Michigan has enacted the Michigan Limited Liability Company Act to regulate the creation and operation of limited liability companies (“LLC”) within Michigan. A business owner may choose to operate his or her business as an LLC because the LLC business entity provides the benefits of both partnerships and corporations.
In Michigan, a LLC is required to identify its place of business, all members and provide the name and location of a registered agent. This information is required by the state for tax and process of service purposes. Failure to provide the proper information can result in a LLC losing its registration and therefore the loss of applicable liability and tax benefits.
Michigan has established the Department of Licensing and Regulatory Affairs (LARA) to oversee the licensing and regulation of businesses within the state. Registration and ongoing filing requirements are done on the LARA website. The LARA website is also open to the public to conduct research on LLCs registered in the state.
A LLC must keep at its registered office or principal place of business in Michigan the following:
- a current list of the full name and last known address of each member and manager;
- a copy of the articles or restated articles of organization (with any amendments);
- copies of the LLC’s tax returns, if any, for the 3 most recent years;
- copies of any financial statements of the LLC, if any, for the 3 most recent years;
- copies of all applicable operating agreements; and
- copies of records showing each member’s shares of the LLC’s and voting rights.
There are two major benefits to the LLC business structure: (1) limited liability to members and (2) “pass-through” taxation.
- Limited Liability. Limited liability means that members (owners) of the LLC are generally not responsible for the debts and obligations of the LLC. For example, if the LLC was sued and lost there are only a few instances where the members would be personally liable.
- “Pass-through” Taxation. The second major reason for selecting the LLC model is that income of the LLC is passed through to the members. This means that the LLC’s income is not taxed at the LLC level. The income passes through the LLC to the members who pay personal income tax.
The advantages of the LLC business formation are generally significant enough to outweigh the disadvantages. However, business owners will want to understand that an LLC requires significant initial and ongoing compliance obligations. This is especially true where there are multiple members to the LLC. Each member, may owe the other members certain duties and there is often significant infighting that occurs with LLCs.
If you have questions or concerns about the formation or operation of your LLC, then contact an experienced Michigan business lawyer today.