How To Start a Business in Michigan

Michigan values small businesses because of their critical contribution to its economy. According to the U.S Small Business Administration Office of Advocacy, its 911,914 small businesses represent 99.6% of state-owned businesses. Those businesses employ 47.9% of Michigan’s workforce.

Michigan Economy Trends

Overall, Michigan offers a smooth business formation process and the required environment for startups to thrive. However, entrepreneurs must take specific strategic and procedural steps to start a profitable business and stay on the good side of the law. Intending founders should ideally go through the following steps when starting their businesses:

Step 1: What Kind of Business Should I Start in Michigan?

The first step in launching a business is knowing what product or service to sell. Individuals looking to start a small firm must determine what they can offer and if the state has the right market. Michigan is known for its vast forests, freshwater coastlines, and thriving automotive industry (especially in Detroit). The state is also known for its crops, leading other states in producing asparagus, beans (cranberry and black), tart cherries, cucumbers, and more.

As such, the top industries in the state include manufacturing, tourism, agriculture, tech, and professional services.

Popular businesses in Michigan are:

How To Do Market Research in Michigan

Aspiring business owners must also conduct thorough market research to identify the right establishments to start. There are different factors to consider besides the state’s thriving business climate. 

Market research reveals everything about the intended consumers, such as their preferences, where they buy, and what they lack. It reduces risk, exposes new business opportunities, and helps entrepreneurs to draft more effective business plans.

Comprehensive market research unmasks the following:

Step 2: How To Write a Business Plan

A business plan is a structured document that establishes the foundation and direction of a business in writing. Entrepreneurs use the paper to outline their company’s roadmap, products and services, business model, target market, financial forecast, strategies, operations, and organizational structure. 

Creating a business plan is one of the foremost steps in starting an establishment in Michigan. The document shows potential investors, lenders, partners, and regulatory bodies the business’s viability, concept, and potential. That way, the firm can attract funding, and investors can feel confident about a return on investment.

The following sections typically appear in a traditional business plan:

Step 3: Do I Need a Business License in Michigan?

Yes. Michigan does not issue a general business license. However, many businesses must acquire some form of state, municipal, or federal license or permit to transact. Some companies may end up obtaining multiple licenses and permits, depending on what they sell or offer.

For example, businesses that deal in tangible products need a Sales Tax License to apply and collect the sales tax on leased or sold items. They can apply for the Sales Tax License online.

Businesses offering professional services may need to obtain one professional license or the other from a state regulator. For instance, the Michigan Department of Licensing and Regulatory Affairs (LARA) provides licensing for several professional occupations. Farming businesses may need to obtain licenses from the Department of Agriculture.

Entrepreneurs can check with local governments or state agencies to confirm whether their business requires a license. For example, the City of Detroit provides a list of licensed businesses, and the Michigan government website provides a search page where prospective business owners can see a list of businesses that must be licensed.

How Much Does a Business License Cost in Michigan?

The fee for a business license differs based on the license required. For example, LARA charges $100 to process an occupational license for a public accounting firm or certified public accountant. Other fees include:

Cities, counties, and other state/federal agencies have different licensing fees. For example, the City of Detroit charges different fees depending on the type of business.

How To Register for a Seller’s Permit in Michigan

A seller’s permit in Michigan is called a Sales Tax License. Michigan businesses that deal in tangible products must obtain a Sales Tax License. Eligible businesses can apply for the license online.

The Sales Tax License is free, and there are no sales tax requirements at the city or county level.

Step 4: How Much Does It Cost To Start a Business in Michigan?

There is no fixed amount of initial investment for starting a business. Startup costs and first-year expenses are determined by the type and size of the business. As such, starting an enterprise in Michigan with millions of dollars or little funds is possible.

Since individuals do not have to file any paperwork to start a sole proprietorship or general partnership and only need to get a business license at the municipal level, they can launch their business with little money. An intending business owner must at least pay the state filing fees to register a Limited Partnership, Corporation, or Limited Liability Company.

How To Get Business Funding in Michigan

Business owners have different options for raising business capital, including the following:

How To Self-Fund a Business in Michigan

A business owner self-funds a business when they bear all the initial startup costs. This type of funding is also called bootstrapping. Self-funding is mostly practiced by founders starting small-scale businesses such as sole proprietorships or, perhaps, LLCs. 

