How to Form a Professional Corporation in Michigan


Steve Bennett
Steve Bennett
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Form a Professional Corporation in Michigan

Are you considering starting a professional corporation in Michigan? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Michigan can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in Michigan, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Michigan!

What is a Professional Corporation in Michigan?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Michigan. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Michigan.

– LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Michigan if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in Michigan

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Resident Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Michigan, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in Michigan

After you have decided on the idea to form a professional corporation in Michigan, deciding the name for your corporation is significant. There is a complete guide on Michigan LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In Michigan, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 6 months. To keep the name, you must file a name reservation application with Michigan Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the Michigan Resident Agent

The next step in forming a professional corporation is hiring the Michigan Resident Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Michigan. Forming a professional corporation for your service will be easier if you have Resident Agent in Michigan.

Alternatively, you can serve as your own Michigan Resident Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Michigan.

Step 4: File the Articles of Incorporation in Michigan

After you hire a Michigan Resident Agent to form a professional corporation, the next step is to file the Michigan Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Resident Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in Michigan may be done with three ways, online, by mail and in-person. The Articles of Incorporation fee may vary from different states. However, in Michigan, it costs $60 for filing online, in person, and by mail. Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything. . For offline filing, Send the form by mail to Michigan Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau — Corporations Division, P.O. Box 30054, Lansing, MI 48909. Drop it off in person at 2501 Woodlake Circle, Okemos, MI.

Step 5: Write an Operating Agreement in Michigan

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Michigan operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in Michigan

The next step is to appoint the initial board of directors in your PC in Michigan. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Michigan SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in Michigan

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Michigan can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Michigan might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in Michigan

Before your professional corporation operates in Michigan, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Michigan, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in Michigan

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Michigan classification of taxes for the taxes an LLC in Michigan has to pay.

Important Information

Maintaining Professional and Business License in Michigan

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in Michigan

In Michigan, you will be required to submit a report each year. The owners’ and Resident Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in Michigan, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in Michigan

