Starting a Michigan Business Series: Forming a Corporation
It’s Monday, which means only one thing. Starting a Michigan Business time. This week the focus is on Forming a Corporation, what you need know, where you need to go, and how to find the documents you need to get started.
First things first.
1. Choose a name.
Have you settled on a name? Make sure you name is not already taken by visiting the Michigan Corporation Division Name Availability Search.
You’ll also need check the list of restricted words. These words are not allowed in your corporate name: List of Restricted Words
2. Determine if your business is subject to special licensing or permits.
No need for surprises. You can check online here: michigan.org/medc/services/license. You may also want to check with your local county, city or township clerk for local requirements.
3. File Paperwork with the State of Michigan
Be thorough when completing the paperwork. Be sure to have the proper corporate form, filled out completely. Forms are returned if not properly completed.
4. Register for a federal Employer Identification Number (EIN)
You can apply for an EIN number by faxing your SS-4 (Application for Federal Employer Identification Number – EIN) to 859.669.5760 or calling 800.829.4933
5. Register for Michigan Taxes
You’ll need to complete Michigan Taxes Form 518 and return to the Michigan Department of Treasury and fax to 517.636.4520
Corporation Advantages:
- Shareholders (company owners) have personal limited liability
- Access to capital is easier than with other structures
- Profits can be divided between owners and the corporation which reduces taxes and offers lower tax rates
- Perpetual existence. Upon death of an owner (stockholder) the corporation continues to exist
- Tax benefits for employee fringe benefits such as medical, dental, and disability
Corporation Disadvantages:
- Fees. It costs money to incorporate, plus recurring annual corporate fees
- There are formalities that MUST be followed. There is no flexibility here
- Profits paid to owners are subject to double taxation
- Can be complex to set up and maintain
- Dissolution does not automatically happen
A great resource for starting a business is Michigan Business One Stop. It’s an online portal with access to FAQ’s and necessary documents for starting a business.
If you have questions you can call the DELEG (Department of Engery, Labor & Economic Growth, Bureau of Commercial Services, Corporation Division) at 517.241.6470. Or visit online at michigan.gov/corporations
It’ never a bad idea to seek out the services of a lawyer and accountant when launching a new a business. While these steps will get you on your way they should never be considered a replacement for legal advice.