However, bootstrapping requires meticulous financial and strategic planning. Owners must identify the right business size and type that fit their budget. They must also ensure the available funds can cover startup costs. It may be necessary to keep other sources of income, such as a day job, while self-funding a startup.

Owners can also consider other funding measures, including personal lines of credit, home equity loans, credit cards, and non-equity options to fund their business if they cannot self-fund without taking on significant risk.

How To Find Investors in Michigan 

Using investors is another common way to fund a startup in Michigan. Investors can also provide expert input in specific business areas and partnership opportunities to help the business grow.

Before searching for investors, the first thing to do is craft a compelling pitch. The pitch must communicate the business plan, value proposition, growth potential, and market opportunity. Then, the business owner can join local startup and business groups, research local angel investors, attend local startup events, engage with local venture capital firms, and use their pitch to close new investors. 

How To Get a Loan To Start a Business in Michigan

Michigan offers different loan options for intending business owners who need additional capital to kickstart their businesses. 

Family and Friends

Entrepreneurs can obtain small loans from family and friends to start their businesses. They may enjoy little to no interest rates using this option. However, it is advisable that the borrower and lender enter a repayment agreement to avoid conflict that may endanger their relationship.

SBA Loans

The U.S. Small Business Administration provides different types of loans for individuals looking to start businesses in Michigan. These loans have lower down payments than traditional loans, may require lower or no collateral requirements, and entrepreneurs can choose from different packages. Some loans also include education and counseling to support small business owners in building their businesses. 

Types of loans offered by the SBA include:

Michigan P2 Loan Program

The P2 Loan Program is intended for small businesses and offers loans up to $400,000. There is a maximum interest rate of 5% for independently owned companies with 500 full-time employees or less. 

Businesses can qualify for the program if they reduce or eliminate waste at their sites, reuse and recycle waste in an environmentally responsible manner, or conserve on-site energy or water. 

Businesses across various sectors in Michigan, such as manufacturing, agriculture, retail, and services, can access these low-interest loans.

How To Find Michigan Business Grants

The State of Michigan runs different grant programs in alliance with the federal government and other stakeholders. Most of these grants are targeted at small businesses. Depending on the grant, funding may be available for only specific business types.

Business owners can also find grant programs in some counties. For example, Oakland County has a dedicated Grants and Loans web page where business owners can find grant opportunities.

Crowdfunding for Businesses in Michigan

Crowdfunding is a capital fundraising method involving raising money from a large pool of investors —primarily online via social media or via crowdfunding platforms. Intending business owners can use different crowdfunding methods, such as equity, donation, debt, or rewards-based crowdfunding, to reach their financial goals. 

Crowdfunding in Michigan operates under the Michigan Invests Locally Exemption (MILE) Act, which permits intrastate crowdfunding. The state also enforces the Federal Jumpstart Our Business Startups (JOBS) Act for equity-based crowdfunding. These laws allow Michigan businesses to raise money online, with specific restrictions, such as the maximum amount of money that businesses can raise.

Can I Start a Business With No Money in Michigan?

No. Generally, it is not possible for intending business owners to start businesses with no money in Michigan. This is because a new business owner may need to file different paperwork for business registration, acquire licenses and permits, and buy insurance—these cost money. Also, while some startups, like service-based businesses, require low upfront capital, owners will eventually spend on things like marketing, utilities, recruitment, and business consultations.

However, individuals can fund their startups through loans, grants, crowdfunding, and investment if they need more capital.

Step 5: Choosing a Business Structure in Michigan

A business’s legal structure determines how the owners will pay taxes, the paperwork to fill out, how they will raise capital, and how much of their assets will be tied to the business’s risks. This structure is also critical in building a solid business foundation as it demonstrates credibility to potential customers and investors. 

There are different types of structures for prospective business owners in Michigan. They include:

How To Start a Sole Proprietorship in Michigan

A sole proprietorship is a business establishment that has a single owner. It is the most common kind of small business because it is the easiest and cheapest to set up. Entrepreneurs who start a business without formally choosing a legal structure run sole proprietorships by default. That is because anyone can start a sole proprietorship in Michigan without filing any paperwork. They just have to add extra schedules to their tax returns and possibly get a business license from the municipality where they operate.

