How to Form a Corporation in Michigan
How to Form a Corporation in Michigan in 5 Steps
Establishing a corporation in Michigan may not be as tough a task as you might have thought it to be, but it can be a bit challenging if you don’t know what you’re doing. To this end, we’ve divided the process into five easy steps. If you follow each step diligently, you should have your very own corporation in no time.
After deciding to start your business as a corporation, your first step will be to determine your business name. Be sure to take some time to brainstorm ideas and choose a business name that will help you stand out from others within your industry. If you’re struggling, you can use our guide on how to come up with a business name for some inspiration and guidelines to choosing a great business name.
Corporations in Michigan must follow the approved naming conventions permitted under state law, per the Michigan Department of Licensing and Regulatory Affairs (LARA) naming rules. The legal name of a corporation must include one of these terms:
The legal requirements don’t end there. To comply with copyright and trademark laws, you must ensure that your chosen name is available. If another corporation is already using it, you’ll need to pivot onto another one. The search should include verification of the name to register with the State of Michigan Department of Licensing and Regulatory Affairs. Other important considerations include searching the U.S Patent and Trademark Database, brand search, and confirming the availability of the domain name.
Michigan Corporation Name Search
An important preliminary step when picking out a great name is to make sure there aren’t any potential problems with the name. Specifically, you should ascertain that the name you wish to use for your business isn’t already taken by another corporation.If you were to submit your Articles of Incorporation with a name that is already registered they will be rejected. To complete a search of the registered Corporations in Michigan, use the Michigan Department of Licensing and Regulatory Affairs (LARA) business entity search.
Important Note: While conducting your name availability search you may find that your desired name is available but was previously in use. In such cases, it is typically best to avoid that name if possible. This is recommended because there may be a potential delay by requiring you to fax additional documentation to the IRS for your EIN to be approved. In these cases, rather than getting your EIN immediately, it may end up taking weeks before your EIN is issued, delaying the start of your business significantly. As a result, we suggest pursuing a different name in these cases, even if the name is available.
Once the name search is complete, you must now carry out a trademark search to verify that the name hasn’t previously been trademarked. Similar to the name search, this can be carried out with relative ease by using the U.S. Patent & Trademark Office TESS Search.
Another piece of the search puzzle is brand search. Many corporations choose to use their corporate name as their brand name. If you wish to do the same, then conducting a brand search is important. This is done via a simple Google search. Corporations are registered at the state level, so it’s possible that there’s one using the same name as the one you prefer in some other state. You would probably wish to rethink the name if there is a potential conflict with another business. This is because branding is crucial to marketing, and if you share a name with another brand, it could cause confusion for potential clients.
Domain Name Search
The verifications aren’t over just yet. Your online presence is a vital cog in your branding process. Even if you feel like you don’t want to focus on the digital space at the moment, it is a good idea to conduct a domain name search and purchase it if your corporation’s name is available. You should do this because it prevents others from using your name to confuse or mislead clients. It also offers you a chance to engage with clients directly rather than through some third party. A domain name, if it’s the same as your corporation name can make you more prominent on search results as well. As you can see, there are only upsides to this decision, so you should probably look into it. You can purchase the .com version of your name for less than $10 with Namecheap.
Every Michigan corporation is required by law under Michigan statute Section 450 to appoint a resident agent, commonly referred to as a registered agent. If you’re unfamiliar with the term, a Michigan registered agent is an individual or entity with the authority to correspond with the Michigan State of Michigan Department of Licensing and Regulatory Affairs on behalf of the business. Correspondence such as compliance notices and service of process go through the agent that you have appointed.
Who can serve as a Michigan Registered Agent?
The individual should be at least 18 years of age or it should be a business entity with a physical address in the state and operate in-person during standard work hours (8 a.m. to 5 p.m.). Your corporation may decide to appoint a founder, director, or employee for this purpose to avoid the fees associated with a registered commercial agent. You should also be advised that this can carry risk so do so only if you understand the potential drawbacks.
Why consider a Commercial Registered Agent?
If you can appoint someone as your registered agent for free, you may be thinking “Why pay for a commercial registered agent?” A commercial registered agent can provide a variety of benefits and help mitigate the risks associated with designating a director or employee of the corporation.
- Ensure Compliance
Registered agents services will send you updates and reminders to ensure that your corporation stays legally compliant and up-to-date with all required filings.
- Always Available
A registered agent must always be available during normal business hours. This means that whoever you appoint but always be available to accept service of process at the address listed. For most people involved in a corporation this is not possible or reasonable as they have other duties and may be required to make business trips out of the office.
A commercial registered agent can help provide privacy by listing their address and contact information whenever possible instead of the directors or owners contact information. This can help to avoid the inevitable spam mail that you’re almost guaranteed to receive, especially immediately after your corporation is formed.
