(Part 1 of 5 in Michigan Business Starter Guide Series)
Michigan is a great place to start a business. The state provides many helpful resources to make starting a small business as affordable, understandable, and attainable as possible. First, you must decide what type of business you should start. Then you can determine what type of corporate structure is best for you and your new company.
What Kind of Michigan Business Should You Start?
There are plenty of opportunities for entrepreneurs in Michigan. Some ideas include:
- Professional businesses: If you’re a licensed professional (for example, an attorney, architect, dentist, doctor, etc.), you might consider hanging out your own shingle rather than working for someone else.
- Tip: A good first step is to consult with the applicable professional licensing organization in your field to explore the rules and regulations; they can also connect you with a mentor to give you real-world advice.
- Cannabis-related businesses: Michigan’s cannabis industry remains strong, despite fluctuating prices. The state’s Cannabis Regulatory Agency provides excellent resources to help you determine whether starting a cannabis-related business is a good choice for you.
- Tip: Explore our Cannabis Law page to learn more!
- Website design and content services: Many businesses struggle with website development and design. You can master the skills necessary to build functional, well-designed websites with or without formal training in a relatively short time.
- Social media management: Many businesses simply don’t have the time, energy, or know-how to effectively market themselves on social media. If you’re a whiz at social media apps and sites, you might want to turn your hobby into a career.
- Handmade goods: If you’re crafty or artistic, consider setting up a business to sell 3D printed items, art, crafts, candles, quilts, upcycled furniture, or other goods.
- Food, beverage, and agriculture: Michigan’s rich agricultural industry supports many types of businesses, including pop-up culinary experiences, food trucks, farmers market vendors, brick-and-mortar restaurants, mail-order food and drinks, breweries, wineries, and farmers.
- Tourism: Michigan welcomes hundreds of thousands of tourists each year. The industry depends on small businesses like tour guide companies, bed and breakfasts, bus and limousine services, campsite operators, equipment rental companies, and more.
- Franchises: Many industries offer franchise opportunities. These allow you to own an outpost of an existing business chain, such as a fitness concept or restaurant.
Deciding what type of business to start often depends, at least in part, on how much time, money, and other resources you have to invest in a new venture. Developing a business plan built on a strong foundation is vital to long-term success and growth. For example, opening a restaurant may be impossible or overly risky, given your current resources. Instead, you could start with a food truck. Investing in a brick-and-mortar location may be more reasonable once you establish your business and build a following.
Choose a Business Structure
The type of business structure you choose for your company determines its obligations to the state and federal tax authorities. It also affects how you can raise capital, your personal liability, and the steps necessary to get it up and running. You can choose between a sole proprietorship, partnership, corporation, and an LLC.
- You are automatically a sole proprietor if you conduct business activities but don’t register as a specific type of business. Your business and personal assets and liabilities are not separated, and you are personally liable for any business debts and obligations. You include the profits and losses of the business in your personal tax filings.
- A limited liability company, or LLC, is a way to structure your business that offers more legal protection for your personal assets than a sole proprietorship but requires minimal corporate formalities. A Michigan LLC is relatively easy and affordable to set up and requires minimal ongoing effort other than filing a yearly renewal. An LLC keeps business profits and losses separate from your personal finances, and you generally won’t be personally liable for any business debts and obligations. Most LLCs “pass through” the profits and losses to members’ personal tax filings rather than filing separate business taxes.
- If you have more than one person, you may choose to structure your business as a partnership. You can determine how liability and responsibility are allocated between the partners.
- A corporation is a legal entity entirely separate from its owners for financial, taxation, and liability purposes. Establishing a corporation is more expensive than other types of business entities and requires more extensive record-keeping, operational processes, and reporting. Corporations can raise capital by selling stock rather than depending on investors.
- Tip: There are different types of corporations, including the standard “C Corp” (most for-profit businesses), nonprofit corporations, S Corp (a status that can provide certain tax advantages), closed corporations, and more. A tax professional or business attorney can help you determine which is best for your situation.
How Do I Get Started?
The Michigan Small Business Development Center publishes a helpful guide to starting and operating a small business that is recommended reading for aspiring entrepreneurs. Its website also helps connect prospective owners to mentors and potential sources of funding that may be available.
If you’re interested in starting a Michigan business, it’s also a good idea to consult with an experienced business attorney. They can help you understand the entire process, choose the right corporate entity type, and comply with the legal requirements to get your business up and running. They can also help you understand what you must do to keep your business compliant and successful.