A sole proprietorship is not a legal entity, as there is no legal separation from the owner. The owner enjoys all the profits generated from the business and suffers all the losses and debts. They share the same risks as the business if it faces damaging lawsuits and bankruptcy.

People who want to own their business entirely and are okay with bearing its losses and liabilities will see a sole proprietorship as an ideal business structure. However, a business owner may have to go through specific processes to start the business, depending on how they want to operate. These include:

Doing Business As (DBA) or Assumed Name Certificate

Michigan law requires sole proprietors to apply for a DBA or Assumed Name certificate to operate their businesses under a name different from their formal names. The filing must occur in the county clerk’s office in the county where the firm operates. The certificate lasts five years, after which it must be renewed.

Sole proprietors must also file for the certificate in any other county where they have an office or run their business. They can visit the website of the Michigan Association of Clerks to find details about county clerk office locations.

Checking the Business Name

Before obtaining the DBA certificate, entrepreneurs must check if their preferred business name is available. They cannot use a name already assigned to another business within the same county. They can run a search on the Business Entity Search page of the Michigan Department of Licensing and Regulatory Affairs (LARA).

Obtaining Permits, Zoning Clearance, and Licenses, if Required

A sole proprietor may need to apply for business permits and licenses, depending on their business industry and type of trade. While Michigan does not require a general business license, people who deal in specific products and services may have to obtain licenses and permits from different regulatory bodies and councils. Even if the business is a sole proprietorship, entrepreneurs may face penalties if they operate without a license. 

Individuals can confirm whether their business requires a license with the State License Search tool. They can also review the licenses listed on the page or contact the Michigan Department of Licensing and Regulatory Affairs.

Obtaining an Employer Identification Number

Sole proprietors who intend to hire employees must obtain an EIN first per IRS regulation. The IRS issues the Employer Identification Number for free. It is a nine-digit number primarily required for filing employee payroll taxes. It can also be used to apply for loans and funding for businesses. Sole proprietors can apply for the EIN on the IRS website.

Purchasing Insurance

If the sole proprietor has at least three part-time employees or one full-time employee, they must purchase employee disability compensation insurance. The insurance covers cases of injuries in the workplace. Purchasing the policy is mandatory per the Worker’s Disability Compensation Act.

How To Start a Corporation in Michigan

A corporation is an independent legal entity that does not share its liabilities with its owners. While business owners can enjoy dividends from a corporation, they are not tied to its debts. They can only become responsible for debts if they stand in as guarantors.

Owners of corporations are called shareholders, and there can be more than one shareholder in a corporation. While every corporation can have a sole owner, they must have a defined governance structure. The structure includes the shareholders (who elect the business’s board of directors), the Board of Directors (responsible for setting up policies, overseeing significant decisions, and hiring officers), and officers (responsible for running the company).

The basic requirement for starting a corporation is filing Articles of Incorporation with the Corporation, Securities, and Commercial Licensing Bureau of the Michigan Department of Licensing and Regulatory Affairs.

Filing the Articles of Incorporation

Per Section 450.1202 of the Michigan Business Corporation Act, the Articles of Incorporation must contain the following:

Naming the Corporation

A corporation’s name in Michigan must include the word “Company,” “Limited,” “Incorporated,” or “Corporation,” or the abbreviation “Co.,” “Ltd.,” “Inc.,” or “Corp.” If the company offers professional services, the words and abbreviations to be included are “Professional Corporation,” “PC,” or “P.C.”

Individuals who want to start a corporation must first decide on its name. To do that, they must ensure the preferred name is available, as using the same corporate name of any other foreign or domestic corporation (including reserved names) is prohibited. Intending owners can search LARA’s records for a business name’s availability.

The Michigan Business Corporation Act (specifically Section 450.1212) also prohibits corporations from using names that contain words or phrases that indicate a different business purpose from what is written in its Articles of Incorporation. 

Additionally, corporations can file for a Certificate of Assumed Name if they intend to use a name different from their actual name.

