Business Lawyer for Limited Liability Companies in Michigan
Are you starting a liability company (LLC) in Michigan? Do you need an operating agreement or articles of organization? Do you understand the benefits, liabilities, and responsibilities of starting and operating an LLC? Is your company already formed as an LLC, but do you need help with things like complex assets, employment issues, taxes, bank financing, real estate, and commercial leases?
LLCs offer real benefits, but many other factors exist that must be considered and addressed in an appropriate and strategic manner. At Lex Novus, our business attorneys will work with you on each and every aspect of starting and operating a successful limited liability company. Contact us today at (248) 581-0987 to schedule a strategy session and to learn more about the benefits of retaining a business attorney in Michigan.
What is a Limited Liability Company (LLC)?
A limited liability company is a business structure that combines features of a sole proprietorship or partnership and corporation. Like a company, the owner's personal liability in an LLC is limited. However, its tax situation is typically the same as a sole proprietorship or partnership. LLCs can have an unlimited number of owners, called members. Each member owns a percentage of the business that is typically proportionate to their investment.
The specific regulations around forming and running an LLC vary between states.
What's the Difference Between an LLC and a Corporation?
While both limit the personal liability of their members (in the case of an LLC) and shareholders (in the case of a corporation), there are some key differences between the two structures.
Corporations are seen as entities that are fully separate from their owners. Unless an LLC has made a "check-the-box" election to be taxed like a corporation, it will be taxed like a sole proprietorship or a partnership (depending on whether it has one owner or more than one owner). A single-member LLC (with no check-the-box election in place) is regarded as the same taxpayer as its owner. A multi-member LLC (with no check-the-box election in place) is regarded as a partnership of its separate owners, and it files its own separate partnership tax return.
Partnerships and S corporations are pass-through entities. The entity files an income tax return, but its profit or loss is allocated among the partners or shareholders and reported to them on a K-1. A single-member LLC (with no check-the-box election in place) is a "disregarded entity", so there's no need for the income to be allocated to the owner -- because the income (or loss) is already deemed to be the owner's income.
LLCs use an operating agreement to set out how it will be governed, including management structure, restrictions on buying or selling shares, profit sharing, and its dissolution. Operating agreements are flexible and can be designed according to the members' wishes. Corporations, on the other hand, are required to formally adopt bylaws according to the relevant state law. However, an LLC that has elected S corporation status must operate according to the S corporation tax rules.
Level of Administration
Corporations must comply with more rigid government rules and regulations that LLCs do not have to follow. These rules and regulations involve stricter reporting and administrative requirements.
Advantages of an LLC in Michigan
There are many advantages that flow from forming a business as an LLC. Below are descriptions of a few of them.
- Limited liability. One of the biggest advantages of an LLC is that it limits the liability of owners to their investment in the business. Owners can't be held personally liable for a company's debts and their personal assets are protected in the event an LLC can't pay a creditor, goes bankrupt, or is subject to a lawsuit.
- Taxation. LLCs can be taxed as a sole proprietorship, partnership, or corporation. By default, an LLC is a pass-through entity. This means taxation is passed to the owners who pay taxes on the profits (or losses) via their personal tax return, avoiding double taxation. In some circumstances, an LLC can elect to be taxed as a corporation. This flexibility allows members to choose a taxation structure best suited to their situation.
- Flexible management structure. When it comes to management, the members of an LLC can choose to either share management responsibilities or act like passive investors by nominating one or two managers to run the business (either members or non-members).
- Less administration. It's typically easier to set up and run an LLC than a corporation. There's less paperwork involved and, unlike a corporation, an LLC isn't required to hold board or shareholder meetings or appoint officers and directors.
Whether one of the above or another advantage benefits your business depends on the business itself and what your goals are. That's why speaking to a business attorney in Michigan can be critical to the success of your company. Our business lawyer in Troy will help you align your goals with the benefits associated with any and all business structures so you can be confident you form and operate your business under the most advantageous structure available to you.
Is Michigan the Best State for My LLC?
You might hear someone say you should form your LLC in another state, like Delaware or Nevada or Wyoming. And that might be good advice in a few special cases. But Michigan is a great choice because it offers:
- One of the lowest formation filing fees in the country. Only two states -- Montana and Arkansas -- charge less than Michigan's $50 initial filing fee. And the annual fee is only $25, which is among the lowest annual fees.
- Anonymity. The member/owner does not need to publicly disclose his/her/its identity to form or maintain the LLC in Michigan. Many states require the members' identities to be disclosed.
- Two-way asset protection:
- Members and managers of the LLC are not liable for the acts, debts or obligations of the LLC; and
- A member's interest in the LLC cannot be foreclosed on by a judgment creditor of the member.
Do You Need a Business Lawyer for an LLC in Michigan?
While there's no legal requirement to hire an attorney when forming an LLC, it's a good idea to speak to a business lawyer to confirm whether it's the right business structure for your circumstances.
They can also assist you with forming an LLC, including registering your business and drafting documents such as the operating agreement. They can also often continue to act as your registered agent, receiving any legal documents on behalf of the LLC.
If your business is complex or involves especially risky transactions, a business lawyer can work proactively to avoid legal mistakes on your behalf. If a legal issue arises, they will walk you through the process, representing your interests throughout it.
Contact a Business Lawyer in Troy Today
Make sure your company gets started on the right legal foot by making sure the business formation you choose, whether it's an LLC or another entity, is right for your business idea and goals. Get clarity and strong representation for a business already established as an LLC. Contact our attorneys either by using our online form or calling us at (248) 581-0987. You can schedule a strategy session to get the answers you need to some of your most pressing legal questions related to your business.