How to Start a Business in Michigan in 2022: The Ultimate Guide, Step-by-Step

In less than 4 years, May Mobility (actually founded in 2017) has risen to become the third best tech startup in Michigan.

How did they get past the ideation phase to starting and running a business in Michigan?

Actually, the thoughts of ‘how to start’ stops many wanna-be entrepreneurs. This shouldn’t be a difficult task. We will walk you through the step guides on how to start and successfully run a business in Michigan.

There are two essential elements in starting a business in Michigan namely the business design and the paper work.

While the business design comprises of idea generation, conducting the market research, and checking the viability of the business, the paperwork are all the documentations that will be filed to kickstart the business.

This guide addresses the two elements and discusses the nitty-gritty of starting a business in Michigan. Stay with us!

Why Start a Business in Michigan?

First, Michigan has an awesome workforce. 60% of its populace has at least a college degree.

There are also compensation laws that enables people start and run a business in Michigan. This compensation plan rewards entrepreneurs for building a successful business.

In addition, the Michigan Small Business Development Center SBDC trains people at no cost in person and online on starting a business. They offer business plan consultation and market resarch amongst other services.

In 2019, they helped obver 500 Michiga businesses launch successfully. This shows that Michigan is a state that encourages residents to start a business.

According to Crunchbase, some of the newest startups in Michigan that have raised funding include:

  • Refraction AI
  • Asalyxa Bio
  • Onboard
  • Healthy Roots Dolls
  • Brighthouse Energy Group

What is the Cost of Starting a Business in Michigan?

A sole prioprietorship is free to start in Michigan. However, an LLC requires a $50 fee to file its articles of organization. Additionally, you will be required to appoint a registered agent for your business.

For a corporation, the business owner will pay $25 to file articles of incorporation.

You also need to get a tax ID number.

In order to acquire a Michigan tax ID number easier, go through a third-party company. It costs typically between $20 and $30. It’s easier to use a third party to handle the process of getting a tax ID number,

Are there Requirements for Starting a Business in Michigan?

There are unique requirements needed in Michigan. The state of Michigan demands businesses be insured.

Workers’ compensation insurance is required for Michigan businesses with one or more employees. It covers claims resulting from work-related injuries.

Professional liability insurance is for businesses that are selling professional advice, consulting or accounting services. It covers financial loss from negligence or malpractice.

There also ongoing requirements after the business has commenced that ensures your business is legal. These are dependent on the business structure you chose.

For a sole proprietorship, you are required to keep a minimal annual bookkeeping. That’s because your business income is taxed as a personal income.

An LLC in Michigan will submit an annual report to the government in order to remain in good standing.

The report must be submitted by February 15 of the following year. If you started your business after September 30, you’re exempt from submitting a report for that year.

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Corporations has more ongoing regulations. You’ll submit an annual report by May 15 each year as well as business records.

Lastly, DBA, also known as “doing business as” is only valid for 5 years. After this, you may choose to renew or change the business name.

A DBA isn’t a separate business type, but simply a tag that allows you to operate a business under a different name other than yours or the name you originally filed.

ANy business type in Michigan can use the tag of a DBA, however, it is most common in sole proprietorship and general partnership.

Which Licenses and Permits are needed to Start a Business in Michigan?

Not every business in Michigan is required to be licensed by the state of Michigan.

Starting a business in Michigan requires a number of licenses and permits especially if it is one that has employees and a physical location that sells products.

Actually, this is also dependent on the type of business you wish to run. For instance, a restaurant will need a health permit. To add a sign to the building, you need a signage permit.

Generally, you need the following licenses:

1. Tax Registration

If you will be selling goods in Michigan, you must register for a sales tax license with the Michigan Department of Treasury (DOT).

To employ workers in Michigan, you need to register for employer withholding tax

2. Employer Identification Number

Since your employees will be taxed separately from the business, you need an EIN from IRS.

Although it may not be a compulsory license for every business, banks require this to open a business account. Also, other companies require the EIN to process payments.

EIN is free to obtain, therefore complete an online application.

3. Regulatory Permits

Regulatory licenses and permits to start a business in Michigan covers areas such as health and safety, the environment, building and construction, and specific industry requirements.

You can check the Michigan state website for a comprehensive list of all licenses.

4. Occupational Licensing

This covers the information for licensing as regards professions and occupations.

How to Start a Business in Michigan: Step by Step Guide?

The discussion is on the key steps you’ll take to start a business in Michigan. This will be a detailed information. Brace up to read and understand the intricacies on strating and running a business in Michigan.

#1 Choose a Business Idea

This goes hand in glove with the saying that everything starts with an idea.

Take time out to explore and research business ideas that suite your personality, interests, skills, available resources and most importantly your ‘why’ of starting a business.

You should consider the likelihood of the business idea to succeed and thrive in Michigan. If your business meets an unmet need in Michigan, then, it will make a profit.

