Doing Business in Michigan

Why should you start a business in Michigan?

Michigan’s economy has shown vital signs of recovery since the Great Recession. Additionally, the state has appealing characteristics for entrepreneurs as well as potential employees with the skills employers want.

1. Michigan has an increased focus on small businesses.

Despite a downturn due to the recession, Michigan has a renewed small business focus that makes the state inviting for new ventures. “After the Great Recession, there has been an increase in emerging small businesses [in Michigan],” said Todd Heyboer, owner of online boutique Closet Barcode. “There has been a great deal in improvement, as you can see in the falling unemployment rate and the rise in median incomes.”

2. Michigan is enjoying economic growth.

While Michigan’s per capita personal income is just 83.9 percent of the national average, it has consistently ticked upward since 2009. In 2022, Michigan had the 14th largest economy in the United States. Before employment rates dipped due to the COVID-19 pandemic in 2020, Michigan’s labor force had been steadily growing since 2011.

3. Michigan has space for businesses to grow.

Michigan has plenty of space for new businesses to put down roots. “There is still a big surplus of available office space and, thus, low rental prices,” said Monte Falcoff, principal at the Harness Dickey law firm’s Detroit office.

For example, in Detroit, about 2 million square feet of new office space is under construction. Leasing opportunities are also expected to increase across the state as companies rebound from pandemic-related financial effects.

4. Michigan’s manufacturing industry is thriving. 

Manufacturing is one of the most vital sectors of Michigan’s economy. About 20 percent of Michigan’s jobs come from manufacturing industries, according to a report by Michigan State University. Additionally, Michigan is home to many workers skilled in engineering or chemistry, and there’s plenty of room for manufacturing facilities.

“Michigan has a history of entrepreneurship and engineering, and a large concentration of engineering talent and manufacturing resources are present within a quick drive,” Falcoff said, making the state an attractive place for entrepreneurs in the manufacturing industry.

5. Michigan’s cost of living is affordable. 

Michigan’s affordable cost of living will likely appeal to the employees businesses want to attract. Additionally, entrepreneurs enjoy low real estate costs and moderate taxes. Michigan’s cost of living is about 10 percent lower than that of the U.S. as a whole, and its housing costs are particularly attractive. According to MIT’s living wage calculator, a single adult without any dependents could meet all their needs in Michigan on a wage of $16.27 per hour.

How do you get a business license in Michigan?

If you’re starting a business in Michigan, you may need to get one or more business licenses or registrations. This is also true for independent contractors working in Michigan, who may need a license or permit depending on their work. Not every business needs a license, however.

In most cases, the licenses you need are issued by a state agency, depending on the type of business you start. For example, a dermatology business must be licensed by the Department of Licensing and Regulatory Affairs, while a movie theater will need multiple licenses from the Michigan Department of Treasury and the Department of Agriculture & Rural Development’s Food and Dairy Division.

To learn whether or not you need a business license in Michigan, visit the state license search page. You can search by business type or browse an alphabetical list. Once you find your business, you can click through to the relevant state licensing agency.

Whether or not you need a license for your business, you must register with the state for tax purposes. You can register through the Michigan Department of Treasury. You will also need an Unemployment Insurance Agency account number if you plan to start the hiring process and bring on employees.

How do I start an LLC in Michigan?

Several types of business legal structures, including limited liability corporations (LLCs), must register with the Corporations Division of the Michigan Department of Licensing and Regulatory Affairs.

To protect your LLC from personal liability, you must report the name and address of your registered office and resident agent to the agency annually. If you have a partnership and want to limit the liability between partners, you can register as a limited liability partnership (LLP) from year to year.

How do I register a business name in Michigan?

If you won’t be operating as a sole proprietor using your own name, you must register a business name with the state of Michigan. This business name is sometimes known as a fictitious name, trade name, assumed name or DBA (“doing business as”).

You must first register your business with the county clerk in the area it will operate. Most business entities — including LLCs, LLPs and corporations — must also file a form with the Michigan Department of Licensing and Regulatory Affairs to conduct business under an assumed name.

Every business in Michigan must have a unique name. You will need to do a business entity search before registering your assumed name with the state to ensure your business name is not already in use.

How much does it cost to start a business in Michigan?

The cost of starting a small business in Michigan depends on the business type. Below are the general filing fees for licensing and permitting a new business in Michigan.

• Filing a city or county certificate for an assumed business name: $10 and up
• Filing an assumed business name with the state: $10 and up
• Filing Michigan articles of incorporation: Starting at $50
• Expedited processing for articles of incorporation: $50 to $1,000
• Business licenses: From free to hundreds of dollars, depending on the type of license

Other costs that vary by business type include the following:

• Equipment
• Supplies
• Inventory
• Website domain and hosting
• Rent for a retail or office space
• Business bank account 

These costs range from a few hundred dollars to tens of thousands. You may also need to pay fees for federal paperwork or licenses. For example, you might hire a company to file for an Employer Identification Number for federal taxes.

