How to start a business in Michigan [Updated 2024]

Michigan offers a wealth of opportunities for small business owners and entrepreneurs. The Great Lakes State boasts robust support systems for new companies, along with a range of incentives and tax credits to promote business growth. So, it may be no surprise that approximately 902,000 small businesses call Michigan home. The 1.9 million small business employees in the state represent 48.3 percent of all Michigan workers.

When embarking on your entrepreneurial journey in Michigan, you need to follow up your business idea with a solid business plan. This plan should outline your company's vision, include market research, and estimate startup costs. However, a well-thought-out plan is just the starting point. To position your business for success, you must navigate the registration process, ensure compliance with regulatory requirements, and address Michigan's specific filing and tax obligations.

Feeling overwhelmed? Our step-by-step guide is here to help. Discover how to establish your Michigan-based business compliantly and cost-effectively. 

1. Name your business

You’ll want to create a business name that is evocative of your services or goods, as this is the first step of establishing your brand. It should be easy to remember and spell. However, simply having a good name isn’t enough—it also needs to be unique and compliant with Michigan state laws. Here are the steps to take:

• Confirm name availability: Verify that your chosen business name is available on Michigan's business name search portal via the Michigan Department of Licensing and Regulatory Affairs (LARA).
• Comply with naming criteria: Your business name needs to fit specific criteria. For example, you can’t use terms that insinuate that your business is associated with a government agency or use the word “Olympic” in the business name. You can find the rules governing names of corporations, LLCs, and limited partnerships in the Business Corporation Act, Limited Liability Company Act, and the Limited Partnership Act. 
• Check trademark status: Perform a search on the US Patent and Trademark Office site to verify that your chosen business name is still available for a trademark.
• Secure your business name: To secure your business name officially, complete the registration process. Where you register depends on your business type (see more on that below). Sole proprietorships and co-partnerships file with the county clerk where their business is located and any other counties where they do business. Limited partnerships, limited liability companies, and corporations file their names at the Corporations Division. 
• Reserve the business name, if needed: Should you need more time to organize your entity, you can put a hold on your business name for a limited time. You can reserve limited partnership names for four months and corporation or LLC names for six months. 

After you’ve secured your new business name, you’ll also want to register a domain name for your website and create social media accounts using that name. 

In certain situations, you may also be required to file a Fictitious Business Name Statement, also referred to as a DBA (doing business as) name. This is necessary if:

• You operate a sole proprietorship or partnership under a business name that doesn't include your name or one of your partner's names.
• Your LLC, LP, or corporation conducts business under a name different from the one used in the initial business registration.

2. Explore your funding options

Before launching your business, you’ll need to secure capital to get it off the ground. Michigan businesses have various funding choices, including:

• Business loans: You can apply for loans from financial institutions, including Small Business Administration (SBA) loans. In Michigan, SBA offers 7a, 504, and Express programs, which you can use for working capital or funding equipment and real estate. Because the government backs SBA loans, these funds often have relatively low interest rates and longer repayment terms.
• Investors: Seek investment from angel investors, venture capitalists, or crowdfunding platforms.
• Grants: Investigate grants provided by federal, state, or local government agencies, as well as private organizations. You might find industry-specific grants or grants targeted for business types. For example, hardware and software manufacturers may be eligible for the Industry 4.0 Technology Implementation Grant through the Michigan Economic Development Corporation, which gives a 50% reimbursement for qualifying tech costs up to $25,000.
• The Michigan Economic Development Corporation: MEDC Capital Access helps small businesses access financing through their Loan Participation Program, Collateral Support Program, and Capital Access Program.

Michigan also offers a variety of incentive programs, including:

• Michigan Business Development Program (MBDP): Available through the Michigan Strategic Fund (MSF) in coordination with MEDC, this program provides loans, grants, and other financial assistance to businesses with competitive projects that will create new jobs or provide investment.
• Critical Industry Program (CIP): This provides investments to qualified businesses for gap financing, deal-closing, and other economic assistance. The business must be making a technological shift in products/productions, making capital investments, or both. 
• Strategic Site Readiness Program (SSRP): This program provides financial incentives to conduct certain activities related to strategic sites with the hope of creating investments in the state.
• Jobs Ready Michigan: This was created by the Michigan Strategic Fund to address the costs of recruiting and training high-wage and high-skill individuals.
• State Essential Services Assessment (SESA) Exemption and Alternative State Essential Services Incentive Programs: SESA is for manufacturers who do not pay personal property tax on manufacturing personal property. 
• Michigan Community Revitalization Program (MCRP): MCRP promotes community revitalization via investment in Michigan’s revitalization, job development, reducing blight, and protecting the state’s natural resources. 

3. Decide on your business structure 

Determining your business structure is the next major step. There are four business entity types and several subtypes you can set up in Michigan, including sole proprietorships, partnerships, corporations, and limited liability companies (LLCs). What you choose depends on your business activity, business needs, and preferred legal structure.

Learn more about each business structure:

4. Register your business in Michigan

Now, you’re ready to register your business with the state of Michigan! While sole proprietorships and general partnerships don’t require formation documents, other entities do:

• LLC: Articles of organization
• LPs: Certificate of partnership
• LLPs: Application to register an LLP
• Corporations: Articles of incorporation 

These documents must be filed with the Department of Licensing and Regulatory Affairs and cost between $10 to $100.

Here are more details on business registration:

5. Decide on a registered agent

When you register a Michigan corporation, LLC, LP, or LLP, it's crucial to designate a registered agent. The registered agent is officially listed on the business's statement of information and assumes responsibility for receiving legal and tax documents on the business’s behalf.