The Incorporators

Incorporators are required to sign the company’s Articles of Incorporation. Every corporation must have one incorporator or more, who must be 18 years old at least. Incorporators can adopt bylaws specifying the company’s structure and how it must be run.

Additionally, incorporators and shareholders of professional corporations must be professionals in one or more fields of the business’s services per Mich. Comp. Laws § 450.1283.

Choosing Company Directors

A majority of the company’s incorporators must select a board before or after successfully filing the Articles of Incorporation. The company must have at least one board member. The number of directors is not fixed by Michigan law. However, state law permits incorporators to specify that number in the company’s bylaws or Articles of Incorporation.

Registered Office and Resident Agent

Michigan law mandates every corporation operating in the state to have a registered office and resident agent. The address of the registered office must be the same as the agent’s residence or the business office address. This address will be included in the Articles of Incorporation.

Foreign Corporations

Foreign Corporations set up under the laws of a different state or country seeking to start operations in Michigan must obtain a Certificate of Authority by filing Form CSCL/CD-560

The application must contain the corporation’s name, registered office and resident agent in Michigan, date of incorporation, term of existence (if not perpetual), the street address of its headquarters (main office), and the number of authorized shares.

EIN, Licenses, and Insurance

Corporations must have EINs and employee disability compensation insurance policies since they will hire workers. They must also obtain the required license from the related state agency or local government to operate.

Certificate of Good Standing

A certificate of good standing is a formal document given to a corporation confirming it was properly set up, complies with state laws, and has satisfactorily completed its yearly filing requirement. For a corporation from a different jurisdiction, the certificate shows it has permission to operate in Michigan, has the proper authorization, and has also completed its annual filings.

The certificate is a plus in attracting investors and boosting the company’s image.

How To Start an LLC in Michigan

A limited liability company (LLC) is a business enterprise that protects its owner from personal risks. It is created by one or more organizers and is owned by members. An LLC is considered separate from its owners (members). Each member is only liable for their investments in the company. 

LLCs offer the ease of setting up a business (like a sole proprietorship) with the safety of personal funds (as with a corporation).

The rules and governance of the LLC are outlined in the Articles of Organization or an operating agreement. To create an LLC in Michigan, intending owners must file Articles of Organization with the Corporation, Securities, and Commercial Licensing Bureau.

Naming the LLC

The following are naming rules prospective LLCs must adhere to per Michigan law:

Intended LLC owners can reserve their company name for six months by filling out the Application for Reservation of Name and submitting it online. They can also submit it in person or by mail to the following address:

2407 North Grand River Avenue

P.O. Box 30054

Lansing, MI 43906

The application costs $25. The fee can be paid by check or money order to the State of Michigan.

The Organizers and Members

Every LLC must have at least one organizer. An organizer is a person or entity that signs the company’s Articles of Organization. Organizers are not mandated by law to be members of the LLC. Members own the company and are usually in charge of its operations. If the intention is to allow managers to manage the company, it must be clearly stated in the Articles of Organization. 

If the LLC provides professional services, its members must be licensed professionals in the same or at least one of the service categories offered by the company.

The Registered Office and Resident Agent

Like Corporations, LLCs must legally have a registered office and resident agent in Michigan. The resident agent accepts notices, demands, and other legal documents on the company’s behalf. LLC owners can act as their resident agents in the state if they have a physical Michigan address and are older than 18.

The Articles of Organization

The LLC becomes official after the organizers file Articles of Organization with LARA. The document ideally contains the following:

Applicants can file this document online or print and mail it to LARA.

Foreign LLCs

Foreign Limited Liability Companies set up under the laws of a different jurisdiction must obtain a Certificate of Authority before they can run their business in Michigan.

EIN, Licenses, and Insurance

LLCs that hire employees must have employee disability compensation insurance policies and EINs. They must also obtain the required state or local government licenses.

Certificate of Good Standing

Like corporations, LLCs in Michigan can also obtain certificates of good standing. It shows that a company adheres to Michigan’s business laws, is current on its annual reports and filings, and is authorized to operate in the Wolverine State. The certificate is sometimes required if the business intends to expand beyond Michigan, wants to secure funding, or intends to sign a contract or agreement with another entity. It is also valuable when renewing certain licenses and permits.

