How to Start a Business in Michigan

TL;DR

• To start a business in Michigan, you will need to find the right business idea, come up with a good business name, and then choose a legal structure; you’ll then need to file the required documents with the Secretary of State’s Licensing Division. 
• Most new/small businesses should go with an LLC as it is affordable ($50 filing fee) and offers personal asset protection.
• There is no general business license mandate in Michigan, although you might need specific licenses or permits based on your industry and location.
• After your business is registered, you’ll need to obtain an EIN — which is similar to a SSN but for your business — in order to open a business bank account. 
• After your business structure is formed, you’ll have a limited time to file a BOI report in order to avoid federal penalties.

Starting a Business in Michigan

There are a number of steps you’ll need to take in order to start your business in Michigan.

We’ve broken these down in detail below.

Step 1: Find the Right Business Idea

It’s important to understand that the right business idea will often not be about finding a universally good idea, but rather discovering the right idea for you — one that aligns with your unique skills and experience while addressing a genuine market need.

Even though countless factors play into selecting the right business idea, you should generally focus on:

Leveraging Your Existing Skills

Your professional experience is an invaluable asset when coming up with a business idea as it provides deep insights into things like:

• Customer needs
• Operational requirements
• Other often-overlooked details that can make or break a business

This insider perspective gives you a competitive advantage in your chosen market — helping you avoid common pitfalls and make better strategic decisions than competitors who lack hands-on experience.

Choosing an Area You Can Realistically Grow In

When selecting your business area, it’s key to focus on markets that you can realistically capture; for example:

• Instead of: The entire Michigan furniture market
• Try This: Sustainable office furniture for small businesses in Grand Rapids

Targeting your approach in this way allows you to build a solid foundation in a niche that you might be able to secure, before expanding into broader segments of the market later down the line.

Targeting Real Market Needs

Instead of just guessing what you think customers want, try to base your business idea on genuine problems that you and others regularly encounter in your daily life, workplace, or community.

A great example of this might be if you notice homeowners in a less populous town in Michigan often struggle with snow removal during winter, because there’s:

• A Clear Problem: Homeowners struggling with winter snow removal.
• A Lack of Existing Solutions: Very few services in the area due to its remote location.
• A Widespread Local Need: Almost all households in the area will face this challenge.

Remember that the most successful businesses often emerge from personal experiences with common frustrations — situations where people have thought “there must be a better way”.

Validate Your Business Idea

Before committing significant time and money to a business idea, it’s crucial that you verify the concept is actually viable and has real world potential. 

There are several effective ways you can validate your business idea, including:

• Researching the search volumes for terms related to your business
• Gathering direct feedback from your target market through platforms like Reddit or LinkedIn
• Starting with a pilot version of your business to test operations and gather real-world feedback

The best form of validation comes from customers willing to commit financially before you’re even up-and-running, which you can test with things like:

• Pre-sale campaigns
• Service deposits
• Early-bird pricing offers 

However, these avenues won’t be available to everyone as they typically require upfront investment in marketing and product development.

Step 2: Find a Business Name

The next step you’ll need to take before getting started is to find and secure the right name for your business.

What You Should Know:

Michigan currently requires all business names to be “distinguishable on the record”, meaning that they must be unique from any active business already registered with the Michigan Department of Licensing and Regulatory Affairs (LARA).

To check if your desired name is available, you can use LARA’s Business Entity Search tool.

What Is Considered Distinguishable:

Generally speaking, a business name is considered distinguishable if it has a different sequence of letters or numbers from any active LLC, corporation, or limited partnership on file. 

For example, if “Create Limited Partnership” is taken, you will not be able to register “Create LLC” or “Create Corporation,” but you could register “Creates Bros LLC” or “Kreate Inc.”

Your Name May Also be Rejected if:

• It misrepresents your business – Michigan does not allow business names that imply an unapproved business activity or one that does not align with the purpose stated in your formation documents.
• It contains restricted words – Certain terms, such as “Bank,” “University,” or any name suggesting a government affiliation, require prior approval from the appropriate state agency before they can be used.

We also generally recommend checking the U.S. Patent and Trademark Office for existing trademarks before finalizing your business name. 

This is because even if a name is available in Michigan, a federal trademark could limit your ability to use it for branding, marketing, or expansion into other markets outside the state.

Important: Make sure that your desired name is available as a “domain”; this is the URL that you will need to use for your business website.

