Thursday, May 23, 2024

How To Start A Sole Proprietorship In Michigan

Register Your Michigan Business

Starting A Business From Scratch: Start an LLC & The Difference Between Sole proprietorship VS LLC

Once youve chosen your business structure, the next step is to form your business. No matter what formal business structure you choose, there are a few common steps, including:

  • Naming your business
  • Choosing a resident agent: an individual or business entity that accepts tax and legal documents on behalf of your business.
  • Getting an Employer Identification Number : a number assigned by the Internal Revenue Service to help identify businesses for tax purposes.
  • Filing formation documents.

In addition to these steps, each business structure has its own requirements that are unique to that business structure.

Here are the steps you need to take to register your business:

Form an LLC in Michigan

LLCs are the simplest formal business structure to form and maintain. With less paperwork than other business structures, you can easily form an LLC in five easy steps.

  • Name Your LLC
  • File Your LLC With the State
  • Create an LLC Operating Agreement
  • Get an EIN
  • To file the Articles of Organization for an LLC in Michigan, you must submit formation documents to the Michigan Department of Licensing and Regulatory Affairs online, by mail, or in person, along with the $50 filing fee.

    Read our full guide on How to Form an LLC in Michigan or have a professional service form an LLC for you.

    Start a Corporation in Michigan

  • Name Your Corporation
  • Read our full guide on How to Start a Corporation in Michigan.

    Form a Nonprofit in Michigan

  • Name Your Nonprofit
  • Select Your Board Members and Officers
  • Apply For Licenses Permits And Insurance

    Once youve obtained your business name and registered your business, its time to apply for the required licenses, permits, and insurance your business needs to operate. Starting a business in Michigan, especially one that has employees or a physical location that sells products, requires a number of licenses.

    Depending on your business type, you might also need permits to legally operate and comply with federal, state, and local regulations. For example, to renovate your space youll need a building permit, if you want to add a sign to the building youll need a signage permit, and restaurants will need health permits.

    Business insurance is just like your personal health insurance. It covers you when something goes wrong. There are multiple types of business insurance you might need or want when starting a business in Michigan. Here are a few types:

    • General liability insurance: This catch-all insurance is great even for small, home-based businesses and covers certain losses that your business causes to another company, client, or vendor.

    • Workers compensation insurance: This is required for Michigan businesses with one or more employees and covers claims resulting from work-related injuries.

    • Professional liability insurance: This type of insurance is most important for Michigan businesses that are selling professional advice, consulting, or accounting services. It covers financial losses caused by your companys negligence or malpractice.

    Do You Need A Business License To Sell In Michigan

    Licenses for Businesses Although the state of Michigan does not provide a general business license, many localities do require local businesses to get a license before they may begin operations. Tax on Sales License All businesses that sell tangible goods or provide taxable services in Michigan are required by law to get a Tax on Sales Permit from the Michigan Department of Treasury.

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    When Do You Need A Business License In Michigan

    When beginning a new business in the state of Michigan, you will likely need at least one, if not two to three business licenses from the local, state and/or federal levels before opening your doors. The majority of local municipalities, cities or unincorporated areas of counties do not require a general business operating license but do require professional licensing for certain occupations and industries.

    The city of Detroit provides a lengthy list of all those businesses required to obtain a specialty license including amusement parks, dry cleaners, gas stations, hotels, pet shops, restaurants and sports stadiums, to name a few. To determine if your business needs a professional license in Detroit, or any other city in Detroit, visit the website of your city clerk or county recorder.

    Similarly, the state of Michigan does not require business licenses for all businesses but does require certain types of businesses and professions to obtain licensing. The list of required licenses includes a number of health-related professions such as acupuncturists, optometrists, pharmacists and social workers as well as a few other industries such as construction, cosmetology and alcoholic beverage sales.

    Finally, your business may be required to obtain federal licensing to operate legally. Though federal licenses are rarer, they are required for businesses operating in certain highly regulated industries.

    Get Prepared To Hire Employees

    How to Register Your (Small) Business in Michigan from GROWGROW

    As a sole proprietor, when the time comes to hire help, you have several options.

    You can hire independent contractors or employees to help you keep up with all the tasks.

    If you decide to hire contractors, be sure to:

    • Have a signed contract that includes details about what services they will provide and how payment will be made.
    • Collect a Form W-9 before you pay them so you can send a Form 1099 in January if required.

    Before hiring employees, you need to:

    • Get a federal employer identification number from the IRS. You can apply for it and get it instantly on the IRS website or apply by mail or fax.
    • Register with your states unemployment office to pay state unemployment tax and with your states revenue department to send tax withholdings.
    • Have the employees fill out Form W-4 and Form I-9 and all other necessary employment forms.

    Once your employees start working, withhold employment taxes from their wages, contribute your employer taxes, and file payroll reports.

