Michigan LLC Laws

By Joseph Scrofano

Limited liability companies are a popular business entity type for small businesses. An LLC provides limited liability to the business owners similarly to what a corporation provides, but can be taxed like a partnership or sole proprietorship. The Michigan Limited Liability Company Act regulates LLCs in Michigan, while the Michigan Department of Energy, Labor and Economic Growth, Bureau of Commercial Services, Corporation Division -- or DELEG -- enforces the laws.

Name

Michigan law has two requirements for choosing a business name: the business name must not be the same or confusingly similar to that of another Michigan business, and the name must end with the words “Limited Liability Company,” or the abbreviations “LLC” or “LC.”

Key Terms

Michigan law defines key terms when discussing the rules for LLCs. The Articles of Organization are the standard form that LLC organizers must file with the DELEG to officially and legally form the LLC. The Articles of Organization must include information like the name and address of the LLC’s Registered Agent, which is the person or business designated to receive important legal mail on the LLC’s behalf. In addition, Michigan law encourages but does not require that the LLC members, or owners of the company, execute an operating agreement, a document that sets out the members’ rights and responsibilities for contributing to, managing and sharing the profits and losses of the LLC.

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Management

One primary benefit of forming an LLC is that it allows the owners flexibility in how they manage and operate the company. LLC members can elect to manage the company themselves, typically referred to as “member-managed.” If the LLC members want to take a more passive role and only share in the profits and losses of the company, they can hire or appoint outside managers to operate the company’s day-to-day affairs. This structure is referred to as “manager-managed.” Finally, the LLC could have some combination of both with some members acting as managers and others taking a passive role.

Dissolution

Article 8 of the Michigan Limited Liability Company Act provides four reasons for an LLC to dissolve, or cease operation and wind up its affairs. First, if the members specific in the Articles of Organization that the LLC will dissolve on a specific date, it will dissolve on that specific date. Second, if the members describe specific events that can lead to the company’s dissolution in the Articles of Organization or operating agreement, then if those events occur, the company will dissolve. Third, if all voting members unanimously decide to dissolve, then the company will dissolve. Finally, if a court enters an order for the company dissolve, then it will dissolve.

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References

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