Step 3: Choose the Right Business Structure

The third step you’ll need to take is to choose the right legal structure for your Michigan business.

This is important because it affects your:

• Personal liability: Most structures either protect your personal assets or leave them vulnerable
• Tax implications: Different structures are taxed in significantly different ways
• Setup complexity: Some structures can be formed in minutes, others require extensive paperwork
• Ongoing requirements: Maintenance obligations vary widely between structures

Below we’ve explored the most common options in more detail. 

Sole Proprietorships

Sole proprietorships are the simplest type of business structure you can form, and in Michigan, they do not require registering with the state (unless you choose to operate with a “Doing Business As” or DBA name).

This means that this business structure lets you:

• Start operating almost immediately
• Incur no set up fees

At the same time, this is seldom recommended because its one disadvantage is a big one: no limited liability protection, meaning that your personal assets will be at risk if you get sued. 

General Partnerships (Should Be Avoided)

A general partnership is similar to a sole proprietorship but for more than one person. 

This should be avoided, as it means that:

• Your personal assets will not be safe in the event that your business accrues debt
• You will be liable for 100% of the business — even if you own half 
• You will likely need to invest in some sort of formal paperwork — meaning that you might as well invest in an LLC and have your head clear. 

LLCs (Recommended)

A limited liability company (LLC) is one of the most popular business structures, with an average of 10,000 new LLC formations per month happening in Michigan alone — and numbers generally ranging between 8,500 and 13,000+. 

This makes sense when you understand the benefits of an LLC in comparison to other structures, which include: 

• Protected personal assets: An LLC is a separate legal entity, meaning that your personal assets will be protected in the event of a lawsuit or accrued debt (of course, there’s exceptions to this rule). 
• Managerial flexibility: Unlike a corporation, you can run an LLC how you want to; you’ll not be legally required to hold quarterly meetings, have a board of directors, or satisfy any other managerial mandates. 
• Low opportunity cost and fast startup time: LLCs are extremely affordable at just $50, and can be formed within just 24 hours for an extra $50 in Michigan (or within 1 hour for an extra $1000!).
• No lawyer necessary: Due to the simplicity and straightforwardness of LLCs, you will not need to rely on an expensive attorney to get started. You can either file your formation documents yourself or hire a cheap LLC formation service (prices start at just $29).  

C Corps

Another option is choosing to form a C Corporation, though this will generally not be recommended for either new or small businesses. 

This is because C Corps:

• Are subject to significant federal scrutiny when it comes to how they operate
• Have complicated tax structures
• Are more expensive both to form and to maintain. 

Having said that, you should note that C Corps could be the preferred structure for your prospective business if you’re:

• Planning to raise substantial capital by issuing stock to investors
• Seeking venture funding or private equity to support growth
• Having long-term goals of expanding on a large scale or going public

S Corp Status

An S Corporation (S Corp) is not a separate business structure but a tax classification that an LLC or a C Corp can choose to elect by filing Form 2553 with the IRS.

The main advantage of electing S corp status is that you will be able to avoid self-employment taxes on all distributions, which are your total profit minus a “reasonable salary” that must be awarded to yourself and all other owners. 

What is a Reasonable Salary?

There is no exact definition of what a “reasonable salary” is, but an easy way to roughly calculate it is to compare it to what an individual with your role, experience, and responsibilities would receive in your location.  

Does S Corp Status Always Make Sense?

In order to elect S Corp status, you will need to make sure that your LLC or C Corp:

• Is able to give you a “reasonable salary” that will be accepted by the IRS
• Has enough left over to give in distributions to make the self-employment tax savings “worth it”
• Has taken into account the extra administrative costs that will arise as a result of electing S Corp status (e.g., accountant, bookkeeping software, etc). 

Note: Not all LLCs or C Corps will qualify for S Corp status, as there are a few federal requirements that must be met first. 

For more information, we recommend having a look at our How to Choose a Business Structure article. 

Step 4: Get an EIN

The next step you’ll need to take is to obtain an Employer Identification Number (EIN) from the IRS. 

This is a nine-digit number that identifies your business for tax purposes and can be thought of similarly to a Social Security Number (but for businesses). 

You will need an EIN if:

• You plan to hire employees (required for payroll tax reporting)
• You want to open a business bank account (most banks require it)
• Your business is a C Corporation or has elected S Corp status (EIN required for tax filing).

You can apply for an EIN online through the IRS website, with approval generally being instant. Keep in mind that there is no fee required for obtaining an EIN. 

