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Editorial 6 MIN READ

Michigan in February 2022: the cheapest fee table in the Great Lakes, and a new entity-level tax sitting on top of it

Fifty dollars to form, twenty-five a year to keep, and a flow-through entity tax the Treasury just turned on

The Editors
Staff, Incorporator.org
6 min read Updated
Contents 6 sections
  1. The fee table, line by line
  2. What the table signals about SOS posture
  3. The thing that actually changed: the flow-through entity tax
  4. What Michigan's corporate side looks like, for contrast
  5. Parallel Delaware, and the math on the delta
  6. Sources

Michigan LLC still costs $50 to form and $25 a year to keep, and neither number has moved in a long time. What changed this winter is what sits on top of the filing table: a flow-through entity tax the governor signed in December that, for qualifying LLCs, lets the entity pay Michigan income tax at 4.25% and hand the members a federal deduction the SALT cap would otherwise eat.

This is an update on the Michigan filing-fee table and the LARA posture behind it, written the last week of February 2022. If you are here to file, the numbers are at the top. If you are weighing Michigan against Delaware, skip to the bottom.

The fee table, line by line

The Michigan LLC is authorized by the Limited Liability Company Act, 1993 Public Act 23, codified at MCL 450.4101 through 450.5200. The Corporations, Securities & Commercial Licensing Bureau inside LARA administers it out of Lansing, and the fees below come from the CSCL fee schedule and the fee provisions in the Act itself.

Articles of Organization for a domestic LLC are $50, filed on form CSCL/CD-700. No publication requirement, no separate name-reservation fee unless you want one. Foreign qualification is also $50, on CSCL/CD-760.

The annual statement is $25, due February 15, under MCL 450.4909. The Bureau mails a pre-identification notice in the fall and the online window opens October 15. A non-professional LLC that misses the deadline does not accrue daily interest; it moves toward not-in-good-standing status and, after two years, toward administrative dissolution. A professional LLC pays $75 rather than $25 and a $50 late penalty under the PLLC subsection.

Expedited processing is ordered on a separate form, CSCL/CD-272, and the fees sit on top of the regular filing fee. For formation and qualification documents the tiers are 24-hour service $50, same-day $100, two-hour $500, and one-hour $1,000. For documents concerning an existing entity the 24-hour tier is $100 and same-day is $200, with the two- and one-hour tiers unchanged. Expedited service is by mail or in person only; the online portal does not offer a rush lane.

Dissolution is $10 on form CSCL/CD-731. An amendment is $25. A certificate of good standing is $10 online, $50 expedited. Those are all the numbers a first-year LLC will meet, and none of them move in 2022.

What the table signals about SOS posture

Michigan has held its LLC formation fee at $50 for longer than most states have held any fee at anything. The annual statement fee has sat at $25 for a generation. Neighboring Ohio charges $99 to form and nothing annually; Illinois is $150 to form and $75 a year; Indiana is $95 to form and $30 every two years. Against that set, Michigan is the low bid on both sides of the ledger.

The posture reads as deliberately modest revenue. Bureau collections on the LLC side look closer to administrative cost recovery than extraction; Michigan is not funding itself off the Corporations Division. LARA has pushed volume onto the MiBusiness Registry portal, and the expedited-only-by-mail rule is the tell: the Bureau is pricing the rush lane to keep it from swamping the online channel, not to harvest it.

The thing that actually changed: the flow-through entity tax

The headline change for Michigan entities in 2022 is not in the fee table at all. It is in the Income Tax Act. On December 20, 2021, Governor Whitmer signed Public Act 135 of 2021, which added a new part to the Income Tax Act at MCL 206.811 through 206.847, creating an elective flow-through entity tax. The operative election provision is MCL 206.813.

Mechanically, a Michigan S-corp, LLC taxed as a partnership, or general partnership may elect to pay Michigan tax at the entity level on the positive business-income base apportioned to Michigan, at the same 4.25% rate levied on individuals under MCL 206.51. Members receive a refundable credit against their own Michigan tax for their share of the entity's payment. The federal point is that the entity- level payment becomes a deduction on the entity's return rather than a capped itemized SALT deduction on the members' Forms 1040. The $10,000 SALT cap from the Tax Cuts and Jobs Act does not apply to state income taxes paid at the entity level, a workaround IRS Notice 2020-75 blessed in November 2020. Our 2021 PTET map walked through the first eleven states that did it.

The election is irrevocable for three tax years. It is made by electronic payment through Michigan Treasury Online by the fifteenth day of the third month of the tax year; for a calendar-year 2022 election, March 15, 2022. The retroactive 2021 election must be made by April 15, 2022.

The arithmetic is clean for a closely held LLC whose members sit in the top federal bracket. On $500,000 of pass-through income apportioned to Michigan, the 4.25% liability is $21,250 either way. Paid personally, the members lose most of that deduction to the SALT cap. Paid by the LLC, it is a federal deduction in full, worth roughly $4,100 a year at a 37% federal rate. Single-member LLCs do not qualify; they are disregarded federally and outside the Michigan definition, which tracks the federal partnership/S-corp scheme.

What Michigan's corporate side looks like, for contrast

Michigan has no franchise tax. A Michigan LLC defaults to pass-through treatment for federal purposes and therefore to flow-through treatment for Michigan individual income tax at 4.25%. An LLC that elects C-corp treatment on Form 8832, or that checks the box and elects S status on Form 2553, changes its Michigan posture accordingly.

A Michigan C-corp is subject to the Corporate Income Tax under Part 2 of the Income Tax Act, MCL 206.601 et seq. MCL 206.623 imposes the tax on the corporate income tax base, after allocation or apportionment to Michigan, at 6.00%. The Michigan stack for a C-corp is therefore $50 to form, $25 a year, and 6.00% of apportioned corporate income. For an LLC it is $50 to form, $25 a year, and either 4.25% individual income tax paid by the members or, now, at the entity level under the new election.

Parallel Delaware, and the math on the delta

Delaware's stack is the comparison most Michigan founders ask about, because Delaware is the default suggestion every venture lawyer makes first. Delaware charges $90 to form a domestic LLC (Certificate of Formation) and a flat $300 annual tax due every June 1, on every LLC regardless of activity. Those numbers, which we walked through in the 2016 guide and again in the 2021 math piece, have not moved.

Against that, Michigan is $50 and $25. Over five years, Delaware is $1,590 and Michigan is $175. Close to nine-to-one cumulative; the annual delta is roughly four-to-one. None of this matters to a venture-backed Delaware C-corp, where legal fees and the Chancery option dwarf the filing costs. It matters to a three-member Grand Rapids operating company weighing a holding structure at home versus in Wilmington.

If you are raising institutional money you form in Delaware because the money will ask. If you are an operating business with Michigan customers, Michigan employees, and Michigan real estate, you form in Michigan and skip the foreign qualification bill a Delaware formation would force on you later. The flow-through entity tax makes the Michigan side marginally better than it was three months ago, not because the fee table changed, but because the income-tax stack quietly did.

Sources

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