Have a grasp of the startup cost, competition, investors and lenders for the business type. Also, create strategies to distinguish your product from the competitors and stay afloat financially.

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These can be reviewed in your business plan.

Read this: How To Invest In Startups For A Heavy Stake In 2022

Sole proprietorship, partnership, limited liability company, and corporations are the most common business types people form.

You have to determine the legal structure which your startup business in Michigan has to be. In making this decision, consider the type of liability protection each business type has and the tax requirements.

In addition, consider the financing options and financial benefits available.

#3 Choose a Business Name

Afer deciding on the legal structure, the next step is to choose a business name.

If the business you intend starting in Michigan is an LLC or a corporation, you’ll need to check if the business name you’ve chosen already exists in the Michigan Department of Licensing and Regulatory Affairs (LARA) file.

You may also reserve a business name for a period of six months by filing an Application for Reservation of Name.

Likewise, if the business is a sole proprietorship or partnership that uses a business name that is different from the surname of the business owners, you must file a notarized assumed name certificate.

Again, if you plan on doing business online, you may want to register your business name as a domain name. You may also check with the state trademark office to make sure the name is not in use to avoid trademark infringement.

In a nutsell, you’ll basically do the following:

  • Make sure the name clearly describes the business
  • Search Michigan Business entitiy database
  • Do a tademark search

#4 Register/Create the Business

The registration process and requirements will be discussed for each business legal structure.

Sole Proprietorship: This doesn’t require you to file any document with the state of Michigan unless you’re using a name different from your legal name.

Partnership: To register a partnership in Michigan, you need to file a certificate of copartnership with the clerk in all the countries your partnership will do business.

To form a limited liability partnership, you’ll file a registration with LARA.

Limited Liability Company: To create an LLC in Michigan, you must file articles of organization with LARA, and obtain a resident agent.

A resident/registered agent is someone who you delegate to receive official papers like court papers, business registration renewal notices, tax notices for your business.

The business owner will submit a form to the state of Michigan registering an individual as his business agent for official communication.

No business can serve as their own agent.

Corporation: To create a corporation in Michigan, file an  articles of incorporation with LARA and appoint a resident agent.

#5 Obtain your Licensing and Permits

After registering a business name, the next step is to apply for the required licenses and insurance. We have already provided the comprehensive information above.

#6 Check the Zoning of the Business Location

If your business is not a home business, then you need a physical location. This warrants checking for local zone regulations. Verify if the place is zoned for your type of business.

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In addition, before committing to a location, calculate the costs of running the business. This refers to rent, utilities, resources, etc.

#7 File for Taxes

Every business in Michigan is taxed.

Sole proprietorships pay business taxes as part of their personal income. Partnerships pay state tax as personal tax. LLCs, pay taxes of their income share as personal tax.

Meanwhile, in corporations, shareholders pay state tax on their dividends. Shareholders who are also employees will also pay personal state tax.

If your business in Michigan has employees, you’ll be responsible for paying employer tax.

#8 Obtain Insurance

Every business needs an insurance cover to protect the company and its assets from unexpected disaster including lawsuits.

#9 Open a Business Bank Account

It is important for a business to have its own bank account. Tracking the business income and expenses becomes easy.

All the business’ finances will flow through this account.

Similarly, LLCs and corporations need a separate bank account to maintain liability protection.

When you’re first starting a business in Michigan, a checking account will be the best option. As the business grows and you’re able to save some money, you can opt for a high yield savings account to help your money grow faster.

Read this: Checking Account Vs Savings Account: Difference and Similarities

#10 Set up an Accounting System

No matter how small your business in Michigan is, you’ll need to set up an accounting system. While employing an accountant may sound feasible, there are accounting softwares you can employ for this function.

All you need is a basic accounting knowledge. This option may be revised when the accounting becomes more comlicated as the business grows.

#11 Create an Online Presence

An online presence is necessary to announce your business faster. Try out creating a website, social media accounts and even registering on review sites.

Most customers research businesses online, therefore, without a website, you may never be found.

Lastly, brand your business through fliers, logos and infographics.

Business Opportunities in Michigan

Here are some examples of business’ you can start in Michigan.

  • Financial Advisory
  • Marketing Services
  • Blogging
  • Online Copywriting Services
  • Content Marketing Agency
  • Social Media Marketing
  • Dairy Exports- Milk is one of the valuable agricultural products in Michigan.
  • Fruit Farming- Michigan is one of the largest growers of fruit in the States.

Conclusion

Starting a business in Michigan isn’t a difficult task. While we cannot boast of giving all the information, this article will stir you in the right direction. Actually, we’ve provided all the necessary steps.

It is time to dig up the buried entrepreneuerial spirit in you. Take the bold step and start a business in Michigan.

The Wealth Circle wishes you the best of luck!

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