How To Start a Business Partnership in Michigan

Individuals can operate two types of partnerships in Michigan: general and limited partnerships. 

How To Start a Limited Partnership in Michigan

Limited partnerships involve limited and general partners. The general partners operate and control the business and are personally liable for its losses and debts. The limited partners only risk what they invest or contribute to the company and do not participate in management.

Intending partners in a Limited Partnership must file a Certificate of Limited Partnership with LARA. The partnership must follow statutory requirements and the Uniform Limited Partnership Act.

Name of the Limited Partnership

The name of the limited partnership, according to Michigan law, must contain the words “Limited Partnership.” The business must not be named after a limited partner unless they bear the same name as the general owner or the company already existed with such a name before the limited partner’s admission.

Business owners must also do their due diligence to ensure they do not pick a business name already reserved or used by another corporation, limited partnership, or LLC.

The Certificate of Limited Partnership

The Certificate of Limited Partnership is a legal document that explains the business purpose, the rights of a limited partner, and how the general partner or limited partner can terminate the membership of a limited partner. The certificate also covers other rights of the limited partner and provisions in the business.

When filing the Certificate of Limited Partnership, business owners must provide the limited partnership’s name, an agent for the service of process and their address, and an address where business records will be kept.

How To Form a General Partnership in Michigan

A general partnership, also called a copartnership, is a business with more than one owner. It is similar to a sole proprietorship, with the only difference being the number of owners. The business’s liabilities and taxes are tied to the owners.

Individuals can start a general partnership without filing paperwork with the state unless they have to file for a DBA or their business requires a license or permit.

How To Start a Nonprofit in Michigan

Nonprofit organizations (or nonprofit corporations) mostly run religious, charitable, and educational services and do not earn a profit. The rules for setting up and operating such an organization in Michigan are outlined in the Michigan Nonprofit Corporation Act (MCL 250).

To start a nonprofit, incorporators must file the Articles of Incorporation with the LARA.

Step 6: Choosing a Business Location

A business’s location determines different actions that a business must take, from obeying regulations and ordinances to obtaining licenses and permits. Therefore, it is essential for business owners to assess local laws and regulations in addition to performing market research before choosing a location for their new businesses.

What Kind of Business Can I Run From Home in Michigan?

Many businesses do not need a brick-and-mortar front; some entrepreneurs can run their businesses from home. The following are suitable businesses that prospective business owners can run from home:

While these and other businesses can be home-based, entrepreneurs must look out for local zoning laws and regulations that may affect the business.

How Do I Start a Small Business From Home in Michigan

Individuals who want to start a home-based business must follow the same processes as other businesses. They must file for a DBA certificate if they are a sole proprietorship using another business name. They must also follow other legal requirements, such as applying for a sales tax license and complying with local home occupation business laws.

Home-based businesses must also acquire the required licenses if they are regulated by LARA, the Department of Agriculture, or their city. 

Starting a Business Online in Michigan

Online business owners in Michigan must follow similar formation processes as other businesses, including registering their organizations, confirming business name availability, and picking up licenses or permits. For example, a business selling food online must have a permit issued by the Department of Agriculture.

Also, online business owners must adhere to specific federal regulations, such as the Integrity, Notification, and Fairness in Online Retail Marketplaces for (INFORM) Consumers Act, if it affects their business activities.

Every entrepreneur must understand the laws and regulations surrounding the business they want to run. It will ensure they know their tax obligations, understand how to operate, and avoid unnecessary and damaging financial losses, lawsuits from other parties, and government penalties.

Depending on the kind of business a person wants to start, the intending business owner may have to complete federal and state business formation processes. However, most processes are at the state level, which typically includes the following:

How To Get an EIN Number in Michigan

An EIN is a federal requirement for employers. The IRS issues this unique number to businesses that hire employees for tax purposes. Thus, it is also called a Federal Tax Identification Number. 

New business owners can obtain their EIN online by using the IRS’s Online Assistant, by mail, or via fax.

Fax and mail applicants must complete Form SS-4 and send it to the following address:

(For businesses in the U.S.)