The registered agent must be one of the following:

• An individual who is a Michigan resident
• A foreign corporation that has a certificate of authority to do business in the state
• A Michigan corporation
• A Michigan LLC
• A foreign LLC authorized to transact in the state

If you're a Michigan resident, you can serve as the registered agent yourself. Alternatively, you can find a professional registered agent, which typically comes with an annual cost ranging between $100 and $300. The price usually varies based on the duration of the engagement and the speed of their service. For instance, same-day document delivery or round-the-clock customer support may come at a higher cost.

6. Apply for an Employer Identification Number

As in the rest of the US, before you can bring employees on board and handle payroll for your Michigan business, you must obtain an Employer Identification Number (EIN).

Think of an EIN as a Social Security number for your new company. This distinct nine-digit identifier is necessary for opening bank accounts, securing loans, fulfilling tax obligations, and ensuring timely employee compensation. You can get an EIN by submitting Form SS-4 to the IRS. Acquiring an EIN is fast and free. 

7. Get up to speed with Business Tax Credits

Michigan state offers a range of business incentives and tax credit programs to promote business growth. Here are some notable business tax credit programs available as of 2024:

• Renaissance Zone Program: The Renaissance Zone program designates specific areas as "renaissance zones" with significant tax benefits. Businesses operating within these zones may receive a waiver of city income and utility user taxes, most city property taxes, county property taxes, and state income tax or single business tax.
• Research and Development Tax Credit: Eligible expenses related to research and development can lead to a 1.9% tax credit.
• Industrial Property Tax Exemption (IPT): The IPT program allows eligible manufacturing facilities to receive property tax exemptions on certain equipment and improvements.
• Historic Preservation Tax Credits: Michigan has various historic preservation tax credits that can benefit businesses involved in restoring and redeveloping landmark properties.

8. Stay on top of filing requirements and taxes

If you have employees, you’ll need to stay on top of payroll tax withholdings, including income tax, federal Social Security and Medicare Tax (FICA), Federal Unemployment Tax Act (FUTA), and Michigan Unemployment Tax (UIA). You may also be subject to corporate tax, sales tax, and more. Consult with an accountant or legal expert on your tax obligations.

Certain business entity types also have ongoing filing requirements:

• LLCs must submit annual reports by February 15 of each year.
• Corporations must file annual reports by May 15 of each year and keep business records at headquarters.
• DBAs must be renewed every five years in the county in which your business operates.

9. Find a payroll solution

When you're hiring employees or contractors in Michigan, there’s a lot to keep track of. First and foremost, you must classify them correctly to avoid potential fines and legal issues. Additionally, you need to be aware of overtime regulations and entitlements. For example, employees must be paid 1.5 times their regular hourly wage if they work more than eight hours per day or 40 hours per week. Michigan's minimum wage is $10.33/hour, which is higher than the federal minimum wage rate. You also need to stay informed about any updates in state and local wage laws.

To stay on top of compliance, streamline the payroll process, and pay your employees and contractors accurately, invest in reliable payroll software. A solution like Rippling can significantly reduce the manual effort involved in payroll administration while ensuring compliance with relevant labor laws in Michigan. With Rippling Time & Attendance, you can automatically track employees' hours and establish notifications for when an employee is approaching overtime. Once approved, these hours seamlessly integrate into payroll, and you can complete payroll processing with a single click. Rippling even automatically calculates net pay and taxes on your behalf.

Hiring globally? Rippling has that covered, too: 

• Pay your whole team—across different tax jurisdictions and even different currencies—in a single pay run. 
• Include hourly employees, salaried employees, and contractors in your pay runs. 
• Consolidate operations by managing your team, systems, and data in one place.

10. Support and scale your growing business with Rippling

Once your business is off the ground and starts growing, you’ll need an HRIS (Human Resource Information System), a software solution that streamlines recruiting, employee onboarding, payroll, benefits admin, and more. 

The sooner you implement an HRIS, the easier it will be to scale. This is particularly true if you’re planning to grow your business globally. Rippling has everything you need to run your global workforce—in a single system. 

• Hire, pay, and manage your entire team—whether they’re based in Detroit, Lansing, or on the other side of the globe.
• Stay on top of local, state, and federal compliance infractions—with an action plan for each one.
• Consolidate all benefits—health insurance, 401(k), commuter, and more—under one system.
• Automate busy work, such as enrolling new hires, updating deductions, and COBRA administration.
• Effortlessly maintain up-to-date recruiting data—from open roles to new hires—and automate every step of the hiring lifecycle. 
• Rely on a single source of truth for HR analytics, policies, and other critical data.

FAQs about setting up a business in Michigan

Do I need a business license in Michigan?

This depends on your business type, as some industries may require licenses. What’s more, if your business sells goods or specific services, you’ll need to get a sales tax license from the Michigan Treasury Department. This licensing is free to obtain.

Do I need a business bank account when launching a business in Michigan?

While you can run certain types of businesses from your personal account, it’s best to keep your finances separate. This helps protect your personal finances and assets should something go awry with your business. Furthermore, having a business bank account is necessary for running payroll. 

It’s wise to open both a business bank account and a credit card, so all of your business income and purchases are easy to track. 

Do I need to get business insurance?

You are required to get workers’ compensation insurance in Michigan if you have one or more employees. Workers’ compensation covers claims that might arise from work-related injuries.

While other types of insurance aren’t required, many businesses choose to obtain coverage to protect themselves and their assets. General liability insurance covers losses suffered by your company’s clients or vendors. Professional liability insurance, on the other hand, covers malpractice and negligence claims for advice, consulting, or accounting services. 

What are Michigan’s state payroll taxes?

There are three types of state payroll taxes in Michigan: unemployment insurance tax, personal income tax, and city income tax. City income tax is levied by certain localities and averages between .5% and 2.4% of income, depending on whether someone is a resident or non-resident of the area.

Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.