In 2025, Michigan’s diverse economy and thriving startup scene created opportunities for 983,079 small businesses. If you are ready to turn your passion into a company, navigating state registrations and compliance steps is the first item on your checklist.
What you’ll learn
What you’ll learn
Key takeaways for Michigan entrepreneurs
- To register your business, file formation documents through the Michigan Department of Licensing and Regulatory Affairs (LARA).
- The licenses you need depend on your industry and municipality.
- If you’ll hire employees, you need a federal Employer Identification Number (EIN).
- Employers must register for withholding tax and unemployment insurance.
Launching a company requires a few steps before you can open the doors. You’ll need to choose a business entity, register with the state, set up your tax accounts, and get the right local licenses. If you plan to build a team, you also need to set up a payroll framework early to meet withholding requirements. To help you check every box, here is your step-by-step guide to starting a business in Michigan.
Choose a business structure and register with the state
For first-time entrepreneurs, entity types can be a lot to think about. That said, your choice impacts taxation, ownership, liability, and scalability. To help you weigh different options and pick the right business setup, here’s a quick comparison of common business structures in Michigan.
| Business structure | Ownership | Liability | Who pays taxes | Formation |
| Sole proprietorship | One person | Unlimited personal liability | The owner, as a personal tax | Simple and inexpensive |
| Partnership | Two or more people | Unlimited personal liability unless structured as a limited partnership | Partners as personal taxes | Partnership agreement recommended |
| Limited Liability Company (LLC) | One or more people | Owners are not personally liable | Members who are taxed as a corporation | File the articles of organization with LARA |
| S Corp | 100 people or fewer | Owners are not personally liable | Shareholders, as personal tax | File articles of incorporation with LARA and elect S Corp status with the IRS |
| C Corp | One or more people | Owners are not personally liable | The corporation and shareholders via dividends | File articles of incorporation with LARA |
Once you’ve picked the structure that suits you, search for your business name availability through the MiBusiness Registry Portal before you begin filing.
Apply for tax IDs and business registrations
If the business name you want is available through the MiBusiness Registry Portal, you can start the registration process. Your business name must be distinguishable from the names of other domestic or foreign companies. If it’s already taken, you’ll need to choose a different one. Once you’ve registered your business, you can apply for federal and state tax accounts.
Federal Employer Identification Number (EIN)
An EIN is a federal tax number that the IRS issues to identify your business if you have employees or plan to form a partnership, LLC, or corporation. While EIN and tax ID are often used interchangeably, an EIN is a federal IRS identifier, while a tax ID can refer to other state or individual tax identifiers. You’ll need an EIN to:
- Open a business bank account
- Hire employees
- File business taxes
- Apply for business licenses and permits
You can apply for an EIN on the official IRS site for free. The process takes a few minutes, and you’ll receive your number immediately after completion.
Michigan state tax registration
With an EIN, you can register with the Michigan Department of Treasury through the state’s MiFile system. Through this platform, you can set up your business tax accounts, which may include.
- Sales and use tax: You’ll need to register for a sales tax license if you sell tangible goods to end customers. The base sales tax in Michigan is 6%. Use tax applies to taxable out-of-state purchases if you did not collect the sales tax on behalf of the state.
- Income tax withholding: If you’ll have employees, you must apply for income tax withholding. The state of Michigan requires employers to withhold a flat income tax rate of 4.25% from employees’ wages.
Apply for business licenses and prepare for hiring
Michigan does not have a single general business license that applies to all businesses. Your licensing requirements depend on your industry and location.
Professional and state licenses
You’ll need to apply for a professional license through LARA if your business operates in a regulated occupation, such as healthcare, contracting, real estate, or law. Use the Michigan license search tool to find out your industry’s requirements.
Local permits and zoning
Many Michigan municipalities require local business permits and zoning approval before you can open to the public. Contact your city or township clerk’s office to identify local requirements.
Employer requirements
If you’ll hire Michigan employees, you need to understand additional payroll requirements to meet the state’s employer obligations. Here are two important requirements to know.
Unemployment insurance
Register with the Michigan Unemployment Insurance (UIA) through the Michigan Web Account Manager (MiWAM) portal. As a new employer, the state expects you to pay 2.7% of employees’ taxable wages into the unemployment insurance fund.
Workers’ compensation
If you’ll have employees who work 35+ hours per week for 13 or more weeks, you’ll need workers’ compensation insurance. The program covers medical expenses and lost wages when an employee is injured on the job.
Set up payroll and maintain compliance
Setting up your business’s financial and payroll infrastructure before your first hire is an important step when you’re thinking of how to start a small business in Michigan. It helps you stay compliant with the law and avoid costly surprises. To set up reliable payroll processes from the start, consider these key steps.
Open a business bank account
Open a dedicated business bank account using your EIN and formation documents to keep your business finances separate from your personal account. Separating the two will:
- Protect you from liability
- Maintain accurate recordkeeping
- Support clean tax filings
Calculate and remit payroll taxes for compliance
As a Michigan employer, you’re responsible for withholding and remitting several taxes on employee wages. Here are the common Michigan payroll taxes for employers you should understand to remain compliant.
| Payroll taxes | Rate | Who pays | Remitted to |
| Federal income tax | Based on the employee’s W-4 | Employee (withheld) | IRS |
| Social Security | 6.2% | Employee + employer match | IRS |
| Medicare | 1.45% | Employee + employer match | IRS |
| Michigan state income tax | Flat rate (4.25%) | Employee (withheld) | Michigan Department of Treasury |
| City income tax | Varies by city | Employee (withheld) | Applicable city |
| State unemployment insurance (SUI) | Varies | Employer only | Michigan UIA |
You can use our Michigan payroll tax calculator to help you get your paychecks. Alternatively, you can use payroll software from OnPay to automate calculations and most of your payroll workflows.
Powerful and valuable
“OnPay provides great customer service! It’s a powerful, yet easy-to-use platform that offers excellent value for small businesses.”
— Ryan Youngstrand, J&R Superior Landscape Solutions LLC
File your annual report with Michigan LARA
If you’re looking to start an LLC business in Michigan or a corporation, you’ll be required to file an annual report with LARA to maintain good standing. Failure to do so may result in penalties or administrative dissolution.
Guiding your growth
Launching a new company involves plenty of moving parts, but handling your back-office setup does not have to be intimidating. At OnPay, we provide payroll and HR services that combine intuitive software with top-notch support, making it easy to keep your business fully compliant from day one. Try OnPay today to automate calculations and simplify your back-office workflows so you can stay focused on growing your business. We’re here to answer your questions and look forward to hearing from you!
Take a tour to see how easy payroll can be.
Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.