your Articles of Organization when you do business out in the real world. Instead, you can use an assumed name, also called a fictitious business name, "DBA" (short for doing business as), or trade name. To do so in Michigan, you must register your assumed name with the Michigan Department of Licensing and Regulatory Affairs. You register by mail by filing a Certificate of Assumed Name. The filing fee is $25. The registration is good for five years. For more on registering business names, see Nolo's article How to Register a Business Name.

2. Appoint a Registered Agent

Every Michigan LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC's behalf someone sues the company. A registered agent may be a Michigan resident, a Michigan corporation, a foreign corporation with a certificate of authority to transact business in Michigan, a Michigan LLC, or a foreign LLC authorized to transact business in Michigan. The registered agent must have a physical street address in Michigan.

3. File Articles of Organization

You can create a Michigan LLC by filing Articles of Organization with the Michigan Department of Licensing and Regulatory Affairs. The articles must include:

• the LLC's name
• the LLC's purpose
• whether the LLC's duration will be perpetual or for a specified period
• the name and address of the LLC's registered agent
• the effective date of filing the Articles if later than the date of filing, and
• signature and phone number of the LLC's organizer.

The articles may be filed by mail or online. The filing fee is $50.

4. Prepare an Operating Agreement

An LLC operating agreement is not required by the state of Michigan, but it is highly recommended. The agreement is an internal document that establishes how you will run your LLC. It sets out the rights and responsibilities of the members and managers, including how you will manage the LLC. It can also help preserve your limited liability by showing that your LLC is truly a separate business entity. In the absence of an operating agreement, state LLC law will govern how your LLC operates.

5. Get an EIN & Comply With Other Tax & Regulatory Requirements

Additional tax and regulatory requirements may apply to your LLC. These may include the following:

EIN: If your LLC has more than one member, it must have an IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you need an EIN only if your company will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online application on the IRS website. There is no filing fee.

Business Licenses: Depending on its type of business and where it is located, your LLC may need other local and state business licenses. For local licenses, check with the clerk for the city or town where the LLC's primary place of business is located (or county if it is in an unincorporated area). For state license information, check State License Search at the State of Michigan website. For more information, see How to Get a Small Business License In Michigan.

Department of Treasury: If you have employees or will be selling goods and collecting sales tax, you'll need to register with the Michigan Department of Treasury (DOT). You can register online using the DOT's e-Registration application or by mail. For more information on state LLC tax registration, check out Michigan LLC Annual Filing Requirements.

6. File Annual Statements

All LLCs doing business in Michigan must file an annual statement with the Department of Licensing and Regulatory Affairs. The report must be filed by February 15 after the year of formation or qualification. However, if you form your LLC after September 30, you do not need to file a statement the following February. For example, if you form your business on November 1, 2020, your first annual statement will be due by February 15, 2022.

The state mails a pre-printed annual statement, BCS/CD-2700, to the LLC's resident agent at the registered office approximately three months prior to the due date. You can file the report online or by mail. The filing fee is $25.

The Pros and Cons of Forming an LLC

While LLCs are a popular choice for new and small businesses, the entity is not the best option for every enterprise. Before you form your LLC, consider the benefits and drawbacks of the entity.

One advantage of LLCs is that they are relatively simple to form and maintain. The entity provides the owners with limited liability protection, pass-through taxation, and flexibility in terms of management and profit-sharing. For more information, see Advantages of an LLC.

The downsides are that, compared to a sole proprietorship, you will face more paperwork and fees to start and manage an LLC. In addition, corporations are typically a better fit for businesses that want to attract investors and pursue tax deductions for employee benefits. To learn more, see Corporations and S Corporations vs. LLCs.