Step 5: Obtain All Applicable Licenses and Permits

The next step will be to obtain all applicable licenses and permits required for your business to operate legally in your area. 

Even though there is no general business license in Michigan, you may be required to obtain licenses at the state, local, and federal levels depending on your business. 

State Licenses and Permits

At the state level, your business will likely need a number of licenses or permits in order to operate, with the most common ones being: 

• Sales Tax License: If your business will sell taxable goods, you will likely need to obtain a Sales Tax License from the state’s Department of Treasury (which will allow your business to collect and remit the state’s 6% sales tax). You can see our Michigan Sales Tax guide for more information. 
• Professional Licenses: If your business will operate in a regulated industry, you will probably need a professional or occupational license from the Michigan Department of Licensing and Regulatory Affairs. 
• Environmental Permits: If your business will handle chemicals, waste, or engage in activities that could impact air or water quality, you may need to obtain permits from the Michigan Department of Environment, Great Lakes, and Energy (EGLE).

Note: For a comprehensive overview of all Michigan-specific requirements, you can reference the Michigan SBDC Business Resource guide.

Local Licenses and Permits

In addition to state-level requirements, your business may also need local licenses or permits depending on the city or county you’re based in. These can include:

• Local Business Licenses: Some cities and counties in Michigan will require you to obtain a business license from the local clerk’s office before you can begin operations. For example, in Lansing, businesses planning to engage in any of the city’s numerous licensed categories — such as auctioneering, ice cream peddling, or secondhand dealing — will need to secure a city license from the Lansing City Clerk’s Office.
• Zoning and Land Use Permits: If you have a physical location, including a home-based business, you may need zoning approval to ensure compliance with local land use laws. For instance, in Grand Rapids, any business planning to offer short-term, one-room rentals will first need to secure a Rental License from the City Clerk’s Office and pay a $569 application fee.
• Health and Safety Permits: If you are going to operate a business such as a restaurant, salon, or childcare facility in Michigan, you will likely need to obtain permits from your local health department. For example, in the city of Detroit, the Detroit Health Department requires all food establishments to pass a routine inspection every six months and secure a Food Service License, with fees ranging from $425 to $575.

Federal Licenses and Permits

Certain industries are regulated at the federal level, including: 

• Alcohol, Tobacco, and Firearms: If your business involves manufacturing, importing, or selling alcohol, tobacco, or firearms, you will need approval from the Alcohol and Tobacco Tax and Trade Bureau (TTB) and, in some cases, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).
• Aviation: If you are operating an aircraft-related business, including commercial air transportation or aircraft maintenance, you will need to obtain the necessary licenses from the Federal Aviation Administration (FAA).
• Commercial Fisheries: If your business involves commercial fishing, you will need to obtain permits from the National Oceanic and Atmospheric Administration (NOAA).
• Transportation and Logistics: If you are running a trucking, freight, or logistics business that operates across state lines, you will need to register with the Federal Motor Carrier Safety Administration (FMCSA).
• Radio and Television Broadcasting: If your business provides radio, television, satellite, or cable broadcasting services, you will need a license from the Federal Communications Commission (FCC).

To find out if your business requires a federal license or permit, you can check the U.S. Small Business Administration (SBA) website, which provides a full list of regulated industries and the agencies responsible for issuing permits.

Step 6: Open a Business Bank Account

Opening a business bank account is an important step as it will allow you to: 

• Keep your personal and business finances separate 
• Accept payments under your business name 
• Build business credit 

To open a business bank account, most banks in Michigan will require the following:

• Employer Identification Number (EIN) (unless you are a sole proprietor using your SSN).
• Business formation documents (such as your LLC’s Articles of Organization).
• Ownership agreements (if your business has multiple owners)

Step 7: Create a Business Plan

You will also need to develop a comprehensive business plan, as this will help you secure funding if needed, map out your expenses, and create a clear strategy for future growth and profitability. 

It can also help you identify potential challenges and refine your approach before investing more time and money.

When creating your business plan, you should include the following sections:

• Business Overview: Describe your company, mission, and the problem you are solving.
• Market Analysis: Identify your target audience, competitors, and industry trends.
• Products or Services: Outline what you offer and at what prices. 
• Marketing Plan: Detail how you will attract and retain customers.
• Operations Plan: Explain your day-to-day business structure and workflow.
• Financial Projections: Provide revenue forecasts, expense estimates, and funding needs.

