Now that you have your registration, bank details, tax registration, and even operating agreement out of the way, you are good to go and run a business in Michigan, right? Wrong! There is one more crucial step that determines if your business can move forward – taxes and various business permits LLC in Michigan. We have broken down this last stage into distinct processes you have to follow as you inch closer to the goal.
Michigan LLC Tax Filing Requirements
Whether you pay Michigan Business Taxes for LLCs and the amounts due comes down to what your company does. Here are some of the most common fees charged on LLCs doing business in Michigan:
State LLC taxes
These are local taxes charged on businesses. Different businesses pay different Michigan taxes LLC based on scales. Most jurisdictions weigh the amounts based on the company revenues, and you pay a percentage of your earnings. You will need to check with the authorities how much you have to pay. If you operate in some industries, you may be privy to some MI state tax waivers or exemptions that may not apply to other businesses. Please note that these charges are on the state level and have no bearing on what you remit to the national government.
Federal LLC taxes
You may already know that as an LLC, you will enjoy the benefit of not paying anything to the national government. Instead, you will pay through your personal tax returns rather than the business. This single point of payment makes this the better choice for entrepreneurs who open an LLC in Michigan. After all, who wants to make payments twice? Of course, there are limits to these perks, and you should ensure that you do not stretch your luck.
Even without making double payments, you have to still report what you have made with the IRS for the fiscal year that has ended. It comes down to the LLC tax structure you choose. For example, if you own the business alone, you can choose to pay self-employment tax like a sole proprietorship. This flexibility also allows you to choose other entity structures you would like to emulate.
Additional Business Taxes
Generally, these payments fall under:
- Sales and use taxes: These apply to businesses that handle physical goods. Once you register with the authorities, you get an ID that affords you the right to collect payments on their behalf. Every period (based on the agreement), you hand over the money to the authorities.
- Employer taxes: These work for businesses that have employees. In such cases, the owner of the enterprise must register with the Michigan Unemployment Insurance Agency for unemployment insurance online or via mail. These monies go into helping people who become jobless due to extenuating circumstances. The cash benefits help them get back on their feet as they figure out what is next. Additionally, employers also remit money for the employee withholding tax payments. These withholding taxes to the revenue are used by authorities to provide essential services to the public.
Please note that failure to comply with these charges can land you in a lot of trouble. Not only may you find yourself incurring penalties, but you can also end up losing your business. It might seem like a good idea to avoid making payments now as you start a Michigan limited liability company (LLC). However, in a few years when the amounts have piled up and the authorities are on your neck, you may rethink that idea. Avoid problems now and keep your business in compliance.
Michigan Franchise Tax
Some states impose a fee on businesses known as a franchise tax which serves as a fee for doing business. All businesses operating in such jurisdictions must set aside some money to pay for this expense. It can be costly to entrepreneurs who are yet to get their businesses off the ground. Plus, it can also serve as a recurring inconvenience.
Do you have to pay privilege taxes in MI? Luckily, no franchise LLC tax is applicable! Unlike some states which revel in charging such fees, the laws in MI are friendly to businesses. You are free to go about your operations knowing that you do not have to incur Michigan LLC taxes. However, keep reading for areas where you may have to part with some cash.
Michigan Business License
Did you know that registering your business does not amount to having the license to start your operations? Most people do not, and they assume they are good to go once they get their registration paperwork. However, you should not make this mistake. It comes with the dangers of:
- Getting into legal trouble if someone sues you for operating without a valid LLC license.
- Incurring penalties, fines and even closure if the authorities realize you are operating without the required business licenses in Michigan.
- Damaging your reputation as a business that is okay with flouting the rules and ruining your chances of clinching good partnership deals.
The list of problems goes on. Why would you want to take the chance? Instead, consult the authorities on what MI LLC business licenses you may need for your business. For example, if you are a professional business, going through the LARA Regulated/Licensed Professions page can give you an inkling of what you need when filing for licenses and permits. If you are handling food, you will need a public health certificate. These are but some of the business licenses for entities operating in Michigan you may come across.
Please note that the requirements trickle down to the local level. Consult your local authorities too and get to know what MI business licenses you may need to get.
Michigan LLC Annual Statement
As we earlier mentioned, you do not need to pay any fee for the privilege of operating in MI unlike the case in some jurisdictions. Even so, you have to keep up with a Michigan annual statement. So, what is it?
Think about it this way. Your business is one of the millions operating in MI, and as you can imagine, it takes a lot of work to manage all these businesses. The authorities must figure out where and when to send reminders, notices, paperwork, and so on. Juggling all this is a challenge. Do you know what can make their work harder? Dealing with outdated information!
If the authorities do not have current details about your business, they can end up sending notices to the wrong address. Plus, you can end up missing out on important information. To ensure that you are both on the same page, they require you to check your information each year. If you have changed your details, you have a chance each year to update the information.
Please note that this is not optional. In fact, not maintaining current annual reports for Michigan LLC comes with a range of disadvantages. They include:
- People who want to learn more about your business will not get the right information when they pull up public records. You can end up losing out on a good investment deal as a result.
- If you ever get into legal trouble, you might not receive the court papers and notices on time. There have been cases where people lost court battles without having stepped into the courtroom.
- If you do not update your annual report filings, the authorities will note that you are no longer in Michigan LLC good standing. Keep up with the late filings or not filing long enough, and they will soon dissolve your business.
These are some of the impacts you can face due to not filing. When you think about it, you are better off complying with the law and getting your paperwork in order. If it feels like too much work, you can also hire a service that specializes in these business records.
How should you file your updates? It is quite easy. First, you need to get the date right. Once you form your business, you have until the 15th of February the following year to update your records. However, if you have formed the business after September, you can skip one year and file the year after that. You will need to pay $25 per statement, and you can factor this into your budget.
Secondly, you need to outline all the aspects you may have changed about the business. Most details will remain the same, but you will want to make sure you have understood all the new changes. You can now proceed to file the paperwork:
To submit the form online, use the online service LARA system
By sending the statement and the applicable fee to:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau
P.O. Box 30054
Lansing, MI 48909
Fill out the form and bring it to the address in person:
2501 Woodlake Circle, Okemos, MI.
Do not forget the payment too.
Once you have covered all these tax filing requirements for Michigan LLCs and left no stone unturned, you will be well on your way to running a successful business. Also, you will not need to look over your back because your operations will be above board.