How to start a business in Michigan in 14 steps (2025 guide)

Starting a business is an adventure filled with possibility and excitement. It’s a chance to turn your vision into reality and share your passions with the world. If you’re an aspiring business owner, Michigan offers a supportive environment to bring your ideas to life. Whether you're a lifelong Michigander or new to the state, we're here to guide you as you begin your business journey. Learn everything you need to know, from funding your business to registering your name and more. 

Why start a business in Michigan in 2025?

Michigan offers a lot for business owners, with its diverse economy, affordable startup costs, and lower cost of living. The Great Lakes State blends vibrant urban areas with stunning natural landscapes, creating a unique and appealing environment for both work and life. A recent score card report by the Small Business Association of Michigan (SBAM) Foundation found that the state’s entrepreneurial economy is experiencing robust growth, surpassing the national average. And, despite historical fluctuations, the state has seen a record number of new businesses launched. 

Wondering how to start a business in Michigan? Our small business guide will walk you through the steps. 

Here are the topics we’ll cover in this step-by-step guide: 

• 14 steps to starting a business in Michigan
• Step 1: Decide what type of industry is best for your business
• Step 2: Conduct industry research
• Step 3: Create a business plan
• Step 4: Choose your business entity: Types of business entities in Michigan
• Step 5: Secure funds: Michigan small business funding, loans, and grants
• Step 6: Choose your Michigan business name and Michigan DBA
• Step 7: Pick a business location in Michigan
• Step 8: Find a Michigan registered agent 
• Step 9: Get a Michigan EIN and file your tax and employer identification documents 
• Step 10: Register as a small business in Michigan 
• Step 11: Register for your business license and permits in Michigan
• Step 12: Secure insurance for your Michigan small business 
• Step 13: Prepare to pay taxes on your business in Michigan
• Step 14: Set up your business bank account
• Additional resources to get your business started
• Frequently asked questions 

14 steps to starting a business in Michigan

Whether you’re planning to open a restaurant in Detroit’s thriving Midtown, or you’re looking to launch that Ann Arbor bookstore you and your friend have been dreaming about, Michigan offers an array of opportunities, industries, and incentives to inspire your inner entrepreneur. 

Below are the steps to opening a business in the Great Lakes State, from refining your idea to setting up a foundation for growth. With small business resources and insights tailored to Michigan, you’ll be prepared for success.

Step 1: Decide what type of industry is best for your business 

Maybe you have a new product idea you want to bring to the world, or you’re looking to transition into consulting services in a university town. Regardless of your small business aspirations, think about how your interests and skills match market demand in Michigan localities. Be sure to reach out to your local chamber of commerce and research trends to identify service or product gaps you might fill.

Not sure where to start? Begin by exploring a variety of small business ideas to spark inspiration.

Step 2: Conduct research in your industry

Before launching your business, it's essential to understand the state's economic landscape and identify potential opportunities. Research industry trends, conduct a competitive analysis, and determine how your business concept might fit into or complement Michigan's key sectors. 

For example, Michigan is a powerhouse in auto manufacturing and healthcare, with other opportunities in technology and agriculture (blueberries, anyone?). The Michigan Economic Development Corporation is a great resource for industry research and discovering potential niches for your business.

Step 3: Create a business plan

Create a business plan, which is a written document outlining and detailing your company's goals, target market, and financial projections. It serves as a roadmap for your business. It not only helps you stay focused but also demonstrates your vision and strategy to potential investors and partners.

Here's a breakdown of the key components:

• Executive summary: Briefly summarize your business concept, goals, and key strategies.
• Company description: Share your company's story, mission, and vision for the future.
• Market research and potential: Dive deep into your target market, industry trends, and potential for growth.
• Competitive analysis: Size up your competition and highlight what makes your business unique.
• Products and services: Showcase your offerings and explain how they benefit your customers.
• Marketing and sales: Outline your strategies for reaching your target audience and driving sales.
• Business financials: Project your financial performance with income statements, cash flow forecasts, and other key metrics.
• Management and leadership: Introduce your team and highlight their expertise and experience.
• Funding request: If you're seeking funding, clearly state your needs and how you'll use the funds.