    We recommend using a payroll app like Gusto or OnPay because managing things yourself is difficult, and the cost of falling out of compliance is high.

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    Open A Business Bank Account And Credit Card

    One of the most important steps in how to start a business in Michigan is to create a separate financial ecosystem for your business. To keep your accounting simple, its key that you separate your business finances from your personal finances.

    To separate your finances, youll need to open a business bank account and credit card. All the income and purchases your business makes will flow through these accounts. A checking account will be the most important bank account to open when youre first starting a business in Michigan. Later on, as your business grows and youre able to keep some money in the bank instead of investing it directly back into your business, you may opt for a high yield savings account to help your money grow. And whether youre looking for a regional or national bank, these best banks for small businesses in Michigan are a good place to start your search.

    A business credit card is an important step in building your companys credit profile, which can help you qualify for a loan or other type of business funding later on. Additionally, a 0% introductory APR business credit card can be a powerful tool to help you get your business off the ground without the help of outside fundingprovided you have a plan to pay off your balance before the introductory offer ends.

    How Do I Start My Own Business In Michigan

    How to Get Your Business Off the Ground in Michigan

  • First, decide what kind of organization you want to have
  • Step 2: Choose a name for your company
  • Step 3: Register your business.
  • The fourth step is to obtain your EIN.
  • 5. Make applications for necessary licenses, permits, and insurance coverage
  • Step 6: Register for a business credit card and a business bank account.
  • Step 7: Investigate available alternative sources of finance
  • Also Check: What Is Better A Sole Proprietorship Or Llc

    Decide A Name For Your Michigan Llc

    The very first step while forming an LLC in Michigan is to give a proper name to your LLC. Before you name your business, you must know that the name should be easy to remember, available in the state, and follows all the LLC naming guidelines.

    Michigan LLC Naming Guidelines

    There are a few specific requirements all the LLCs in Michigan have to follow while naming their Company. Some of the most important requirements are as follows:

    • Your business name should be available and no other existing business in Michigan can have the same name. Perform a name search from the below-mentioned source to be sure your name isnt taken already.
    • Limited Liability Company, LLC, and L.L.C. any one of these has to be used as a suffix in your business name.
    • You cannot use any name for your business that is confusing or misleading. Terms such as Treasury, State Department, FBI, CIA, etc. shouldnt be included.
    • Terms like Bank, University, Attorney, Doctor, etc can be added only after the additional requirements by Michigan State Government are fulfilled.
    • Its better to name your business something for which your desired domain is available.
    Important Links
    Lansing, MI 48909.

    Reserve Business Name for Future

    Doing Business As or Trade Name

    Recommended: You can do name search, get company logo, business domain, website, emails, and a lot more in one place by hiring a professional service. We recommend using

    Tailor Brands Online LLC Setup

    After Filing Your Michigan Dba

    Types of Business Organization in Michigan – Starting a Business in Michigan

    If filing a DBA marks the beginning of your business journey, then there are a few more steps that you should take before getting started:

    • Create your Businesss Website – Every business needs a website. Luckily, drag-and-drop builders like GoDaddy and Wix make the job quick and easy. Check out our Best Website Builder article to find the tool thats best for you.
    • Get your Business Finances in Order – Youll need to separate your business finances from your personal ones. This is accomplished by opening a business bank account. If your business has long lead times or other cash flow irregularities, you can also look into a business credit card.
    • Protect Your Business – While an LLC will help to protect your personal assets in the case of a lawsuit, your businesss assets also need protection. Having the right business insurance will ensure that youre covered if the worst happens. Most businesses start with general liability insurance as their base coverage.

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    Open A Bank Account For Your Georgia Business

    A sole proprietorship business is a single owner driven and controlled business. Since the business and the owner are not considered separate entities like in an LLC you will be required to file a personal income tax return. Hence, it is very important to ensure the revenue generated or expenditures of your business are separate from your personal bank account. This can be made possible by opening a business bank account using which you can make business related transactions. You can open this business account before or after filing a sole proprietorship in Georgia.

    Open A Business Bank Account

    The final step to making your Michigan sole proprietorship a reality is to open a business bank account. Its important to keep your business and personal transactions separate to prevent the co-mingling of funds. The easiest way to do this is to open a designated business bank account and use it only for business transactions. This will make it easier for you to complete your accounting and bookkeeping tasks.

    Once you have established your sole proprietorship, you will also want to complete these important tasks:

    • Setup Credit Card Processing:Considering that over 60% of transactions are done via debit and credit cards, its essentially a requirement to accept credit card payments. We go over how to do this in our How to Accept Credit Card Payments guide.
    • Establish an Accounting System:Youll need to determine the accounting method you will use for your business: cash basis accounting vs. accrual accounting. To learn more, check out our guide on small business accounting 101.
    • Get Business Insurance Coverage:As a sole proprietor, you lack personal liability protection, so getting adequate business insurance could be your only financial protection method. Learn more about business insurance here.

