Limited Liability Companies in Michigan

In Michigan, Limited Liability Companies are regulated under MCL 450.4101, also known as the "Michigan limited liability company act" (the Act). According to the Act, “Limited liability company" or "domestic limited liability company" means an entity that’s an unincorporated membership organization. The term unincorporated differentiates this form of business entity from a corporation. In order for you to create a Limited Liability Company or LLC in MI, you must fill out an application and file it with the Department of Licensing and Regulatory Affairs (LARA) of in the State of Michigan Corporations Division. 

When you apply, the articles of organization must also be filed to organize your LLC, outlining the purpose of the company, its duration, and how it will be managed. Once the entity is formed, it can be managed by a manager or run by a member or members. A manager would be designated by the LLC according to a clause or provision in the articles of organization stating that the business is to be managed by or under the authority of the manager(s). A member would be a person that has been admitted to an LLC as described in MCL 450.4101 Section 501. There are several ways of admitting a member, but usually, it’s defined in  your operating agreement, as agreed to by the members. 

The Act provides that a member can make a contribution to the LLC, as a prerequisite for membership, which can be anything of value, including cash, property, services performed, or a promissory note or other binding obligation to contribute cash or property or to perform services. A member has membership interest, which includes the right to receive distributions of the LLC’s assets, the right to vote, and the right to participate in management. Generally, members are protected under the LLC limited liability shield; they have no personal liability for the LLC’s obligations. 

To ensure that members are protected, they shouldn’t mix personal assets with LLC assets. Members should also keep personal transactions, such as purchases, accounts, insurance and leases separate from the LLC’s transactions. Limited Liability Companies provide a tax advantage because they’re considered pass through entities and are treated as partnerships for purposes of taxation. This means that all company earnings pass through to its members, thus avoiding double taxation at the entity level (unlike corporations). 

Contact the business attorneys in Ann Arbor at Pear Sperling Eggan & Daniels, P.C. today, and let us help you set up your Limited Liability Company, as well as discuss your start up or existing business operational and legal needs.