Internal Revenue Service

ATTN: FIN Operation

Cincinnati, OH 45999

Fax: (855) 641-6935


(For foreign businesses)

Internal Revenue Service

Attn: EIN International Operation

Cincinnati, OH 45999

Fax: (855) 215-1627 (within the U.S.)

Fax: (304) 707-9471 (outside the U.S.)

How To Get a Michigan Registered Agent

Michigan LLCs, corporations, nonprofits, and partnerships must designate an entity or individual in the state to receive official and legal documents on their behalf. The agent serves as the official point of contact for the state for any legal matter or correspondence, such as service of process, tax notices, or regulatory filings.

A new business can choose a Michigan resident or a business entity authorized to operate in the state as its resident agent. The name and address of the resident agent must be included in the firm’s Article of Incorporation, Article of Organization, or Certificate of Limited Partnership.

Patents, Trademarks, and Copyrights in Michigan

Michigan protects intellectual property rights through state and federal patents, trademarks, and copyrights.

Patents give inventors the authority to exclude others from exploiting their inventions for a limited period, typically 20 years. Patents are issued by the U.S. Patent and Trademark Office (USPTO) under Title 35 of the US Code and upheld in Michigan through federal law.

Copyrights protect the exclusive rights of authors and creators to display, reproduce, and distribute their original creative works. These works include books, music, films, performance, and software. In Michigan, copyrights are safeguarded under federal law (Title 17 of the United States Code). The protection lasts for the author’s lifetime and another 70 years after their death.

Trademarks protect brand identities, such as logos, symbols, and names that distinguish business products and services. In Michigan, trademarks are protected indefinitely under the Michigan Trademarks and Service Marks Act (1969 P.A. 242) and the federal Lanham Act (15 USC Ch. 22).

Michigan Business Tax

Michigan has different business taxes, and each is applied depending on the type of business. They include:

Michigan Business Tax: The Michigan Business Tax (MBT), enacted on July 12, 2007, levies a 4.95% business income tax and a modified gross receipts tax at a rate of 0.8% on business. Insurance and financial institutions are subject to alternative taxes.

Corporations Income Tax: The Michigan Corporate Income Tax (CIT) applies a 6% tax rate to C corporations and businesses that pay federal taxes as corporations. The state offers a small business alternative CIT credit, which reduces the tax rate to 1.8% on adjusted business income. Insurance and financial companies can also use alternative taxes. The CIT replaced the Michigan Business Tax (MBT) in 2012 for most taxpayers, exempting those with a maximum annual liability of $100 or gross receipts below $350,000.

Michigan Sales Tax: The sales tax is levied on every Michigan business selling tangible products to customers. Every business that should pay a sales tax must obtain the Michigan seller’s permit (also called the Sales Tax License).

Individuals can find more information on the state’s Business Taxes webpage.

Are Business Records Public in Michigan?

Yes, business records submitted to government agencies are open to public inspection and reproduction. The Michigan Freedom of Information Act (FOIA) governs public access to records maintained by public bodies. Under the FOIA, a public body in Michigan must provide access to its records upon request, except for exempted records. If a business has submitted records to a public body, those records may become accessible under the FOIA unless they fall under an exemption.

For example, members of the public can perform a business entity search on the website of the Michigan Department of Licensing and Regulatory Affairs using a business’s name, filing ID, or ID number. The search provides records such as:

However, the FOIA exempts specific records from public access. These records include the following:

Records specifically restricted from public access under another law or statute are also exempt from public disclosure. For example, MCL 205.28(l)(f) prohibits the Department of Treasury from sharing any tax-related information unless it is necessary for administering or enforcing tax laws or the Department is compelled by law. 

Note that the FOIA directly applies to public bodies and not private businesses. Business records maintained solely by private businesses are generally not considered public records, except those submitted to or held by a public body that do not fall under any exemption.

That said, records generated by private businesses, such as a business’s balance sheets and internal correspondence, can be requested by its shareholders or by court order, according to Section 450.1487 of the Michigan Business Corporation Act. Further, MCL 450.4503 also allows members of an LLC to inspect and copy records generated by the company. These records include financial statements, tax returns, and other formal accounting of the business’s affairs.