Now that the preliminary steps are taken care of, it is time you called your first meeting. The initial meeting offers you a chance to set the tone from the get-go. You should gauge your operations readiness while also taking care of the formalities such as board appointments and paperwork. These steps will help you complete the process of incorporation. Before the meeting starts, secretaries draft documents for the minutes, stock reports, and taxes. Once these steps are complete, the meeting comes to a close.
Agenda items for the initial meeting include:
- Appoint the board of directors and officer roles
- Draft corporation by-laws and shareholder agreement
- Issue stock to shareholders
- Select employee benefit plans
- Decide on C or S corporation tax filing status
- Sign articles of incorporation
- Approve the banking resolution
- Present corporate seal and stock certificates
It’s important to note that sometimes interested shareholders won’t have the funds to pay upfront for stock certificates. In this case, the issuing happens after the shareholder payment is received. Each certificate lists the corporation name, number of shares confirmed on the certificate, the shareholder’s name, and the incorporation status of the business.
The next step to incorporate your business legally is to file your Michigan Articles of Incorporation with the State of Michigan Department of Licensing and Regulatory Affairs. The Articles of Incorporation includes:
- Article I: Legal Name of the Corporation
- Article II: Purpose Statement
- Article III: Total Authorized Shares including Common Shares, Preferred Shares and statement of rights, preferences and limitations of the shares in each class.
- Article IV: Resident Agent (Registered Agent) Name and Address
- Article V: Names and Addresses of the Incorporators
To legally form your Michigan corporation you’ll need to submit your articles of incorporation along with the filing fee. The filing fee in Michigan is based on the number of authorized shares plus a $10 fee.Michigan Corporation Fee Schedule:
|More than 10,000,000||$500.00 for the first 10,000,000 shares plus $1,000.00 for each additional 10,000,000|
Options to file your Michigan Articles of Incorporation
File online via the Michigan State of Michigan Department of Licensing and Regulatory Affairs
File your Articles of Incorporation by Mail:
Download the Articles of Incorporation Form and complete
Mail the Completed Articles of Incorporation and the filing fee to:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau
P.O. Box 30054
Lansing, MI 48909
The last step in setting up your corporation is signing up for an employer identification number (EIN). This number will be used for legal and tax purposes to identify your business and complete loan applications, bank account setups, and employee hiring.
It’s easy to apply for an EIN online or by fax/mail. Also called a federal tax ID or FEIN, this number is essential to begin a business and a legal requirement for corporations. All corporations are required to obtain an EIN.
Read our guide on applying for an EIN to get a better understanding of this number and why it’s so important for a newly formed corporation.
Steps After Forming a Corporation
Now that you’re familiar with how to incorporate in Michigan, you can start planning for the future of your business. There are a few things you can do after incorporating to put your business on the path to better success.
- Open a Business Bank Account
- Complete Michigan State Registrations
- Obtain Michigan Business Licenses and Permits
- Establish a Business Accounting System
- Set up Credit Card Processing
- Sign Up for Business Insurance
After receiving your EIN you can open a bank account for your business at the bank of your choice. This account will enable your corporation to pay suppliers, process card/check payments, and thoroughly record daily expenses and income with a business credit card. Just remember that signing up for a corporate credit card generates the corporation’s credit record, so spend wisely and make sure the finances are properly monitored.
More info: How to Open a Business Bank Account
Every state has different requirements for corporations, and you need to properly register as an employer and tax-paying corporation. The main registrations to put on your to-do list include:
- Sales tax registration – Register with the Michigan Department of Treasury
- Employment, withholding and unemployment – Register with the Michigan Department of Labor and Economic Opportunity
Businesses must adhere to city, county, and state regulations, including license and permit requirements. The necessary permits vary based on the nature of your business and the location, but you must acquire these licenses or face serious consequences.
Common examples of licenses and permits that corporations need are:
- Construction permits
- Land use permits
- Zoning permits
- Fire permits
- Health and safety permits
- Professional licenses
- Liquor licenses
- Natural resource licenses
Part of running a successful Michigan corporation is properly managing your finances and making sound financial choices. You can start by setting up an accurate accounting system to track income and expenses.
Choose from accrual basis or cash basis accounting methods, or select accounting software such as Xero, QuickBooks, or Microsoft Business Central.
Learn more: Small Business Accounting 101
In addition to an accounting platform, you also need to look into your options for taking payments via credit card. Look for a merchant provider that allows traditional point of sale purchases as well as mobile and online credit card payments to serve customers with Mastercard, Visa, Discover, and American Express.
To get the most value out of this investment, estimate the sales volume associated with this type of transaction. Then you can choose a merchant account provider or gateway service that approves credit card transactions quickly and securely.
Read more: How to Accept Credit Card Payments
You now know how to form a corporation in Michigan, but you also need to understand how to protect it. Considering the time, effort, and money required to establish a business, you must find business insurance. Include this insurance policy as part of your corporation’s risk management priorities and strategies.
Learn more: Small Business Insurance 101