Whether you’re looking at the northern or southern peninsula of Michigan, there are many vibrant cities for entrepreneurs to call home. But before you pack your bags and move, or start scouting locations in your home state, you should know what it takes to make your business official in the Wolverine state.
Michigan Means Business
If you’re a first-time business owner, you’ll be hard-pressed to find a state more hospitable to entrepreneurs than Michigan. Michigan is already home to 870,301 small businesses, and nearly half of its 3.6 million employees are employed at a local small business. In almost every city in the state, you’ll find a thriving community of like-minded entrepreneurs, with whom you can share stories, advice, and tips on how to grow. Michigan is also growing at a slightly faster rate than the average across the United States, establishing a strong potential future.
Detroit, Ann Arbor, Grand Rapids, Lansing, and Kalamazoo are just a handful of the up-and-coming urban areas in Michigan, but if you’re looking for something calmer and less expensive, you’ll also have your pick of mid-sized cities to choose from. No matter where you end up, you’ll likely find local grants and incentives to help you get your business off the ground.
Forming a Business in Michigan
Let’s talk about how to build your business in Michigan. This assumes you’ve already put together a business plan, in which you’ve outlined your business’s path to the future and identified key threats, like competitors. With those basics in mind, you should have all the information you need to choose an appropriate business structure.
If you’re thinking about taking the business public someday, your best option is undoubtedly forming a corporation (though you can always change your business to a corporation at a later date). Corporations serve as separate legal entities, so they keep track of their income, expenses, profits, and losses independently from the owners. They offer tons of legal protection to the owners, but also make you vulnerable to double taxation; income is taxed at the corporate level, and then at the personal level when you withdraw it as a salary or dividend.
Limited liability companies (LLCs) are a bit simpler, but offer similar liability protection. They’re a popular option among Michigan entrepreneurs because they’re approachable for small businesses, but are much better protected than sole proprietorships or partnerships. Michigan doesn’t impose a separate tax on LLCs, though you may be required to pay a 6 percent corporate tax on income above a certain threshold. Instead, you’ll only pay taxes on money you take from the LLC as an owner.
You might also consider starting a sole proprietorship or partnership. These businesses are very similar in structure, with the only difference being the number of people involved (partnerships involve two or more owners). The advantage here is you can start these and maintain them much more simply, and you’ll be taxed as an individual. Of course, the downside is that you’ll have more personal liability; you’ll be responsible for all your business’s debt, and may be legally responsible for anything that happens within the business.
Federal Tax ID (EIN) Number Obtainment
Almost all businesses, even sole proprietorships and partnerships, should get an employer identification number (EIN), sometimes known as a federal tax ID number. This is a signature number that applies only to your business, in the same way your social security number (SSN) applies only to you.
Like your SSN, your EIN will serve as a way for the federal government to keep tabs of your income throughout the year—and a crucial piece of information to file taxes at the end of the year. You’ll be using this number for many essential business functions, including hiring new employees, starting a bank account, and even establishing partnerships with other businesses.
There are a few ways to get a federal tax ID number, but not all of them are reliable. If you want to make quick work of the chore, make sure to use our federal tax ID obtainment services; with basic information about your business, we can get you an EIN in just a few hours.
Michigan State Tax ID Number
If a Michigan state tax ID sounds similar to a federal tax ID, that’s because it is. Your Michigan state tax ID will be a unique identifier tying your business to the state of Michigan. While Michigan corporate tax rates only applies to LLCs and corporations making more than $350,000 annually, it’s still a good idea to get this tax ID number early.
You may also need a Michigan state tax ID to register for sales taxes, or if you’re selling certain products (like gasoline or liquor), excise taxes.
Even if you think you can get away without a Michigan state tax ID, it’s prudent to get one early. By taking advantage of our Michigan state tax ID obtainment service, you can get your ID number in the span of a day (or less).
Localized Licenses and Permits in Michigan
Michigan doesn’t have a one-size-fits-all business license necessary for entrepreneurs, but that doesn’t mean you can get by without a permit or license. Most counties and cities in Michigan have their own regulations for which businesses require permits. For example, any organization relevant to healthcare will almost certainly require specific licensing, and establishments like liquor stores and casinos will also need permits to operate.
If you’re confused about which permits you need, make sure to talk to the people at your local Chamber of Commerce, or entrepreneurs in a local chapter of a small business organization in your area. If you’re running a typical business, obtaining the proper paperwork shouldn’t be too difficult.
Getting a federal tax ID and state tax ID for your Michigan business is the first major step toward beginning operations. Thanks to our services, we can set you on the right path in a matter of hours—so don’t miss out!