Appendix: Include supporting documents like market research data or legal agreements.

Step 4: Choose your business entity: Types of business entities in Michigan

Whether you’re launching a solo venture or planning to create a more formal structure with shareholders, your business entity structure defines the legal and operational framework of a business. It outlines its governance, taxation, liability, and profit distribution and determines how the business is organized, managed, and taxed.

Here are the main types of structures for Michigan small businesses: 

Sole Proprietorship

A business owned and operated by one person, with no legal distinction between the owner and the business.

General Partnership

A business owned by two or more people who share profits, losses, and management responsibilities.

Corporation 

A legal entity separate from its owners, with shareholders who have limited liability for the company's debts and obligations.

Limited Liability Company (LLC)

An LLC is a hybrid business structure combining the limited liability of a corporation with the tax flexibility of a partnership. 

Step 5: Secure funds: Michigan small business funding, loans and grants 

Determine how you will fund your new business. While business registration fees are low in Michigan (you can start for under $100), costs can quickly add up. Expenses like rent or mortgages, utilities, employee salaries, equipment, supplies, and necessary permits, fees, and licenses can push startup costs into the tens of thousands. Your overall funding requirements will depend on factors such as your business structure, industry, and specific goals. 

Here are a few common options for securing business funding:

Michigan offers a variety of funding options to help startups and small businesses thrive, including programs and resources provided by the state government and local municipalities. Here’s a sampling:

Michigan Economic Development Corporation (MEDC)

MEDC provides an array of support to help small to medium-sized businesses connect with capital access programs. 

Community Development Financial Institutions (CDFIs)

Interested in accessing CDFI funds for businesses in underserved communities? Check out MEDC’s CDFI resource locator. 

Michigan Early Stage Funding

MEDC helps startups connect with early stage funding resources, whether through the Michigan Economic Opportunity Fund or the Business Accelerator Fund. 

Michigan Women’s Foundation

Starting a woman-owned business? Access small business micro loans up to $50,000 through the support of the Michigan Women’s Foundation. 

Motor City Match

If you’re looking to start a business venture in Detroit, then Motor City Match is a good place to search for funding resources. 

Step 6: Choose your Michigan business name and Michigan DBA

Select a business name that differentiates your business from your competitors. Michigan requires a completely unique name for your business. When choosing something that reflects your brand identity, you’ll need to do an entity search to ensure your desired business name is available. 

Reserve your business name

You can reserve your Michigan business name by filing an Application for Reservation of Name with the Department of Licensing and Regulatory Affairs (LARA). You’ll need to pay $25 to reserve a name for an LLC and $10 for a corporation. 

Filing an assumed name (DBA)

To file an assumed business name (typically called “doing business as” or DBA for short in most states) in Michigan, you can submit a Certificate of Assumed Name to LARA.

Step 7: Pick a business location in Michigan

Planning to start a home-based business in Kalamazoo? Or eyeing a small retail space in Grand Rapids to capture local foot traffic? The location you choose for your Michigan business will impact everything from operating costs and tax considerations to customer and employee accessibility.

Before deciding on a space, check with local municipalities to determine the licenses and permits needed. Depending on your business type, running it from home could significantly reduce overhead costs. For those seeking commercial spaces, consider local business regulations, zoning laws, and potential economic development incentives offered by different Michigan communities. Here’s an overview of the major business areas in Michigan.

Detroit

• Despite the decline of the auto industry’s significance to Motor City, Detroit has experienced a significant resurgence in the last decade with a thriving downtown, Midtown, and prospering surrounding suburbs.
• The city is now known as not only a super affordable place to live but also a cost-effective location for new businesses. 
• Especially attractive to young professionals and young families, Detroit offers a fun metropolitan scene with museums, restaurants, and entertainment of all kinds, plus one of the country’s biggest and best farmers’ markets.
• The City of Detroit is also committed to attracting entrepreneurs and startups. To learn more, check out Detroit Means Business. 

