A state of Michigan small business is not subject to any filing requirements unless they are operating under a fictitious name. However, there are certain steps you have to follow to start a business in this state.

1. Write a Business Plan

Begin by writing a business plan. Many people write a business plan only with the intention of obtaining a bank loan. However, there are several other benefits of writing a business plan. It puts down your ideas on paper and helps you create a roadmap for your business, which is critical for its success.

An effective business plan should not be difficult to write or understand. You can use one of the free templates available online and customize it according to your requirements. Another option is to use business plan software to guide you through the process.

2. Choose a Business Entity

Next, choose a business entity or structure for your venture. There are four popular types of business entities to choose from:

  • Sole proprietorship: A sole proprietorship is operated by one individual owner. It is the easiest and least expensive business to form. A sole proprietorship in Michigan is not subject to any filing requirements. However, a sole proprietor is personally responsible for all actions and liabilities of the business. In other words, you, as the owner, have unlimited liability, and creditors can pursue your personal assets. Another downside is that your business profits will be subject to self-employment tax, and you may end up paying more taxes than other forms of businesses.
  • Partnership: A general partnership is like a sole proprietorship, but it has two or more owners doing business together. Just like a sole proprietorship, a general partnership does not require any formal filing, and the partners have unlimited liability. Moreover, the actions of one partner bind all other partners even if the action is taken without approval of other partners. Profits and losses of a partnership business pass through the personal tax returns of the partners. The partners are also required to pay self-employment tax on their respective shares of income.
  • Corporation: A corporation is a separate legal entity from its owners. Forming a corporation is more expensive and involves extensive paperwork. However, it offers the benefit of limited liability. The owners' personal assets are safe even if the company is not able to meet its financial obligations. A corporation can choose to be taxed in different manners. Also, you need not pay self-employment tax on the company's income since the owners will receive money either by way of salary or dividends. To form a corporation, you must file articles of incorporation with the Department of Licensing and Regulatory Affairs.
  • Limited Liability Company (LLC): An LLC combines the benefit of limited liability of a corporation with a sole proprietorship's ease of operation. Unlike traditional corporations, it need not have directors or conduct board meetings and shareholders' meetings. It offers the highest level of flexibility among all four forms of business. You can elect to pay your taxes as a pass-through entity or as a corporation. In order to form an LLC in Michigan, you must file the articles of organization (along with the required filing fee) with the Department of Licensing and Regulatory Affairs.

3. Register a Business Name

Sole proprietorships and general partnerships doing business under the owner's personal name need not file anything. However, if you are operating a business under a fictitious name, you must file an assumed name with your County Clerk. Corporations and LLCs must choose a unique business name at the time of filing the formation documents.

4. Obtain an Employer Identification Number (EIN)

The Internal Revenue Service (IRS) issues an EIN to identify a business and monitor tax returns. You will need an EIN to open a bank account. Even if you are operating as a sole proprietorship or a partnership, if you have employees, you should obtain an EIN.

5. Obtain Business Licenses and Permits

Although the state of Michigan does not have a state-level business license, you may still need to obtain certain permits and licenses depending upon your industry and location within the state.

6. Find Finance for Your Business

Small businesses in Michigan can get financing from banks, the Small Business Administration (SBA), peer-to-peer lending, and grants.

7. Hire Employees

Register as an employer and start hiring employees for your business. Make sure you fill out necessary paperwork and comply with labor laws and regulations.

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