By Mark Henricks
Thinking of starting a business in Michigan? Thanks to its fabled automotive industry, technology and innovation are some of its strong points. The Wolverine State also has one of the lowest costs of living in the nation. Here’s what you should know, including business licenses and tax requirements, to launch a business.
Many financial advisors specialize in helping business owners with their finances. Find a local financial advisor today.
Make a Business Plan
Planning is the first step to starting a business. To create a business plan, most entrepreneurs begin with an idea for a product or service they will offer. The selection of the offering is typically guided largely by the founder’s skills and passions. Market conditions should also be a consideration.
Although Michigan is the center for the auto industry, when it comes to employment other industries are bigger – and growing. Trade, transportation, utilities, services, health and education all employ more than manufacturing.
Marketing is the next key question, and Michigan has special characteristics to consider. The population of nearly 10 million consumers is about 79% white, according to the U.S. Census Bureau. And fewer than 1 in 20 are foreign-born. That’s about one-third the rate of the nation as a whole.
The automotive industry represents a significant marketing opportunity for a wide range of products and services. Michigan produces more cars – 2 million a year – than any other state. And there are more than 1,600 automotive-related manufacturing establishments in the state.Choose a Business Structure
Every business has to be organized in one of the common business entity structures. Choosing a structure needs to be done early and with care. Long-term, this can affect the owner’s level of risk and the business’s ability to grow.
Michigan businesses can register through the Corporations Division of the Department of Licensing and Regulatory Affairs.Register the Business Name
A sole proprietor business operating under anything but the owner’s first and last name must register an assumed name with the county clerk. Other types of businesses register names with the Department of Licensing and Regulatory Affairs when registering the business entity. No two businesses using the same form of entity can have the same name.
Entrepreneurs can check name availability with the state’s online business entity search tool. Or they can call the Department of Licensing and Regulatory Affairs at 517-241-6470.Get Tax Permits
Michigan businesses need to register for tax purposes with the state and federal taxing authorities.
To get a federal Employer Identification Number, businesses can apply with the Internal Revenue Service. The EIN let employers withhold taxes on worker wages and salaries and file the business’s federal tax return.
Before hiring employees, businesses need an Unemployment Insurance Account. This is handled by the Department of Licensing and Regulatory Affairs and allows the business to file quarterly tax reports.How Michigan Taxes Businesses
Michigan imposes a corporate income tax of 6% on corporations that are taxed as C corporations by the IRS. Sole proprietors, S corporations and other entities federally taxed as flow-through entities are not covered by Michigan’s corporate income tax.
Small businesses may be subject to an alternate tax rate of 1.8%. Businesses with less than $350,000 in receipts are not required to file or pay the corporate income tax.
There are no city, county or other local sales taxes. The state sales tax is set at 6% and is required of retailers but not wholesalers. Contractors are liable for sales taxes on inventory and value of materials affixed to the property. Service providers must pay sales tax for any tangible personal property that goes to a customer along with the service.Obtain Permits and Licenses
Acupuncturists, clothing manufacturers and auto body repair shops are some of the businesses that require licenses to operate in Michigan. Billiard halls, janitorial services and lawn mowing services do not.
To find out whether a business type needs a permit or license to operate in Michigan, use that state’s online license search tool. It also describes which of the state agencies administers the relevant permits and how to contact them.Bottom Line
Michigan’s long history as a center for the automotive industry underpins strengths in innovation and technology. The state’s low cost of living makes starting a business inexpensive. However, its public schools are not ranked well.Tips: Resources for Starting a Small Business
Photo credit: ©iStock.com/pawel.gaul, ©iStock.com/ShriramPatki, ©iStock.com/ehrlif
Information contained on this page is provided by an independent third-party content provider. Frankly and this Site make no warranties or representations in connection therewith. If you are affiliated with this page and would like it removed please contact email@example.com