Are you looking to form a professional limited liability company (PLLC) in Michigan, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Michigan PLLC that is compliant and able to do business in the state.
What is a Michigan Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. Professional services are defined under Michigan law as any personal service to the public that requires a license or other legal authorization in order to be performed, including, but not limited to, services rendered by a certified or other public accountant, chiropractor, dentist, optometrist, veterinarian, osteopathic physician, physician, surgeon, podiatrist, chiropodist, physician's assistant, architect, professional engineer, land surveyor, or attorney-at-law.
The Michigan PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Michigan have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in Michigan (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
Michigan requires that the name of a professional limited liability company contain the words “professional limited liability company” or the abbreviation “P.L.L.C.” or “P.L.C.,” with or without periods or other punctuation. The name cannot include words that refer to other business types, such as “corporation” or “incorporated,” and you also cannot use any phrase, abbreviation, or derivative of a word or phrase that implies that your PLLC is formed for a purpose other than the purpose or purposes permitted by its Articles of Incorporation.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. You can check if your name is available by conducting a business entity search on Michigan’s Department of Licensing and Regulatory Affairs (LARA) website. Once you’ve chosen a name, you can reserve it for six months for $25 by submitting an Application for Reservation of Name to the Department of Licensing and Regulatory Affairs either in paper form or online.
Step Two) Designate a Registered Agent
Every PLLC in Michigan is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
As noted in step 3 below, you will need to name your registered agent in your Articles of Organization. Your PLLC’s registered agent must have a physical street address in Michigan, which will also serve as your PLLC’s registered office address. You can appoint either an individual Michigan resident, a Michigan corporation or a limited liability company, or a foreign corporation or limited liability company authorized to transact business in the state of Michigan.
Without a registered agent, you could lose your good standing with the state of Michigan, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your Michigan professional limited liability company, you will fill out the Articles of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of your PLLC
- Description of the professional services to be rendered by your PLLC
- Duration of your PLLC (if not perpetual)
- Street address and mailing address of your PLLC’s registered office
- Name of your PLLC’s registered agent
- Signature(s) of the organizer(s)
- Submitter’s contact information
Cost to Form a PLLC
Michigan charges a fee of $50 to file Articles of Organization. There are also a number of expedited review options available for an additional fee: $50 for 24 hour review, $100 for same day review, $500 for 2 hour review, and $1,000 for 1 hour review.
The processing time for your Articles of Organization will vary depending on whether it is submitted online or mailed, but generally your filing will take about 3-5 business days to process with standard review. Expedited options range from 1 hour to 24 hours. These estimates assume that your filing is complete and accurate. If your filing contains any deficiencies, you will be contacted and processing will be delayed.
Step Four) Create an Operating Agreement
After you register a PLLC in Michigan, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
Your PLLC may be subject to certain state-level business taxes, depending on your business activities and how you elect to treat your company for tax purposes. If you elect to treat your PLLC as a corporation for tax purposes, it will be subject to corporation income tax. To learn more about the various state taxes in Michigan, you can visit the Michigan Department of Treasury’s website. You can also use Michigan Treasury Online to register for business taxes, access your Treasury business account, update your business account information, e-file and make e-payments for most business taxes, and more.
Depending on where in Michigan your business is located, you may also need to pay some local taxes. You can access business resources for the four largest cities in Michigan by visiting their websites: Detroit, Grand Rapids, Battle Creek, and Sterling Heights.
Step Six) Obtain Business Licenses and Permits
Not every business in Michigan is required to obtain a business license. To find out if your business will require any licenses, you can use Michigan.gov’s State License Search tool. An alphabetical list of professional licenses and permits can also be found on the Bureau of Professional Licensing’s website. The Bureau of Professional Licensing is responsible for licensing and regulating a number of professions in the state. Given the nature of a PLLC, you will likely need to have one of these licenses or another professional license from a state board or agency in order to legally operate your business.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in Michigan
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Almost all employers in Michigan are required to obtain workers’ compensation insurance for their employees. Most employers purchase a insurance policy from a private insurance company, while others apply for self-insured status or join a group fund. If you intend to hire employers for your PLLC, you should visit the Workers’ Compensation Agency’s website for additional information on the workers’ compensation requirement and your responsibilities as an employer. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
The income for your PLLC should be reported on the appropriate income tax form. You can find individual and business state income tax forms on the Michigan Department of Treasury’s website.
Understand annual reporting
Every LLC in Michigan is required to file an Annual Statement each year. The Department of Licensing and Regulatory affairs will send a pre-printed form to your PLLC’s registered office 90 days before the due date. You should confirm that the details on the form are correct and report any changes in your registered agent or registered office. If your PLLC fails to file its Annual Statement, it will no longer be in good standing after two years and your PLLC’s name will become available to any other business entity.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.