The first step in turning your good idea into a marketable business venture is to determine what form you want your business to take. Different forms have advantages and disadvantages, and it is a good idea to contact an experienced attorney to help you weigh the pro’s and con’s of one form over another. Your basic options are:
- LLC’S – Limited Liability Companies
- General partnerships
- Nonprofit Corporation/Tax-Exempt Status
Some considerations include, the level of personal liability, tax obligations, and corporate responsibilities. Choosing the right form can have the effect of protecting yourself from a failed business. Our experienced attorneys can help you decide which form is right for you, and then get you off to a good start.
One very common form of new business is an LLC (Limited Liability Corporation). An LLC has the advantage of protecting you from personal liability while not requiring a lot of initial set up or significant filing requirements. It is appropriate for most small business but if you have many employees or will be doing non-profit work. The basic steps are as follows:
1. Choose a business name for your LLC and check for availability in Michigan. You must have “limited liability company” or the abbreviations “L.L.C.” or “L.C.” in the name, and may not include the words corporation and incorporated. In some circumstances you may be able to use a D/B/A name (doing business as) and avoid these requirements in your informal business name ONLY.
2. Prepare and File Articles of Organization with the Department of Licensing and Regulatory Affairs. The filing fee is $50.00.
3. Negotiate and execute an operating agreement. An operating agreement is not required by the State of Michigan, but it is a key document to get your business running smoothly. It sets out how meetings will be run, management format, capital contributions, and how any disputes will be managed.
4. Obtain any required local licenses.
5. Determine any tax or regulatory obligations are necessary and register them. You will need to request an Employer Identification Number from the IRS. This can be done online and does not require a filing fee. There are requirements associated with how many employees your business has.
6. Open a separate bank account for your business. This is critical to maintain the protections from personal liability that you have worked so hard to establish.
Finally, there are continuing annual reporting requirements that must be complied with in order to maintain your LLC status.
Garmo & Kiste, PLC has a lot of experience setting up businesses for our clients. With us its personal, we are also a small business and remember what it felt like just to be getting started. It is exciting to be getting your business off the ground, but it’s also important to protect yourself from the worst. Let us handle setting up your business, and we can guide you through potential pitfalls so you can focus on the important matters.
To retain Garmo & Kiste, PLC, for assistance in these matters call us at (248) 398-7100 for a free consultation or contact us with a private message. We are experienced Michigan attorneys with offices in Troy, MI.