Michigan has a cheap cost of living and one of the most business-friendly tax climates.
The Great Lakes state ranks 12th in Tax Foundation’s 2020 State Business Tax Climate Index. The rank is due to its low corporate and individual income tax rates. US News ranked it 5th most affordable due to its top-10 cost of living and housing affordability. Low taxes and predictable expenses might help a startup survive.
Michigan is affordable and offers sandy dunes, lush forests, and more shoreline than any other state save Alaska. Making it ideal for outdoor enterprises. This article covers all the essential processes of launching a business in Michigan, from writing a business plan to finding investors.
Michigan small business data.
99.6% of Michigan firms are 870,301 small businesses. Small businesses employ 49.2% of Michigan workers—1.8 million people. As small company employers, manufacturing, housing, and food services follow health care and social support. Michigan has the 12th most business-friendly individual income tax and the 18th most business-friendly corporate tax. 85.28% of Michigan small Michigan Small Business startups start by choice. 80.95% of Michigan small business owners survive their first year, 7th highest in the nation. In their first year, Michigan small Michigan Small Business startups create 4.33 jobs.
Good ideas launch every successful business. Ponder these:
What new product or service can your company offer?
Your company idea improves what?
Determine your talents and interests: generating a concept that complements your personality and positive attributes will motivate you. You will work long hours to overcome the many hurdles you’ll experience in starting your firm.
Learn how to market your expertise: if you don’t believe in and can sell your business idea, it won’t succeed.
Research Michigan Small Business
Test your idea to see if it’s marketable. Market research solves these crucial questions:
Does Michigan need your product/service?
Michigan companies offer similar products/services?
What sets your company apart?
Answers may need refining or scrapping your original idea. Be patient: only proceed with the next steps if your business idea has a niche in Michigan.
Plan a business.
Write your business plan. A good business plan should help investors finance your company’s growth. Business plans should include these sections:
Executive summary – Your business and why it will succeed
Firm description: List the benefits and issues your business solves.
Market research—Research your industry, target market, and competition.
Organization and staff—Describe your company’s structure and management.
Describe your product or service.
Marketing plan—Describe how you’ll attract customers.
Fundraising: How you’ll spend the money you need to grow your business in five years.
Financial forecast – Business data and balance sheets.
Appendix—An optional section with supporting and/or requested papers such resumes, letters of reference, permits, etc.
Every startup needs money. According to a U.S. Bank study, 82% of businesses fail due to cash flow issues. It’s time to get the money your business strategy estimated for at least a year.
You have alternative possibilities if you’re not affluent enough to self-fund your firm. These include a U.S. Small Business Administration loan, a commercial bank loan, equity crowdsourcing. Or a Michigan-based angel investor or venture capitalist firm.
Unlike VCs, angel investors are rich individuals who spend their money in a venture, usually in its early stages.
Angel investors invest lesser amounts to assist startups get started, while VCs invest larger amounts for more control over a business. Smaller firms typically seek angel investment. Michigan has many investors of both categories.
Michigan Angels and VCs
Blue Water Angels—A Michigan-based investment group with over 25 portfolio companies. Health, energy, IT, software, and mobile startups are welcome.
Grand Angels — A fifteen-year Michigan company investor. It has invested nearly $30 million in Michigan businesses.
Woodward Angels — A new Detroit-based investment group that funds early-stage tech and digitally scaling firms.
Michigan Angel Fund — A for-profit, professionally managed fund for early-stage Michigan Small Business owners.
Michigan Angel Investors: AngelList A comprehensive list of roughly 5,000 Great Lakes angels seeking assistance.
Brief bios include career history, total investments, and interests.
Choose a business structure.
Your business entity choice will impact numerous things.
Three key choices:
Sole proprietorship—self-employment. Your business is you legally.
Partnership—A partnership is a sole proprietorship with two or more people.
Corporation— A sophisticated legal framework that protects owners by separating directors, officers, and shareholders from the owner.
LLC – A “Limited Liability Company” combines the benefits of a sole proprietorship and a corporation.
LLCs offer liability protection like a corporation without double taxation because profits flow through your tax return. Small business owners choose LLCs because they are easier to run and offer corporate benefits without the complexity.
Taxing as a sole proprietorship.
An attorney can assist you choose a company entity.
Incorporate your Michigan Small Business
Michigan business registration follows entity selection. The process differs in whether you run a single proprietorship, LLC, or corporation.
No files are needed if your Michigan sole proprietorship uses your name. You must file an assumed name certificate if you use an assumed name.
First, check with the Michigan Department of Licensing and Regulatory Affairs to see if your business name is available. After verifying your name is available, fill out, notarize, and submit an assumed name certificate to your county clerk. Municipalities set filing fees. After filing, you can run your business but must renew the assumed name certificate every five years.
Michigan Small Business owners must choose a registered agent to receive process notices and government mail. Suppose you have a physical address in Michigan. In that case, you can be your registered agent. But hiring a professional is inexpensive ($50-$200 a year.) And ensures that your documents are filled out and filed correctly.
Next, check if your company name is available in the state.
Then you can file your business registration documentation with the Michigan state government.
Michigan corporations require Articles of Incorporation. Online, mail, or in-person. The filing charge is $10, plus a $50–$500 fee based on your company’s authorized shares. LLCs must file Articles of Organization by mail, online, or in person. $50 for filing.
Top registered agent services
Registered Agent Northwest assists.
To start a business, file paperwork. Northwest has offices nationwide and helps company owners with this every day. Northwest provides registered agent services, annual report filings, and free Michigan Small Business startup legal documentation.
ZenBusiness helps business owners start, run, and grow. Start with an LLC and business formation strategies. Later, you may use their registered agent, domain name, or annual report filing services. $0 + state fees.
Incfile your Michigan Small Business
Incfile’s library helps first-time business entrepreneurs choose a business type. Incfile will help with papers and filing and explain registered agents, articles of organization, and EIN.Online reviews praise the company. See the Best Registered Agent Services.
Get tax IDs.
You need a Federal Employer Identification Number (EIN) to open bank accounts, process payroll, and file taxes. Corporations and LLCs need EINs, whereas sole proprietorships need not. EIN applications can be submitted online or by mail. State company laws and taxes vary. Visit the Michigan Department of Treasury to register your firm for taxes online and learn more about the Michigan Business Tax (MBT).
Obtain licenses and permits.
Depending on its type, you may require several licenses and licenses to lawfully operate your firm. Restaurants need liquor licenses, and pawn shops need reseller’s licenses. The paperwork is tedious, but it protects you from penalties, litigation, and other legal issues. Use the Michigan State License Search to determine if your business requires special licenses, permits, or certifications.