Forming your business in Delaware, specifically as a corporation, gives you a lot of freedom, but depending on what state you do business in, you may still need to follow local laws.
In particular, if you run a business in Michigan, you need to register with the state. We'll show you how to do it and make it easy. But first, how can you tell if your business in Michigan is operating legally in the state?
When to register as doing business in Michigan
The State of Michigan calls Delaware C corps and all other corporations that were formed outside of Michigan "foreign" corporations.
The laws of Michigan don't say exactly what it means to do business in the state. But Michigan law says that you don't have to register with the State if you do any of the following:
Defending or settling a legal action
Having a state-issued bank account
Using independent contractors to sell
When To Register To Collect Sales Tax In Michigan
Each state has its own rules about when a business must pay sales tax. These are called "nexus rules" for sales tax.
You can think of the nexus as a special version of the state's border. If you do certain business activities within that border, you fall into the state's sales tax nexus and are required to register for and collect state sales tax.
Most of the time, these things happen when people buy and sell goods and services.
In Michigan, the rules about sales tax nexus only apply to people who sell physical goods or services to people who live in Michigan.
Before 2018, you usually didn't have a sales tax nexus if you sold or bought non-physical goods like subscriptions to streaming services, SaaS memberships, etc. In 2018, an important court decision changed that. Now, if you buy or sell services or things that don't have a physical form in a state, you may be subject to its sales tax nexus.
Michigan Sales Tax Nexus (physical goods and property)
You may need to register with Michigan's Department of Treasury to collect and send sales tax if you:
- Are physically present in the state for more than 24 hours
- Actively try to sell in Michigan and has gross sales from Michigan of at least $350,000
- Have an ownership or beneficial interest in a flow-through entity with a strong connection to the state
The State website has more information about physical presence for sales tax purposes.
Michigan Sales Tax Nexus (non-physical goods and property)
The new state sales tax legislation for non-physical (i.e. online) sales allow you to qualify for sales tax nexus even if you don't have a physical presence or sell tangible things. To be eligible in Michigan, you must meet a particular criterion.
You will need to remit sales if you have:
- $100,000 or more in sales to Michigan in the previous calendar year; or
- 200 or more separate transactions of sales into Michigan in the previous calendar year
If you would like to take a deeper dive, you can check out the State's website.
This is only a guide, not legal advice. If you're unsure if you're subject to Michigan's sales tax, consult your legal counsel and/or an accountant who is familiar with the state's legal code and tax rules.
How To Register To Do Business In Michigan
- Select a name under which to do business. This doesn’t have to be the name you registered when incorporating in Delaware, but it can be.
- Fill out an application. You’ll need to file an Application for Authority to Transact Business or Conduct Affairs in Michigan. ou can submit the application online along with a Certified Copy of your Articles of Incorporation and a Delaware Certificate of Good Standing.
- Pay the fee. Now you pay the Michigan Secretary of State a $60 filing fee.
- Submit your Application for Authority to Transact Business or Conduct Affairs in Michigan.
- Wait. Processing typically takes two to four weeks.
After receiving approval to operate as a qualified foreign firm in Michigan, you will be required to adhere to specific regulations.
Compliance as a Qualified Foreign Business in Michigan
You must retain a registered agent and file an annual report in order to maintain compliance and continue conducting business lawfully in Michigan. You will also be required to pay a Michigan business tax and a corporation income tax.
Registered Agent in Michigan
Your Michigan registered agent is your point of contact with the local government. If your firm does not have a physical location in Michigan, it may be beneficial to obtain a registered agent to accept state notices on your behalf.
Foreign corporations are obliged to have a registered office in the state of Michigan. It must be an actual address of your registered agent or a qualified registered agent service, not a post office box.
Your registered agent will forward to you any relevant correspondence, such as business mail. There are several companies that subcontract registered agents. They normally cost between $50 and $100 annually.
Annual Reporting In Michigan
Annually, you must file a statement with the State that reflects any changes to the company's address or Board of Directors and officers. You'll need to provide details such as:
- The legal name of your business
- The name and address of your registered agent
- The names and addresses of board members, managers, and officers
- Certified copies of any amendments to the Articles of Incorporation or of any merger to which the corporation may be a party.
There is a $25 fee for filing your annual report.
Paying Michigan Corporate Income Tax
Michigan imposes a tax on business revenue. The corporate income tax is a tax placed directly on the corporation's revenue. Please review the following instructions from Michigan's Department of Treasury for further information on filing and paying your corporate income tax.
Paying The Michigan Business Tax
Finally, you must pay a Michigan business tax. This tax is based on both the income and gross revenues of your business. Please review the following instructions from Michigan's Department of Treasury for further information on filing and paying your corporate income tax.
How To Register To Collect Sales Tax In Michigan
If you fall within the Michigan sales tax nexus, your company will need to register to collect and remit sales tax in the state:
- Register for an account on Michigan Treasury Online (MTO).
- Apply online through MTO.
Hiring And Paying Employees In Michigan
When you hire a new employee in Michigan you must report them to the Michigan New Hire Operation Center within 20 days of the date of hire. You can report new hires through the employer services portal.
Your payroll provider should be able to take care of paycheck withholdings, but it’s up to you to register as an employer with the State and set up an online employer account.
For a comprehensive guide of your responsibilities, Michigan provides the following information.
The Easiest Way To Register Your Business In Michigan
To register your business in Michigan, you’ve had to keep track of a lot of moving components. There are a lot of pitfalls to avoid if you don't know what you're doing when it comes to compliance.
Capbase makes it easy. When you incorporate your Delaware corporation on Capbase, we will provide the information necessary to register to do business in Michigan and keep you up-to-date on all filing requirements.
The compliance calendar inside your Capbase account will alert you of forthcoming fees, reporting, or other obligations, so you can maintain your startup in good standing with Michigan state regulators.
Written by Beth Zhao
Beth is a second year law student at The George Washington Law School. She is a member of the Public Contract Law Journal.
Is your company doing business in Vir? Get an easy-to-follow explanation about what forms you’ll need, information about registration fees, filing deadlines, naming requirements, and more.