Grand Rapids

• Located less than an hour’s drive from the scenic shores of Lake Michigan, Grand Rapids has earned recognition as a thriving community for entrepreneurs. 
• With an excellent school system, safe community, access to a well-trained workforce, and affordable cost of living and startup costs, the city is a great spot for new small business owners and their families. 
• Learn more from the Grand Rapids business development service known as Grow. 

Ann Arbor

• There are a few reasons why Ann Arbor is considered one of the best places to live in the US—its university town atmosphere, trending cultural scene, and high-quality, affordable lifestyle.
• Home to the University of Michigan, Ann Arbor enjoys access to a talented workforce, proximity to the metro Detroit area, and a thriving startup culture.
• Learn more about the city’s support offerings for small businesses through Ann Arbor’s Economic Development Corporation. 

Step 8: Find a Michigan registered agent

Any business operating in the state of Michigan requires a registered agent, whether a professional service or an individual. Your registered agent acts as a point of contact for your business’ important state and legal mail. Requirements of a registered agent include that they have a physical mailing address (not a P.O. Box or remote location) in the state. They’ll also need to keep regular business hours. 

You can also choose to be your own registered agent, or you can appoint a trusted friend or family member to do so, as long as they meet the above requirements. If you use a service for a Michigan registered agent, you’ll pay a fee likely ranging from $50 to $600 per year. 

Step 9: Get a Michigan EIN, and file your tax and employer identification documents

An EIN (Employer Identification Number) is a nine-digit number the IRS uses to identify your business for tax purposes. Although Michigan doesn't require a state EIN, you'll need one to file payroll taxes and federal tax returns, open a business bank account, and apply for loans. You can apply for a free EIN through the IRS website.

Step 10: Register as a small business in Michigan

When launching a small business in Michigan, you’ll need to register it if it’s a partnership or corporation. Make sure to look up current filing fees before sending in applications. 

Step 11: Register for your business license and permits in Michigan

Depending on your industry, you may need business licenses and permits to operate in Michigan. Some localities also require permits, so perform your due diligence before starting your business.

Do you need a business license in Michigan?

While you won’t need a state-level business license to operate in Michigan, you will need state-level licenses and permits for businesses involved in food service, alcohol sales, cosmetology, and pest control, for example. And if you sell tangible products or property, you’ll need a sales and use tax license. 

Step 12: Secure insurance for your Michigan small business

To protect your Michigan business assets and tangible property, you’ll likely need business insurance to help mitigate costs from accidents, property damage, or liability. Extreme weather happens, so make sure you’re adequately protected if you have a brick-and-mortar store, warehouse, or industrial facility. Ensure that you have liability insurance as well in case someone is injured on your business property or files a lawsuit against your company.

Types of small business insurance in Michigan

Step 13: Prepare to pay taxes on your business in Michigan 

Before you begin operations, make sure you understand all your Michigan tax obligations. Many such taxes are industry-dependent, so do your homework.

Corporate Income Tax (CIT)

Michigan’s corporate income tax rate is 6%. Taxpayers with less than $350,000 in gross receipts are not required to file or pay the CIT. Pass-through entities such as S corporations, partnerships, and sole proprietorships are generally exempt from the CIT. They pay business taxes on their personal income tax returns. 

Sales and Use Tax

Retailers, wholesalers, contractors, and certain service providers have to pay sales and use tax. Michigan has a 6% sales tax on tangible personal property and some services, with a 4% rate for residential utilities. Use tax applies to taxable items brought into Michigan or purchased remotely from out-of-state sellers who don't collect sales tax.

