Grand Rapids Business LLC
Many entrepreneurs choose to form their businesses as limited liability companies due to the flexibility and ease of management LLCs offer. However, deciding how to structure your company requires careful consideration of the unique circumstances and needs of your business. Working with experienced legal counsel can help you make an informed decision about which type of business form to choose. Contact for an initial evaluation with a business lawyer to discuss the pros and cons of choosing a limited liability company as the form for your new business.
What Are LLCs?
A limited liability company (LLC) is a type of legal entity that combines features of sole proprietorships/partnerships and corporations. In Michigan, a party called an organizer forms the LLC with the Corporations Division. The organizer may become an owner of the LLC, but does not have to assume an ownership role. The LLC’s owners, called members, may assume direct management of the company, or they may structure the LLC for managers elected by the members to manage the LLC. A manager of an LLC can, but does not have to, have a membership interest in the company.
An LLC has a separate legal existence from its members. Furthermore, the limited liability nature of an LLC means that members only have liability for the LLC’s debts and expenses to the extent of their financial contribution or investment in the company. Although a member may lose their financial investment in an LLC due to the company’s debts or expenses, the company’s creditors may not pursue further contributions from members.
Members may govern an LLC through its articles of organization filed with the Michigan Corporations Division and under the Michigan Limited Liability Company Act. Alternatively, an LLC’s member(s) may create an operating agreement to serve as the governing document for the LLC.
Advantages of Forming an LLC
Many entrepreneurs choose LLCs as the legal structure for their business due to the various advantages they offer, including:
- Limited Liability Protection – Members do not have liability for an LLC’s debts or expenses, beyond any money they have already invested in the company.
- Tax Flexibility – LLCs can choose between different forms of taxation depending on their ownership and equity structure, including sole proprietorship taxation (for single-member LLCs), partnership taxation, or Subchapter C or S corporate taxation.
- Management Flexibility – Members have significant flexibility in structuring the LLC’s management, as an operating agreement can combine various aspects of how partnerships or corporations typically manage themselves. Members may choose to manage their LLC more like a partnership or more like a corporation.
- Professional Credibility – Having a formal legal entity for a business can enhance its professional image and credibility with potential investors, vendors, customers, and clients.
Disadvantages and Considerations of an LLC
Before choosing an LLC as your business form, it’s important to consider the potential downsides or drawbacks of this structure. Some of the disadvantages of an LLC include:
- Potential Self-Employment Taxes – LLCs, by default, have pass-through taxation, which can make members liable for self-employment taxes.
- Challenges in Raising Capital – Depending on an LLC’s tax structure, a company may find it more challenging to raise capital from investors, who may have concerns about having liability for the LLC’s taxes.
- Restrictions on Transferring Ownership Interests or Dissolution – Transferring one’s membership interest or dissolving an LLC can become more complicated when the company has multiple members, some of whom object to the transfer or dissolution.
- Possible Need for Comprehensive Governance Agreements – When an LLC has multiple members, they may need clear, in-depth operating agreements to spell out their rights and obligations to one another and to the business.
Steps to Form an LLC
In Michigan, the process of forming an LLC involves the following steps:
- Choosing a Name – An LLC must have a unique name that distinguishes it from other LLCs, limited partnerships, or corporations organized or registered in Michigan. The name must not contain words indicating a purpose for the company other than those stated in the articles of organization. The name cannot include the words “corporation” or “incorporated” or their abbreviations.
- Filing Articles of Organization – Creating an LLC requires the organizer(s) to file articles of organization with the Michigan Department of Licensing and Regulatory Affairs’ Corporations Division.
- Appointing a Registered Agent – An LLC must have a registered agent – a person or entity appointed to accept legal documents on behalf of the LLC – which must have a physical address in Michigan.
- Drafting an Operating Agreement – An LLC may have an operating agreement to serve as its governing document, especially if the company has multiple members.
- Obtaining an EIN – In many cases, an LLC will need an EIN, especially if it must register to remit payroll or sales taxes or when a financial institution requires the company to have an EIN to open an account.
- Registering for Taxes – Depending on its line(s) of business, an LLC may need to register with the state to pay or remit various taxes, such as sales, excise, or payroll taxes.
- Complying with Licensing Requirements – An LLC may need to apply for various professional or local business licenses or occupancy permits.
Why Work with a Michigan Business Attorney to Form an LLC?
A Michigan business lawyer can help you with setting up a business as an LLC by:
- Discussing your business needs and goals to assess the suitability of the LLC form
- Walking you through the pros and cons of LLCs
- Helping you structure operating agreements and other governance documents
- Ensuring your LLC meets filing requirements
- Advising you of other registration, licensing, or permitting requirements for your business
Why Choose SBS Law PLC?
When you’re considering setting up an LLC, hiring experienced legal counsel can help you structure the company in a way that’s tailored to your specific needs and objectives. Let a business attorney from SBS Law PLC help you create an LLC that sets your new business up for success. For years, Michigan business owners and entrepreneurs have chosen us for their legal needs because of:
- Our Diligence – When you turn to our firm for help establishing an LLC, you can expect us to get started quickly, handling all the details of your case with attention to detail and a sense of urgency so you can get your business off the ground as soon as possible.
- Our Combined Approach – Our practice combines the benefits of a small firm’s attentiveness with the knowledge and experience you would expect from a big firm to provide the stellar service you need.
- Our Professionalism – We work hard to build a culture of compassion, helpfulness, and diligence to help you feel comfortable entrusting us with your legal needs. Our team treats every client who comes to our firm with the dignity and respect they deserve.
- Our Extensive Experience – Our attorneys have worked diligently to earn the respect and trust of clients through our experience and insights that allow us to help business owners manage the complex issues and challenges that can arise.
Contact Our Firm Today for Support and Advice
Do the advantages and benefits of forming a limited liability company make this your preferred option for structuring your business? Contact SBS Law PLC today for a confidential consultation with a business attorney to learn more about the suitability of the LLC form for your company.
