Articles of Organization

Forming your Michigan LLC means that you have to file articles of organization. The certificate must be executed (signed) by at least two of the organizers and delivered, along with a copy and the $50 nonrefundable filing fee, to the Bureau of Commercial Services, Corporations Division, of the Michigan Department of State. The articles must include:

• The LLC's name
• The purpose for which the LLC is being organized
• The title or capacity of the signers
• Whether the LLC will be of limited duration or perpetual
• The street address, including county, of the LLC's initial registered office
• The name of the LLC's registered agent at the LLC's registered office
• Whether the LLC will be member-managed or manager-managed

It can also list other items-even ones that are included in the operating agreement-if the members so desire, as long as they don't conflict with state law.

An organizer is allowed to be any natural person, or it may be a legal or commercial entity. The organizer is not required to be a member of the LLC, but there must be at least two organizers of some type.

Registered Agent and Office

A Michigan LLC must at all times have a designated registered agent in the state-someone to receive official state legal and administrative correspondence on behalf of the LLC. A registered agent in Michigan may be an individual state resident whose business office or residence is the same as the registered office, or a corporation or LLC having a business office that is the same as the registered office:

The registered office may be-but does not have to be-the LLC's place of business. However, the registered agent must maintain a registered office that is identical with the business office.

Operating Agreement

The LLC's second most important document is its operating agreement, which can be changed by the members as set forth by the agreement itself or applicable state law. Having an operating agreement is not legally required by the state, but it's a vitally important internal document that sets forth how the LLC will run.

The operating agreement needs to list the LLC's members, how much each one has invested, how any profits will be distributed, and how much relative weight each member has when voting.

The operating agreement may also include requirements for meetings (notice, quorum, voting rules, etc.) and similar functions, but it doesn't have to. Usually, though, it does include operating constraints and allowances already contained in state law and policy. It also may contain constraints on the members' authority to change or repeal the operating agreement or a provision thereof. If there is more than one member, the operating agreement must initially be unanimously approved in writing.

Membership in the LLC

A Michigan LLC must have at least one member, and each member must be a natural person. Someone may be admitted as a member of an LLC either when it is formed (by signing the initial operating agreement) or, after the LLC is formed, by complying with the operating agreement. Unless the operating agreement specifies differently, a unanimous vote of all the members is required to admit a new member. If the operating agreement does not address this situation, a unanimous vote of all members who are entitled to vote can also bring in someone new.

A member can acquire an interest in proportion to their contribution, or in some other manner set forth in the LLC's operating agreement. Becoming a member usually requires a contribution of cash, property, services rendered to the LLC, or a promissory note or obligation to contribute one of these. However, an LLC in Michigan is allowed to admit a member who does not make a contribution or take on an obligation to make a contribution if the members decide to do so.

An LLC member can only resign as permitted in the certificate of organization or operating agreement, which usually specify a minimum membership time before a member may resign.

Ongoing Requirements

Michigan LLCs need to keep the following types of records open to inspection at its office:

• Names and addresses of all members and managers.
• A copy of the articles of organization, together with any amendments to the articles, that were filed with the Michigan Secretary of State.
• Copies of the LLC's federal, state, and local tax returns and reports, if any, for the most recent three years.
• Copies of any LLC financial statements for the most recent three years.
• Copies of operating agreements.
• Copies of records that would help a member determine the members' relative` shares of the limited liability company's distributions and the members' relative voting rights.

Dissolution

A Michigan LLC is dissolved when any one of the following events occurs:

• Event(s) or a time specified in the articles of organization or operating agreement
• Unanimous written agreement to dissolve
• Event that makes it illegal for the LLC to continue
• Judicial decree ordering dissolution

Taxes

An LLC does offer some tax advantages over a corporation, including the availability of more deductions. Additionally, an LLC is not required to be a separate tax entity like a corporation. Instead, it can be a "pass-through" entity so that the LLC owners report business losses or profits on their personal tax returns, like a partnership.

Unless you choose for some reason to have your LLC taxed as as a corporation, the IRS treats single-member LLCs as sole proprietorships for tax purposes. This means the LLC itself does not pay taxes and does not have to file a tax return. Unless you decide to have the LLC taxed as a corporation, the IRS treats multi-owned LLCs as partnerships for tax purposes. This means that LLC owners each pay taxes on their lawful share of the profits on their personal income tax returns, not the LLC itself. If you like, by filing IRS Form 8832, you may elect corporate taxation if you regularly need to keep a substantial amount of profits in your LLC.

The LLC tax rate for Michigan is variable and is based on Michigan taxable net income.