How are business taxes handled in Michigan?

“Our government instituted a flat 6 percent corporate tax, among the country’s lowest, and that’s helped Michigan become a great place to open a new business or expand a current one,” said B.J. Lennon, senior director of strategic sales for recruiting and staffing company Aerotek.

This tax rate, known as the Corporate Income Tax (CIT), went into effect in 2012. For most businesses, it replaces the Michigan Business Tax (MBT). Businesses that qualify for the small business alternative credit under the CIT pay a tax rate of 1.8 percent instead of 6 percent.

If your business doesn’t qualify for the CIT, you will likely need to pay the MBT, which imposes a business income tax of 4.95 percent and a modified gross receipts tax at a rate of 0.8 percent. Michigan also levies a 6 percent sales tax and a 4.25 percent flat personal income tax rate. The Michigan Department of Treasury provides more information about the state’s business taxes.

Some business sales are taxed in Michigan, while others are not. Either way, it’s smart to obtain a sales tax license through the Department of Treasury. In some cases, this license will also allow you to make purchases for resale without paying taxes to the original vendor.

How do I start a business in Michigan with no money?

Accessing capital for startups or expansions is a little more challenging in Michigan than it is on the coasts. However, some small business owners have found that access is improving as the economy grows.

Heyboer noted that rapidly growing startups encounter many pain points because access to venture capital is not as great in Michigan as in other parts of the country. Young companies should prepare for a challenging time finding investors and plan accordingly.

Since venture capital is not widely accessible in Michigan, many entrepreneurs turn to local federal credit unions, such as the Michigan State University Federal Credit Union. The federal Small Business Administration (SBA) also provides loans, financing and business grants for small businesses and startups.

Various nontraditional small business financing options are also available to entrepreneurs who lack the cash flow to start a business. These include peer-to-peer lending and community development finance institutions. Many nontraditional options rank among our picks for the best business loans.

Best industries for starting a business in Michigan

If you want to start a business but aren’t sure which industry to choose, here are some of the most favorable Michigan industries.

• Manufacturing. Michigan ranks number six in the U.S. for exports, with a total export value of $55.5 billion in 2021. General Motors, Ford and Whirlpool all have manufacturing facilities in Michigan. The manufacturing industry presents several opportunities for new businesses, including furniture, wood products, toys and electronics.
• Medical technology. Michigan ranks among the top 10 states nationwide for medical device technology businesses. In 2020, 40 percent of the state’s venture capital was invested in the life sciences and healthcare fields. Michigan also is a top host in the U.S. for biomedical engineering students. As these graduates look to gain experience and enter the workforce, they create a source of new talent for Michigan businesses.
• Tourism. Michigan’s outdoor activities are a significant attraction for tourists, presenting several opportunities for small businesses. For example, boating and fishing activities in the state generated about $948 million in 2021. Michigan also boasts a profitable wine industry that attracts 615,700 tourists and produces almost $209 million worth of related sales every year. Bed and breakfasts and fruit farms are other attractions that business owners are finding profitable.

Resources for small business owners in Michigan

If you’re a small business owner in Michigan looking for resources to help you move forward, many organizations and government agencies can help. Below are some services that can answer your questions and connect you with the resources you need to get up and running.

1. Michigan SCORE. SCORE’s volunteer business professionals and expert mentors give counsel and guidance to entrepreneurs looking to start or expand their businesses. The services are entirely free and volunteer-driven. Chapters in Michigan include Traverse City, Tip of the Mitt, Muskegon and Grand Rapids.
2. SBA district offices. The U.S. Small Business Administration has a Michigan district office where small business owners can access financing and grants, as well as consultations and counseling services. The district office also offers opportunities to apply for federal government contracts through the SBA and avenues for assistance in the wake of natural disasters.
3. Michigan Small Business Development Centers. Michigan hosts a number of development centers for small businesses. Each center in the Michigan SBDC network is dedicated to supporting the development and retention of Michigan small businesses. These centers help entrepreneurs do everything from writing business plans to navigating the state’s tax code.
4. Michigan Economic Development Corporation. The MEDC answers many questions about starting and running a small business in Michigan. It can also connect business owners and entrepreneurs to various resources. You can assess information such as links about regulations and permits as well as real estate databases to find property for new businesses in the state.

Starting up in the Great Lakes State

You now have the steps you need to get your great business idea moving in the right direction. With expert advice and resources, you can start your business equipped with everything you need. A successful launch — and growth — in Michigan may be right around the corner.

Shayna Waltower and Adam Uzialko contributed to this article. Some source interviews were conducted for a previous version of this article.