If you want help creating your business plan or need more information on this topic, you can have a look at our How to Write a Business Plan guide.

Step 8: Get Business Insurance

Once your business bank account is set up, the next step you’ll need to take is to get business insurance, which will help protect your company from potential lawsuits, property damage, and all other applicable risks.

Even though the exact type of insurance you’ll need will depend on your specific business activities, most businesses will require some combination of the following:

• General Liability Insurance: Covers claims related to third-party injuries, property damage, and legal fees. This is one of the most common types of business insurance and is often required for leases or contracts.
• Professional Liability Insurance: Also known as Errors & Omissions (E&O) Insurance, this is essential for service-based businesses and protects against claims of negligence, omissions, or failure to deliver services.
• Commercial Property Insurance: Covers business property, equipment, and inventory from damage due to fire, theft, or natural disasters — among other covered risks. 
• Workers’ Compensation Insurance: Required in Michigan if you have employees. This covers medical expenses and lost wages for employees who get injured during work.
• Commercial Auto Insurance: If you use vehicles for your business, Michigan law will require you to purchase commercial auto insurance in order to cover any liability that arises due to traffic accidents. 

To find the right policy, we recommend comparing quotes from multiple insurance providers to ensure you’re getting the best coverage at a competitive price.

You can also read our review of the best small business insurance companies.

Step 9: Secure Funding (If Applicable)

Depending on your business — and on your personal finances — you may need some type of financing in order to start your business. 

Generally speaking, most aspiring small business owners choose one of the following financing options: 

• Small Business Administration (SBA) Loans: These are government-backed loans designed to help small businesses, and typically offer lower interest rates and longer repayment terms compared to traditional bank loans.
• Traditional Bank Loans: These are financing options provided by banks and credit unions, typically requiring strong credit, a solid business plan, and financial documentation that demonstrate your ability to repay the loan.
• Private Investors: These are individuals or firms that provide funding to businesses in exchange for equity or a structured repayment plan, often offering more flexible terms than traditional lenders.
• Angel Investors: These are high-net-worth individuals who invest in early-stage businesses, typically in exchange for equity. They often provide not only funding but also mentorship, industry connections, and strategic guidance.
• Crowdfunding Campaigns: These are online fundraising efforts that allow businesses to raise capital from the public, often in exchange for rewards, early product access, or equity. Platforms such as Kickstarter and Indiegogo are commonly used for this type of funding.

In addition to these options, there are also a number of state and local funding programs in Michigan that you can explore:

• Michigan Economic Development Corporation (MEDC) Programs: Offers grants, low-interest loans, and business incentives for startups and growing businesses in Michigan.
• Michigan Small Business Development Center (SBDC): Provides free consulting and guidance on securing funding, business planning, and loan preparation.
• Michigan Business Growth Fund (MBGF): Supports small and medium-sized businesses by providing loan guarantees and collateral support to help secure financing.
• Michigan Community Development Financial Institutions (CDFIs): Nonprofit lenders that provide microloans and financing options for small businesses that may not qualify for traditional bank loans.
• Detroit Development Fund (DDF): Offers loans and resources for small businesses and entrepreneurs in Detroit, with a focus on minority- and women-owned businesses.
• Pure Michigan Business Connect (PMBC): Helps businesses secure funding by connecting them with Michigan-based lenders, investors, and procurement opportunities.
• Motor City Match (For Detroit-Based Businesses): A grant program that provides funding and support to new and expanding businesses in Detroit, with awards of up to $100,000.
• Invest Detroit Ventures: Focuses on funding early-stage startups in Michigan through capital investment and mentorship.
• Michigan Angel Fund: A network of accredited investors providing capital to high-potential startups across the state.
• Renaissance Venture Capital Fund: Connects Michigan businesses with venture capital funding sources to support high-growth potential companies.

Note: It’s important to keep in mind that just because a funding option is available doesn’t mean it’s the right fit for your business. Remember that taking on debt can put real pressure on your finances, so always make sure you can manage repayment comfortably before committing to a loan.

Bottom Line

Starting a business in Michigan will require you to complete several steps, including finding the right business idea, choosing a business structure, and filing the right documents with the Secretary of State’s Licensing and Regulatory Affairs division (LARA). 

After your business is registered, you’ll likely need to complete certain steps to make sure it can operate legitimately, such as acquiring an EIN, obtaining the right licenses and permits, and filing a BOI report.