Articles of Incorporation

In accordance with the Michigan Business Corporation Act contained in Chapter 450 (Corporations) of the Michigan Compiled Laws, corporations must file articles of incorporation with the Michigan Department of Labor and Economic Growth, Bureau of Commercial Services, Corporation Division, before conducting business in the state.

The articles must be delivered by at least one of the incorporators, accompanied by the filing fee of $60 minimum, depending on the number of shares authorized. There must be at least one incorporator, who must be either a natural person of adult age (18) or a corporation. The incorporator does not have to be a director, officer, or shareholder of the corporation.

The following information must be included in the articles of incorporation:

• The names and addresses of the incorporators
• The mailing address of the corporation's principal office
• The street address and mailing address, if different, of the corporation's initial registered office and the name of its initial registered agent at that office
• The duration or lifespan of the corporation, if it is not perpetual
• The aggregate number of shares that the corporation is authorized to issue
• The designation of stock classes and series of shares, as well as their relative rights, if any
• A statement of what authority the board of directors has (or doesn't) to divide classes into series, if any

Michigan law allows a corporation to be formed for any lawful business activity. Althought it is required to state the business purpose, it is sufficient to state that the corporation may engage in any activity included in the purposes for which corporations may be legally formed under the Michigan Business Corporation Act. State law may have additional requirements for corporations that are formed for education-related purposes.

Michigan law also allows additional provisions to be included in the articles for managing the business and regulating the affairs of the corporation, as well as regulating the corporation's powers, its board of directors, and shareholders

Registered Agent and Office

All corporations authorized to conduct business in Michigan must have and maintain both a registered office (which may be the same as its place of business) and a registered agent in the state-someone designated to receive official state correspondence, including notice if the corporation is "served" with a lawsuit. The registered agent must be either:

• An individual resident in Michigan whose business office or residence is the same as the registered office
• A domestic corporation, or
• A foreign corporation authorized to transact business in Michigan and having a business office that is the same as the registered office

Bylaws

Bylaws describe the corporation's basic managerial and legal operating principles. The corporation's initial bylaws must be adopted by its incorporators, its shareholders, or its board of directors.

A Michigan corporation should keep a copy of its bylaws at its main executive office, but is not required to file them with the state. The bylaws may contain any provision for managing the business and regulating the affairs of the corporation that's not in conflict with law or the articles of incorporation.

The board of directors or the shareholders may adopt, amend, or repeal bylaws, unless the articles of incorporation or the bylaws reserve this right to the shareholders. At its initial meeting, the board of directors should adopt corporate bylaws, and then keep them updated as time goes on. Bylaws normally address:

• Shareholders and directors meetings
• The authority, number, and tenure of directors
• Voting procedures
• The duties, responsibilities, and tenure of officers
• How stock is issued
• How and when annual financial information is provided to shareholders

Directors and Officers

The corporation's board of directors must consist of one or more members. Normally, the corporation's bylaws or articles of incorporation will specify the number of directors and their qualification prerequisites, if any. However, if neither of these documents specify the number of directors, then state law requires that the corporation have three directors.

Officers must be named in the bylaws or elected by the board of directors. As a minimum, there must be a president, a secretary, and a treasurer; if desired, the corporation may have a chairman of the board, one or more vice presidents, and other officers as set forth in the bylaws or as decided by the board of directors

Officers may appoint other officers in compliance with the bylaws. If the articles of incorporation and the bylaws allows it, an officer may hold multiple offices in the corporation, but they may not sign any documents in more than one capacity.

At least one officer should be designated as responsible for preparing minutes of the directors' and shareholders' meetings, and for maintaining and authenticating corporate records.

Required Reports

A report must be filed with the Michigan Secretary of State no later than May 15 of each year (except for the first year of incorporation) indicating:

• . The corporation's name
• . The registered in-state office address
• . The name of the corporation's resident agent at that office in this state
• . The general nature of the business in which the corporation is engaged
• . The names and addresses of the directors, president, secretary, and treasurer
• . For foreign corporations authorized to transact business in the state, the total number of authorized shares and the most recent percentage used in computation of the tax required by the single business tax act

Within four months of the end of the corporation's fiscal year, it must also send a financial report to its shareholders with its end-of-year balance sheet, state of income, and any other information required by state law.

Taxes

Michigan imposes a Single Business Tax (SBT) on both corporate and noncorporate business income as the only general business tax levied by the state. The SBT replaced net income-based taxation with value-added taxation, which levies taxes on a "services consumed" or "benefits received" basis. It was enacted in 1976 to replace seven business taxes, including the corporate income tax. In 1999, the governor signed legislation to phase out the SBT by 2022.