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    How Much Does It Cost To Start A Business In Michigan

    The cost to start a business in Michigan is going to vary significantly depending on what the business does and where its located. Below is a list of the estimated costs for some of the more common licenses and registrations a business will need:

    Business Entity Formation $0 $60 Business License $0 $250

    The Proper Way To Start Business As The Michigan Sole Proprietor

    Sole Proprietorship California: A Guide for Solopreneurs  Collective Hub

    There is no algorithm for organizing the business work of an individual entrepreneur in Michigan as for LLC. In addition, the state does not charge additional service fees for the formation or management of this type of business or company. Are you looking to become an individual business owner and start a sole proprietorship in Michigan? Just start working!

    Though, you still have to go through several additional legal formalities. These service stages are optional. Although many sole proprietors prefer not to neglect them, compliance with these formalities guarantees the legal protection of their interests.

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    Register Your Michigan Dba With The State

    If your business is an LLC, Corporation, or LLP, you are required to file your DBA with the Michigan Department of Licensing and Regulatory Affairs .

    First, print a copy of the certificate of assumed name form. When you are filling out your application for your DBA, Michigan State requires certain information about your business, such as:

    • Line 1: Your current legal company name
    • Line 2: Company identification number

    You can also file online.

    A DBA does not offer any protection for your personal assets in the event that your business is sued. For more information on setting up a limited liability company, visit our How to Form an LLC page and select your state.

    Submit Your Certificate of Assumed Name Form


    • $10 filing fee for corporations and limited partnerships
    • $25 filing fee for LLCs
    • $50 for 24-hour processing, $100 for same day, $500 for 2-hour, $1,000 for 1-hour


    • Online with Visa, MasterCard, or Discover.
    • Mail by check or money order.
    • In person by all of the above.

    Manage Your Michigan DBA

    Renew Your DBA with the State

    Your certificate of assumed name expires on Dec. 31 of the fifth full calendar year following registration.

    Withdraw Your DBA

    You can find the Certificate of Termination of Assumed Name form here.

    Choose Your Business Structure

    Your first step to starting a business in Michigan is to structure your business by choosing your business entity. The most common business structures in Michigan are sole proprietorship, corporation, and LLC.

    Your business structure will have an effect on how you operate your business, whether or not you can hire employees, your level of personal liability, and how youre taxed, so its important to choose the right structure for the type of business youre starting.

    If youre not sure which is the right business structure for you, consider asking for help from a tax advisor or business attorney with experience working specifically with small businesses.

    Sole proprietorship

    A sole proprietorship is one of the simplest business structures available. A sole proprietorship is a single-owner business where the owner files their business income on their personal tax return.

    While the simplicity of this business structure is a big selling point for many small business owners, the drawback is that you as the business owner are personally liable for the businesss debts and legal obligations.

    LLC is short for limited liability company. An LLC is a great business structure for small businesses, whether you have one employee or 20. An LLC provides the business with benefits such as lower taxes and liability protection, as well as being easy to manage.


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    Ease Of Setup And Maintenance

    The primary advantage of a Sole Proprietorship is how easy they are to set up and to maintain.

    In fact, there is no form to file in order to create one. If youre doing business by yourself, youre operating as a Sole Proprietorship.

    Think of it this way: once you engage in business activities, with the goal of eventually making money, you are operating as a Sole Proprietorship.

    For example, if you want to start a wedding planning business, the moment you begin doing business research, calling potential customers, or building your website, youre operating as a Sole Proprietorship.

    Name Your Michigan Llc

    How to File a DBA in Michigan – 2 Steps to Register a Michigan DBA

    The first step is to name your LLC in Michigan. In addition to choosing something fits your desired brand image, you also need to make sure the name you want is allowed. That means ensuring the name isnt already in use by another company, and adhering to Michigan naming rules.

    Find the perfect name

    Official Naming Requirements for Michigan LLCs

    For starters, the name of your Michigan LLC cannot be the same as, or confusingly similar to, any other business name in the state. Use our Michigan Business Entity Search page to check online and see if a name is available.

    Your business name must also include a designator that it is an LLC. Options for LLC designators in Michigan include:

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

    Your LLC name cannot contain any words or phrases that suggest it is a corporation, such as Corporation,Incorporate,Corp., or Inc.

    Reserving a Business Name in Michigan

    Found the perfect name, but arent quite ready to form your business? In Michigan, you can reserve your name for up to 180 days. Use our business name reservation service to hold your name until you are ready to file your Articles of Organization.

    Get a domain name for your business

    Being available online is a big part of running a successful business. Thats why you might want to make sure your desired business name is also available as a URL. Use our domain search tool to discover what domain names are available for your LLC.

    Filing for an Assumed Name


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