A partnership is type of business run by two or more individuals. In Michigan, partnerships may become limited liability corporations, or LLCs, by filing the appropriate paperwork with the state Department of Licensing and Regulatory Affairs, or LARA, and paying the necessary fees. An LLC will be taxed similarly to a partnership, unless the business files Form 8832 with the IRS, electing to be taxed as a corporation.
Fit your business needs with the right LLC package
Check the intended name of your LLC to ensure it is not already in use by another Michigan LLC. The name must contain the words "Limited Liability Company" or the abbreviation "L.L.C." or "LLC." Contact the Corporation Division, Bureau of Commercial Services by telephone or use the division's online business name search tool to determine whether your chosen LLC name is available. If your partnership is currently doing business under a "doing business as" name, you may use this name for the LLC if it is not already in use by a Michigan LLC and you have added the words "Limited Liability Company" or the abbreviation "LLC" or "L.L.C."
Create your LLC's articles of organization. The Michigan Department of Labor & Economic Growth (DLEG) offers a form for creating an LLC's articles of organization, which can be obtained via the DLEG website or by calling LARA. On the form, include the LLC's name, its purpose, its intended duration, and the name and mailing address of its registered agent. If a manager rather than the partners will manage the LLC, include this information in Article V.
Fill out the certificate of conversion. The certificate of conversion appears on page 2 of the articles of organization form available on the DLEG website. Include the name of the partnership, including its DBA name (if applicable), and the date on which the partnership was formed. The certificate of conversion should be signed by at least one member of the LLC. Once the articles of organization and certificate of conversion form is complete, file it with the Department of Labor & Economic Growth Bureau of Commercial Services, Corporation Division. You must pay the filing fee when you file the articles of organization and certificate of conversion. Instructions for filing the form and current fees are included on pages 3 and 4 of the form.
Create an operating agreement. While Michigan law does not require LLCs to have operating agreements, a partnership that becomes an LLC can benefit from an operating agreement that clarifies the role each partner plays in the LLC, each partner's share of any LLC profits, and each partner's share of the LLC's expenses. Since an LLC that does not elect corporate taxation is taxed like a partnership, specifying the percentage of profits and expenses allocated to each partner can clarify tax matters.
File Form 8832 with the Internal Revenue Service if the LLC wishes to elect corporate taxation. An LLC that elects corporate taxation is not taxed like a partnership, in which revenues and expenses "pass through" to the partners. Instead, partners pay taxes on any share of the LLC's earnings actually distributed to them, while the LLC pays taxes at corporate rates on any earnings it retains. You can change the choice of corporate or pass-through taxation only once every five years. Form 8832 is available on the IRS website.
File the LLC's annual statement with the Michigan Department of Labor & Economic Growth. The annual statement is due before February 15 of each year. However, if the LLC was formed after September 30, an annual statement is not required until the February 15 that falls after the LLC's first-year anniversary.