Many self-employed Michigan residents are eager to start their businesses. The simplest and most rational solution to this issue is to join the ranks of sole proprietors.

Organizing and managing a business in this format is the least difficult in America and has no service pitfalls. Although, future business owners will have to adhere to certain norms. Also, be prepared that you will have to face some restrictions regarding the functions of your sole proprietorship. 

So, the main task of this manual is to help you answer the essential question – is the business format of an individual enterprise right for you? And, of course, we will tell you which aspects to pay attention to while opening a sole proprietorship and how to set up a business structure in this vein properly.

It is vital: business owners should be aware that a sole proprietorship is not a guarantor of the safety of personal assets. But with LLC, on the contrary – the assets will be safe. LLC is easy to organize by doing forming it yourself or hiring a cheap LLC service.

The Proper Way To Start Business As The Michigan Sole Proprietor

There is no algorithm for organizing the business work of an individual entrepreneur in Michigan as for LLC. In addition, the state does not charge additional service fees for the formation or management of this type of business or company. Are you looking to become an individual business owner and start a sole proprietorship in Michigan? – Just start working!

Though, you still have to go through several additional legal formalities. These service stages are optional. Although many sole proprietors prefer not to neglect them, compliance with these formalities guarantees the legal protection of their interests.

Applying For DBAs

Almost every company and business owner prefers doing business as a DBA. There are many benefits to running a business under an assumed name compared with an entity or LLC. We are talking primarily about creating the business image of your company. Potential clients and consumers will find this approach more professional and give you more confidence. It turns out that a company that uses the real name of its owner is often not competitive.

Let’s clarify that a company owned by sole proprietors can use the DBA to open and manage a business bank account. Customers will appreciate it as one more advantage in favor of the business owner, so they feel more comfortable.

DBA registration in Michigan is regulated by the scribe of the locality to which your business belongs. Before submitting the necessary paperwork for individual name registration to the local authority, you will need to review all of the Business Entity Database, which is located on the website provided by the Department of Licensing and Regulation, to see if the desired name is available.

Clarification & Compliance with Tax Requirements

You can run your business in this format and not hire third-party employees. In this case, you do not need to obtain an EIN (Federal Tax Identification Number) because your Social Security number will replace it. Of course, it would be correct to take care of your confidentiality and still use the EIN and not the SSN.

The nature and the structure of the business activity of individual entrepreneurship determine the list of tax requirements that the state will put forward (as with LLC).

For example, if an entrepreneur sells goods and services in Michigan, you are more likely to have to go through the registration process to make tax payments, including sales and use. Other tax deductions are also available. To get help with the Michigan tax deductions your business is subject to, you should contact the Business Tax Section, which is presented by the Department of the Treasury in that same state.

Business Licenses & Permits

The State of Michigan does not require work permits for merchants but based on the nature of the business, you may have to use different licenses and/or permits the appropriate permissions to operate in compliance with all governing authority’s requirements.

The state of Michigan has an impressive list of permits that includes hundreds of provisions. There is a pretty good chance that your business will need to obtain one or more of them.

To find the Michigan List of Licensed Professions, as well as information about their applicability to certain types of businesses, including yours, check the list for all licensed professions. For a list of other licenses in the state, use the Michigan Licenses and Permits Search on the state website.

Among other things, you should find out if there is a need for local licensing for your business.

Businesses providing services in the following cities: Lansing, Ann Arbour, and Grand Rapids should be aware of the need for local permits allowing them to operate in the area.

Michigan Sole Proprietor: The Notion & Essence

A sole proprietor is not a legal entity! But any corporation and limited liability company (LLC) has this status. As a sole proprietor, you run the business alone (register and manage it on your behalf). It is worth noting that this gives the business owner advantages, though, imposes additional obligations and responsibilities on him.

Make Sure to Pay Attention to the Following Three Aspects

There are obligations to pay taxes to the state

A business owner and an individual entrepreneur are the same people. It means that filing tax returns is not a requirement, as with an entity or LLC. You need to declare your income and expenses and fill out the declaration of an individual;

Signing contracts

Business owners who are registered as sole proprietors have the right to enter into contracts on their behalf, unlike an entity. Also, receiving profit from clients, in checks they can indicate their name in the recipient column;

Flexible terms of business management

The advantage difference between individual entrepreneurship and any entity is the ability to combine work and personal assets. Whereas corporations and LLCs must separate personal assets from company assets. It has several positive and negative aspects. For example, if you have financial difficulties, creditors can seize or confiscate your personal property (house, car, etc.). In the case of corporations and LLCs (or any entity), creditors do not have this freedom, as their powers only apply to business assets.

Final Thoughts

Of course, the structure of doing legal business as a sole proprietor is greatly simplified while in Michigan. You don’t even have to pay any commission fees provided for the entity or LLC. At the same time, based on the nature and structure of the business activity that you conduct, you will all have to go through a series of entity stages.

The issues of taxation, obtaining licenses, and permits require more detailed consideration. Also, pay attention to the possibility of obtaining and using DBA. These aspects are vital, as their omission can result in unnecessary legal penalties for you.

We have prepared this manual so that you can think over the structure of your business to the smallest detail. Manage it correctly and get more legal profit!

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