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Your Michigan LLC type depends on your business needs

Michigan residents and businesses may want to learn more about the different types of Limited Liability Companies (LLC) that are entities in the state. Organizers are responsible for forming the business, whether or not they’re a member, but what might make this complicated is that the business itself will determine the type of LLC that is created.

Domestic Limited Liability Companies

At its simplest, a domestic LLC is formed to protect business owners from liability and extra taxes while they attempt to make a profit. The use of “domestic” indicates that the LLC primarily does business in the same state that it is created. This kind of LLC grants many of the benefits of a corporation to the LLC, such as the limited liability. In contrast, if the LLC is owned by only one person, it can be taxed as a sole proprietorship; with multiple owners, it can be considered a partnership, even with the tax benefits that both LLCs and corporations enjoy.

Professional Service Limited Liability Company

Some states don’t allow people in specific professions to simply set up an LLC. Instead, you must set up a Professional Service LLC, which requires members to be licensed in their field. Some states do not allow non-licensed professionals to have stake in the Professional Service LLC. Furthermore, the board that governs licenses in your state must approve your articles of organization.

Some examples of professions that may require a Professional Service LLC include:

  • Osteopathic physicians
  • Dentists
  • Physicians
  • Surgeons
  • Attorneys at law
  • Aestheticians

Foreign Limited Liability Company

Foreign LLCs are businesses formed in one state but registered as a foreign entity for business in others. Michigan LLCs, for example, may need to get a Certificate of Authority from other states to do business in them. Where a domestic LLC does business primarily in its home state, foreign LLCs operate elsewhere.

However, just because you do business in another state doesn’t mean you must register your company as a foreign LLC. The laws vary by jurisdiction, so you must do research before expanding business to other locations. Failure to do so may result in fines and owing back taxes.

With the complicated nature of business law, it’s easy to get confused. A business lawyer may be able to help answer any questions you may have and even help you decide what type of LLC will be in your best interest.