State laws in Michigan offer businesses and entrepreneurs many advantages. Therefore, the state is popular for LLC formations and has over 319,000 active LLCs.
What makes Michigan so popular for LLC formations?
Michigan is the ninth largest state by population but is ranked as the second fastest-growing state for jobs in the science, technology, engineering, and mathematics sector by the U.S. Chamber of Commerce, and is ranked 6th for job creation.
When you form an LLC in Michigan its members have contractual freedom to customize contributions, duties, distribution of profits and losses, and other rights. Also, members can protect their control of an LLC, and the LLC can also outlive its members’ lifetime.
When filing for an LLC, the “person” can be any kind of legal entity, so you don’t have to file the names of members if the Articles of Organization are filed with the Michigan Secretary of State.
If the Articles of Organization does not set a limit to the duration of the LLC, the Michigan LLC Act provides for an unlimited lifetime. This includes the death of a member, withdrawal, or expulsion. In any such event, the LLC can continue to retain its tax status.
Protection against unwanted business partners
Members can protect their control of an LLC with an LLC agreement which prohibits any members from assigning their membership interests. However, if the LLC agreement does not prohibit is, such an assignment does not dissolve the LLC, nor does it entitle the assignee to become a member. The assignor just concedes his share of profits, distributions, or even losses to the new assignee. If all the other members agree, the new assignee can become a member.
Creditors cannot get control rights
The LLC is also protected against if any member has a judgment creditor order. The judgment creditor cannot become a member and the existing member retains the powers of membership, only losing his monetary distributions to the charging order. Therefore, a court cannot order an LLC to act for a judgment creditor or to provide any accounting or other LLC information.
Minority members have rights
Under Michigan state law, minority members can file against the majority LLC members for any illegal, unfair, oppressive, or fraudulent act.
How to start an LLC in Michigan
The process of forming an LLC in Michigan is very easy and can be carried out in a few basic steps online.
- Name the LLC and check for the name availability. You can choose a legal and brand name in Michigan. Once you are sure of its availability, you are ready to start the LLC formation. At this stage, the domain name can also be reserved for the LLC.
- Choose a registered agent service before going online to do the formation. If you want, you can be your own registered agent, but you will have to be available during office hours to receive compliance notifications and other legal notices. A professional registered agent offers many benefits, is available to receive notifications, and assures that you are always up to date with all compliances.
- File the Articles of Organization online on the website of the Department of Licensing and Regulatory Affairs. The filing fee is $50 and the processing takes 24 hours. You can also mail the papers to them, but then the processing takes 3 to 5 working days.
- Define the roles for you and your members by creating n LLC Operating Agreement. You need to outline responsibilities, how members are admitted, transfers and terminations of existing members, and distribution of profits and dividends.
- Finally, obtain an Employer Identification Number so that you can open a bank account, file for both federal and state taxes, and hire employees.
If you are too busy to form your LLC or don’t know where to begin, you can hire a professional service to do it for you. With over 45,000 LLCs formed in Michigan annually, it is obvious that its advantages are favorable for startups.