What Are the Advantages of an LLC in Michigan?

By Stephanie Kurose, J.D.

What Are the Advantages of an LLC in Michigan?

By Stephanie Kurose, J.D.

A limited liability company, or LLC, is a common type of business entity that combines features of both a corporation and a partnership. There are a number of advantages to forming an LLC, especially in Michigan since its state laws are favorable to businesses and entrepreneurs. In fact, more than 45,000 new LLCs are formed in the state each year.

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LLC Basics

Each state has its own laws that govern business formation, including LLCs. Thus, the rules and regulations that govern your LLC will depend on the specific state in which you operate. However, there are a few characteristics and advantages that are common throughout the country. For example, the owners, called members, of an LLC are not held personally liable for any of the business's debts. This means that if a creditor sues the LLC to recover any unpaid debt, the creditor can only reach the capital that members put into the business, not their personal assets. Another advantage of an LLC is the flexibility it provides its owners when managing the business. There are very few formal requirements, such as having annual board meetings or retaining meeting minutes.

Benefits of Forming an LLC in Michigan

Michigan is the ninth largest state by population and is one of the best when it comes to job creation. The Michigan Limited Liability Company Act ("Michigan LLC Act") governs all the state's LLCs with provisions that make forming a business easy and cost effective.

Contractual Freedom

The Michigan LLC Act allows LLC members to customize in the business's Operating Agreement their financial contributions and their share of any profits or losses. This allows flexibility; members can adapt their cash flows and risks of loss to further their management plans in a way that works best for their particular business. The law also allows new members to join the LLC without making any financial contribution.

In addition, the LLC Act allows members to create classes of membership, each with different rights, powers, responsibilities and voting interests. This provides further flexibility to manage the LLC and tailor the internal organization in a way that is most efficient.

Rights of Minority Members

LLC minority members are given certain rights under Michigan state law. Minority members can file a lawsuit against the LLC and its members for any act that is illegal, fraudulent, willfully unfair or oppressive. This is an important right, since minority members cannot otherwise stop any unfair or illegal acts of the majority members.

Dissolution

In some states, an LLC automatically dissolves when a particular event occurs, such as when a member dies, withdraws or expels from the LLC. However, in Michigan an LLC can last in perpetuity should the members wish. This also has the added benefit of being able to retain the LLC's tax status.

If you would like more information on forming an LLC in Michigan, consider contacting an online service provider.

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.

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