How to Pay Taxes for a Limited Liability Corporation in Michigan

By Jennifer Kiesewetter, J.D.

How to Pay Taxes for a Limited Liability Corporation in Michigan

By Jennifer Kiesewetter, J.D.

To operate in Michigan, limited liability companies (LLCs) must pay both state and federal taxes. Your LLC will also have to file various initial and on-going tax-related documents to meet all reporting requirements.

Businesswoman sitting at a desk smiling

Follow these steps to pay taxes for a limited liability corporation in Michigan.

1. Register to pay business taxes online.

Michigan requires you to register online to pay for most state business taxes. The state no longer considers any paper Registration for Business Taxes forms (Form 518).

To be eligible to use this online service, your LLC must be newly formed or created from a merger or acquisition, and you can't have a paper copy of the Registration for Business Taxes form already on file with the state. Furthermore, your business must have engaged in one of the following:

  • Sold or leased tangible personal property
  • Hired or planning to hire employees to perform services within the state
  • Provided services that will require paying withholding, sales, use, motor fuel, or tobacco taxes
  • Acquired any or all of the assets from an existing business with employees in Michigan
  • Changed your business entity type, for example, from a partnership to an LLC

Have your federal employer identification number (FEIN) handy to complete the registration process at Michigan Treasury Online. You can then perform tasks on behalf of your LLC with the Michigan Department of Treasury.

2. Pay your Michigan Business Tax.

The Michigan Business Tax (MBT) affects every business in the state. It replaces the Single Business Tax, effective for any activity occurring after January 1, 2008.

If your annual tax liability exceeds $800, then you must file quarterly estimates of your taxes. If your gross receipts are less than $350,000, you don't need to file or pay your MBT, except if you run an insurance company or financial institution. These businesses pay state taxes relative to their industries.

3. Pay your sales, use, and withholding taxes.

Here are the rates for these three types of taxes in Michigan.

  • Use taxes. Businesses must pay a use tax of six percent on the total cost, including shipping and handling, of any taxable items brought into the state or purchased from out-of-state businesses that don't collect sales or use taxes on behalf of their customers. Use tax also applies to certain services provided in Michigan, such as telecommunications.
  • Withholding taxes. Michigan businesses must withhold federal and state income taxes from wages paid to their employees. Additionally, if employers provide retirement benefits, they must withhold federal and state income tax from any distributions made from those plans. For 2019, the Michigan withholding tax rate is 4.25 percent. For more information, including instructions on personal exemption amounts or exclusions, review Michigan's Income Tax Withholding Guide (Form 446).

Sales, use, and withholding taxes may be reported quarterly, based on your business's circumstances. If you file and pay these taxes quarterly, use the 2019 Sales, Use and Withholding Taxes Monthly/Quarterly Return (Form 5080). For annual reporting, use the 2019 Sales, Use and Withholding Taxes Annual Return (Form 5081).

4. Pay your unemployment taxes.

In addition to employee withholding taxes, Michigan businesses must pay state and federal unemployment taxes. Employers pay these taxes based on rates ranging from 0.06 to 10.3 percent on the first $9,000 of each employee's wages. Businesses should pay these taxes online to Michigan's Unemployment Insurance Agency (UIA).

Additionally, an employer must pay federal unemployment taxes according to the Federal Unemployment Tax Act (FUTA). The current rate for FUTA is 6.2 percent on the first $7,000 of an employee's wages. If a business pays its federal unemployment taxes before January 31 each year, it is entitled to a tax credit of 5.4 percent, minimizing the taxable burden.

5. Pay your corporate income taxes.

LLCs are pass-through entities, meaning that the owner reports the business's earnings and losses on his or her income taxes. Thus, the LLC itself doesn't pay federal or state income taxes, only the owners do.

However, you can have your LLC taxed as a C corporation. If you elect this type of taxation, then the business must pay both federal and state income taxes. For federal income taxes, the company use the U.S. Corporation Income Tax Return (Form 1120). For state taxes, any company expecting to exceed $800 in annual tax liability must file quarterly and annual corporate income tax (CIT) returns online.

6. Pay other applicable taxes.

As a member of an LLC, you may have additional state and federal taxes to pay. For example, depending on the income derived from the LLC, you may need to make quarterly self-employment tax payments. Additionally, depending on your type of business, you may need to pay state tobacco, motor fuel, or international fuel taxes.

As you review your LLC's tax obligations for the year, you may have questions about which taxes or exclusions apply to you. Consult with an attorney or use an online service provider to help answer these questions. By seeking expert advice, you can save time and money in the long run.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.