Federal taxes

In addition to state and local taxes, all businesses must pay applicable federal taxes, including:

• Federal income tax
• Self-employment tax (for sole proprietors and partners)
• Employment taxes (if you have employees), including the Federal Unemployment Tax Act (FUTA tax)
• Excise taxes (for certain industries)

To ensure you understand your federal tax obligations, check out these IRS resources: Publication 334, Tax Guide for Small Business and Publication 583, Taxpayers Starting a Business and Keeping Records.

Tax credits and incentives for Michigan employers

Tax credits and incentives can help reduce your tax liability and free up funds to invest in your business growth and development. The following are a few examples: 

• The Commercial Rehabilitation Tax Act offers tax incentives for the rehabilitation of commercial property for the primary purpose and use of a commercial business or multi-family residential facility.
• The Small Business Alternative Credit provides a reduced tax rate for eligible small businesses.
• The New Jobs Training Program (NJTP) provides tax credits for businesses creating new jobs or expanding operations.
• The Good Jobs Tax Credit rewards businesses for creating high-wage jobs.
• The Work Opportunity Tax Credit (WOTC) helps people gain on-the-job experience and achieve better employment outcomes. It offers federal tax credits to employers as an incentive to hire employees in several specific target groups.

Learn more about state-level tax credits and incentive programs for small businesses through the Michigan Economic Development Corporation. 

Step 14: Set up your business bank account

One of the first things you’ll need to do is to set up a business bank account. A business bank account is important for separating personal and business finances, ensuring clear records and easier tax management. Here’s how: 

1. Collect all your business paperwork, including your EIN, business formation documents, registrations, permits, and licenses to open your small business bank account. 
2. Choose a bank or credit union that offers products and services you need, whether loan offerings, checking, or high-yield savings accounts. 
3. Establish business credit using a bank credit card for business-related purchases and expenses. 
4. Set up your financial records by selecting the right accounting software for your organization. 
5. Hire a professional accountant well-versed in local tax codes and your industry to help with financial and other bookkeeping services.

Additional resources to get your business started 

There are several state and federal resources that can support your business with guidance, training, potential funding, and more. 

State resources

Michigan Economic Development Corporation (MEDC): Working with over 100 partners, MEDC promotes Michigan as a prime business destination and supports businesses at any stage of growth. It provides customized assistance to help companies invest, expand, and develop their workforce in communities across the state. No matter the size or industry, businesses can access valuable tools and resources through MEDC’s statewide network of partners.

Michigan Small Business Development Center (SBDC): The Michigan Small Business Development Center provides counseling, training, research, and advocacy for startups, existing small businesses, and innovative tech companies.

Pure Michigan Business Connect (PMBC): This initiative connects Michigan suppliers with local, national, and global buyers. PMBC helps facilitate business matchmaking and provides resources to enhance procurement opportunities for small businesses.

Michigan Department of Licensing and Regulatory Affairs (LARA): LARA provides information regarding business licenses, permits, and regulatory compliance for businesses operating in Michigan. It offers resources to help navigate the legal requirements of starting and operating a business in the state. 

Federal resources 

Small Business Administration (SBA): The SBA supports small businesses through various loan programs, including the 7(a) loan, provides resources for government contracting, and offers counseling and training programs to help entrepreneurs start and grow their businesses.

Grants.gov: This centralized platform simplifies the process of searching for and applying for federal grants across various sectors. It also provides grant writing tips and has a Grants Learning Center featuring the basics of grants, eligibility, and more. 

Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR): SBIR and STTR programs provide research and development funding to innovative tech companies. 

SCORE: SCORE is a national nonprofit organization that partners with the U.S. Small Business Administration (SBA) to provide free mentoring and educational resources to entrepreneurs and small business owners. While not a direct federal agency, SCORE is an independent organization with a network of volunteer business mentors across the United States.

U.S. Department of Agriculture (USDA): The USDA website lists grants, loans, and other programs and resources for farmers and other businesses serving rural America. 

Disclaimer: 

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