opening a new michigan business

Forming a new Michigan business can be relatively simple.

1.Verify with the State of Michigan name availability:

Name Availability Search

2. Complete and File your articles of incorporation or organization with the State of Michigan

Business Entity Forms

3. Obtain your Federal Employer Identification Number (EIN) with the United States Internal Revenue Service

EIN Apply online

However, as the phrase goes, “the devil is in the details”.

Will you be the only owner?

Will you have partners or investors that will require an ownership interest?

What are the benefits of an LLC over a Corporation?

Do you need a shareholder agreement or operating agreement?

While many sites will allow you to form and incorporate your new business for a small fee, most will not provide you the legal guidance and strategy to determine if this is the best course of action for your particular situation. This is where a good business attorney and your tax preparer can help.  Having a cohesive team will make your new start-up process seamless and worry free. Here are some things to consider:

LLC or Corporation?

Do you want your new business to be a Limited Liability Company (LLC) or a Corporation? For most new businesses, the LLC is the best and most flexible option.  An LLC provides a separation between the individual owner and business entity, for liability purposes, but provides a “pass-through” basis for taxation purposes.

There can be some substantial tax benefits in forming an LLC, especially if you are going to be the sole owner/member, including the following 2:

1. Taxation at your personal tax rate.

As an LLC, you can elect for taxation purposes to be taxed as a disregarded entity. This means that any income earned would be taxed at your personal level. Further meaning that if your tax rate is lower than the current corporate rate, a substantial savings in taxes paid.

2. Larger Contributions to a retirement account.

As a single member LLC, you can set up a separate retirement account for yourself, including a self-employed 401k. This type of retirement account allows you to defer your compensation, up to certain IRS limits – up to $18,000 for 2015. For example, lets say your LLC business (elected as a disregarded entity) earned $58,000.00 in income. Instead of paying taxes on all $58,000, you could contribute the full limit to your self-employed 401k, and reduce your reported income by $18,000. Of course, this a VERY simplified and general example, as there are many factors that go into this decision. Which is why it helps to consult with your attorney and CPA. Most attorneys can provide cost-effective representation for new businesses.

Good luck with your new business venture

As a small business owner himself, Attorney Dominic Silvestri has been helping business owners for over 10 years to become successful business owners

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