One of the first questions many entrepreneurs bring to the Michigan SBDC is whether they should establish an LLC, corporation, or another structure when starting their small business. It’s a common point of hesitation—deciding which format to choose, how to file and understanding the costs involved.

It can be tempting to turn to an online “instant lawyer” or a registered agent who promises to handle your filings quickly and cheaply. While those services can seem convenient, they often charge additional fees for work you can easily do yourself—with guidance from your Michigan SBDC consultant.

The most affordable and straightforward way to file your business in Michigan is online through the Department of Licensing and Regulatory Affairs (LARA). With the assistance of an Michigan SBDC consultant, you can complete the process in about 10 minutes for a total cost of $50.00. Within five to seven days, your business will be official. Best of all, Michigan SBDC consulting services are offered at no cost.

Before you begin, it’s important to understand your options. Michigan entrepreneurs can choose from several structures—sole proprietorship, partnership, corporation or limited liability company (LLC). The best choice depends on factors such as your business’s risk level, potential liabilities, tax obligations and whether you plan to have investors or partners.

Because each structure carries unique advantages and responsibilities, the Michigan SBDC recommends discussing your options with a business attorney or tax professional before registering. Below is an overview of two of the most common business structures: the Sole Proprietorship (DBA) and the Limited Liability Company (LLC).

Sole Proprietorship or DBA

A sole proprietorship is the simplest and most common structure for small businesses with a single owner. If you don’t formally choose a business structure, your business will automatically operate as a sole proprietorship. There is no separate legal entity, which means the business’s income and expenses are reported directly on your personal tax return.

If you wish to operate under a name other than your own, you’ll need to file an Assumed Name Certificate, often referred to as a DBA (“Doing Business As”), with the county clerk in the county where your business is located. Note that a DBA applies only within that county—it does not extend statewide. Visit michigancountyclerks.us for contact information for your local office.

Advantages

• Easy and inexpensive to establish
• Profits are taxed once at the owner’s personal income tax rate

Disadvantages

• The owner has unlimited personal liability for business debts and obligations
• Ownership is limited to one person

Because the business and owner are legally the same, your personal assets could be at risk if the business is sued or owes money to creditors. For many entrepreneurs, this liability concern leads them to explore forming an LLC.

Limited Liability Company (LLC)

A Limited Liability Company (LLC) offers the best of both worlds—combining the limited liability protection of a corporation with the simpler, pass-through tax benefits of a partnership. LLC owners, known as members, are typically not personally liable for business debts or claims.

To form an LLC in Michigan, you’ll need to file Articles of Organization with LARA and pay the $50 filing fee. You can easily complete this process online. LLCs must also pay an annual renewal fee to maintain active status.

In addition, members should create an Operating Agreement, which serves as an internal roadmap for how the business operates. This document clarifies how decisions are made, how profits and losses are distributed, and what happens if ownership changes.

Advantages

• Limited personal liability for business debts and claims
• Flexible tax treatment options
• Easier to establish and maintain than a corporation

Disadvantages

• More complex startup requirements than a sole proprietorship or partnership

Support from the Michigan SBDC

Deciding how to legally structure your business can feel overwhelming, but you don’t have to navigate it alone. Your Michigan SBDC consultant can guide you step-by-step through the filing process, helping you understand your options and complete your registration correctly—all at no cost to you.

From business planning and financial projections to marketing and expansion, the Michigan SBDC is here to support you at every stage of your business journey.

Ready to get started?
Connect with your local Michigan SBDC at michigansbdc.org for personalized guidance and expert support as you take the next step in building your business.

is online through the Department of Licensing and Regulatory Affairs (LARA). With the assistance of an SBDC consultant, you can complete the process in about 10 minutes for a total cost of $50.00. Within five to seven days, your business will be official. Best of all, SBDC consulting services are offered at no cost.

Before you begin, it’s important to understand your options. Michigan entrepreneurs can choose from several structures—sole proprietorship, partnership, corporation, or limited liability company (LLC). The best choice depends on factors such as your business’s risk level, potential liabilities, tax obligations, and whether you plan to have investors or partners.

Because each structure carries unique advantages and responsibilities, the SBDC recommends discussing your options with a business attorney or tax professional before registering. Below is an overview of two of the most common business structures: the Sole Proprietorship (DBA) and the Limited Liability Company (LLC).

Sole Proprietorship or DBA

A sole proprietorship is the simplest and most common structure for small businesses with a single owner. If you don’t formally choose a business structure, your business will automatically operate as a sole proprietorship. There is no separate legal entity, which means the business’s income and expenses are reported directly on your personal tax return.

If you wish to operate under a name other than your own, you’ll need to file an Assumed Name Certificate, often referred to as a DBA (“Doing Business As”), with the county clerk in the county where your business is located. Note that a DBA applies only within that county—it does not extend statewide. Visit michigancountyclerks.us for contact information for your local office.

Advantages

• Easy and inexpensive to establish
• Profits are taxed once at the owner’s personal income tax rate

Disadvantages

• The owner has unlimited personal liability for business debts and obligations
• Ownership is limited to one person

Because the business and owner are legally the same, your personal assets could be at risk if the business is sued or owes money to creditors. For many entrepreneurs, this liability concern leads them to explore forming an LLC.

Limited Liability Company (LLC)

A Limited Liability Company (LLC) offers the best of both worlds—combining the limited liability protection of a corporation with the simpler, pass-through tax benefits of a partnership. LLC owners, known as members, are typically not personally liable for business debts or claims.

To form an LLC in Michigan, you’ll need to file Articles of Organization with LARA and pay the $50 filing fee. You can easily complete this process online. LLCs must also pay an annual renewal fee to maintain active status.

In addition, members should create an Operating Agreement, which serves as an internal roadmap for how the business operates. This document clarifies how decisions are made, how profits and losses are distributed, and what happens if ownership changes.

Advantages

• Limited personal liability for business debts and claims
• Flexible tax treatment options
• Easier to establish and maintain than a corporation

Disadvantages

• More complex startup requirements than a sole proprietorship or partnership

Support from the Michigan SBDC

Deciding how to legally structure your business can feel overwhelming, but you don’t have to navigate it alone. Your Michigan SBDC consultant can guide you step-by-step through the filing process, helping you understand your options and complete your registration correctly—all at no cost to you.

From business planning and financial projections to marketing and expansion, the Michigan SBDC is here to support you at every stage of your business journey.

Ready to get started?
Register with the Michigan SBDC at michigansbdc.org for personalized guidance and expert support as you take the next step in building your business.