A professional corporation takes a lot of time to process and pursue. However, with the help of the Michigan Resident Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Michigan.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What are the requirements to form a professional corporation in Michigan?
In Michigan, the requirements to form a professional corporation are
How do I register a professional corporation in Michigan?
In Michigan, you must first file a Certificate of Incorporation with the Department of Licensing and Regulatory Affairs. You must also file a Statement of Professional Corporation with the Michigan Department of Treasury. Finally, you must obtain the necessary professional licenses from the appropriate licensing boards.
What fees are required to form a professional corporation in Michigan?
The filing fee for a Certificate of Incorporation is $50, and the filing fee for a Statement of Professional Corporation is $50.
What documents must be filed to form a professional corporation in Michigan?
In Michigan, you must file a Certificate of Incorporation and a Statement of Professional Corporation with the Department of Licensing and Regulatory Affairs and the Michigan Department of Treasury, respectively.
What are the tax implications of forming a professional corporation in Michigan?
Professional corporations in Michigan are required to pay federal taxes on their income, as well as state taxes on the profits distributed to shareholders.
Do I need to file an annual report for my professional corporation in Michigan?
Yes, all professional corporations in Michigan are required to file an annual report with the Department of Licensing and Regulatory Affairs, which must include the name and address of the corporation, the name and address of its registered agent, and the name and address of its officers.
What are the regulations for professional corporations in Michigan?
Professional corporations in Michigan are subject to the rules and regulations of the Michigan Professional Corporation Act. These regulations include requirements for filing annual reports, shareholder meetings, and corporate recordkeeping.
Can professional corporations in Michigan enter into contracts?
Yes, professional corporations in Michigan are able to enter into contracts as long as they are in compliance with the Michigan Professional Corporation Act.
How do I dissolve a professional corporation in Michigan?
To dissolve a professional corporation in Michigan, you must file a Certificate of Dissolution with the Department of Licensing and Regulatory Affairs. The dissolution must also be approved by the shareholders of the corporation.
What other licenses and permits do I need to operate a professional corporation in Michigan?
Professional corporations in Michigan must obtain any necessary professional licenses from the appropriate licensing boards. The corporation may also need to obtain additional permits or licenses depending on its type of business.
What is a Professional Corporation in Michigan?
A professional corporation in Michigan is a business entity formed to provide services in a professional service field, such as law, accounting, engineering, or medicine.
How do I form a Professional Corporation in Michigan?
To form a professional corporation in Michigan, you must first file articles of incorporation with the Michigan Department of Licensing and Regulatory Affairs (LARA). Once the articles are approved, you will need to obtain a Certificate of Authority from the Office of the Michigan Secretary of State. After that, you will need to obtain any necessary business licenses and permits.
What information is required to form a Professional Corporation in Michigan?
To form a professional corporation in Michigan, you must provide the following information with your articles of incorporation
Can I form a Professional Corporation online in Michigan?
Yes, you can form a professional corporation online in Michigan. You can file your articles of incorporation online through the Michigan Department of Licensing and Regulatory Affairs (LARA) website.
What are the benefits of forming a Professional Corporation in Michigan?
Forming a professional corporation in Michigan provides a number of benefits, including limited liability protection, tax advantages, and the ability to maintain a professional business identity.
What documents are required to operate a Professional Corporation in Michigan?
To operate a professional corporation in Michigan, you will need to obtain a Certificate of Authority from the Office of the Michigan Secretary of State, a business license, and any other necessary permits.
What are the legal requirements for a Professional Corporation in Michigan?
In Michigan, a professional corporation must have a minimum of one shareholder and at least one director. The shareholders must be licensed in the professional service field for which the corporation is organized. The corporation must also maintain a registered office in Michigan, and it must file annual reports with the state.
Are there any restrictions on the use of a Professional Corporation in Michigan?
Yes, there are certain restrictions on the use of a professional corporation in Michigan. For example, a professional corporation may not engage in activities that are outside the scope of its corporate purpose. Additionally, a professional corporation may not enter into partnerships or other business arrangements with unlicensed individuals.
What information do I need to include in the Articles of Incorporation?
The Articles of Incorporation must include the name of the Professional Corporation, the address of the principal office, the name and address of each incorporator, and a statement that it is a Professional Corporation.
What are the filing fees for Articles of Incorporation in Michigan?
The filing fee for Articles of Incorporation in Michigan is $50.
What other requirements must be met to form a Professional Corporation in Michigan?
In addition to filing the Articles of Incorporation, you must also register with the Michigan Department of Treasury and obtain a Certificate of Authority and any other required licenses.
What is the purpose of a Certificate of Authority?
A Certificate of Authority allows a business to transact business in the state of Michigan.
How do I obtain a Certificate of Authority in Michigan?
To obtain a Certificate of Authority in Michigan, you must complete an application and submit it to the Michigan Department of Treasury with the required fee.
What other licenses may be required to form a Professional Corporation in Michigan?
Depending on the type of services provided, additional licenses or registrations may be required.
Who can be a shareholder in a Professional Corporation in Michigan?
A shareholder in a Professional Corporation in Michigan must be a licensed professional providing services that are consistent with the purpose of the company.
Does a Professional Corporation in Michigan have limited liability protection?
Yes, a Professional Corporation in Michigan has limited liability protection, meaning that the shareholders of the corporation are generally not liable for the debts and liabilities of the corporation.
What are the tax implications of forming a Professional Corporation in Michigan?
Professional Corporations in Michigan are not subject to corporate income tax, but the shareholders of the corporation may be subject to individual income taxes.
Do I need to register my Professional Corporation in Michigan with the Secretary of State?
Yes, all Professional Corporations in Michigan must file a biennial statement with the Michigan Secretary of State.
What type of reports must a Professional Corporation in Michigan file?
Professional Corporations in Michigan must file an annual report and a biennial statement with the Michigan Department of Licensing and Regulatory Affairs.
Are Professional Corporations in Michigan required to hold annual meetings?
Yes, Professional Corporations in Michigan are required to hold an annual meeting of shareholders.

Also Read

Why Michigan Professional Corporation is So Important

One of the key reasons why professional corporations are so important in Michigan is the liability protection they provide to their owners. In a professional corporation, the personal assets of the owners are typically shielded from the debts and liabilities of the business. This means that if the company were to face a lawsuit or bankruptcy, the owners would not be at risk of losing their homes, savings, or other personal assets. This level of protection is crucial for professionals who may be exposed to higher levels of risk in their line of work.

Furthermore, professional corporations in Michigan offer a level of flexibility and autonomy that is not typically found in other types of business structures. Owners have the ability to make decisions about the direction of the company and how it is run without having to seek approval from outside shareholders or directors. This allows professionals to maintain control over their own practices and maintain their professional independence.

In addition to these benefits, professional corporations in Michigan also have access to certain tax advantages that can help them save money and reinvest in their businesses. For example, owners may be able to deduct certain business expenses, such as equipment purchases or professional development expenses, from their taxable income. This can result in significant savings and allow professional corporations to invest in their growth and success.

Another key reason why professional corporations are so important in Michigan is that they can help professionals attract and retain top talent. By operating as a corporation, professionals can offer benefits such as retirement plans, health insurance, and other perks that may be attractive to potential employees. This can help them build a strong team of talented professionals who are committed to the success of the business.

Finally, professional corporations in Michigan can also help professionals establish a strong brand and reputation in their industries. By operating as a corporation, professionals can show potential clients and partners that they are serious about their work and committed to maintaining high professional standards. This can help them stand out from competitors and attract more opportunities for growth and success.

In conclusion, professional corporations play a vital role in the business landscape in Michigan. They offer professionals the liability protection, flexibility, tax advantages, and branding opportunities that are essential for success in today’s competitive market. For professionals looking to take their practices to the next level and position themselves for long-term growth and success, forming a professional corporation in Michigan is an essential step.

Conclusion

In forming a professional corporation in Michigan, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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