Are you looking to form a Michigan professional corporation, but you’re not familiar with the incorporation process?
Professional corporations are those owned and operated by licensed professionals, like doctors, lawyers, and architects. There are quite a few important steps you’ll need to take to create your Michigan professional corporation and maintain it, so this guide will outline the rules and regulations involved with this process.
To get started, please reference our 12-step guide below or hire a professional online incorporation service like LegalZoom.
How to Form a Michigan Professional Corporation (in 12 Steps)
Step One) Determine Whether a Professional Corporation is the Right Choice
A professional corporation ― sometimes also referred to in the state of Michigan as a professional service corporation ― is a business structure formed by licensed professionals. The professionals that may form a professional corporation in Michigan include, but are not limited to, a certified or other public accountant, chiropractor, dentist, optometrist, veterinarian, osteopathic physician, physician, surgeon, podiatrist, chiropodist, physician's assistant, architect, professional engineer, land surveyor, or attorney-at-law.
Before beginning the process of forming a Michigan professional corporation, it’s very helpful to review your business’ objectives and become familiar with your options as a business owner.
Should you form a professional corporation?
This guide explains how to create a Michigan professional corporation. When starting a new business, forming a professional corporation is just one of several options. Many businesses instead choose to set up a professional limited liability company, or PLLC.
In general, the difference between the PLLC and a Michigan professional service corporation is the same as the difference between a regular LLC and corporation ― namely, that the corporation is a more formal and less flexible business type. Not sure which option is right for you? Read this guide from the SBA.
How will ownership be divided?
A professional corporation issues “shares” to its owners, who are known as its shareholders. Before forming your professional corporation, it’s important to decide how shares of ownership will be divided among the owners.
It’s crucial to note that any shareholders, directors, or officers of a professional corporation must all practice the same profession. In other words, people who are not physicians cannot hold these positions in a professional service corporation for physicians.
How will the professional corporation to be managed?
Corporations have two layers of control. The first layer is the Board of Directors. Directors are elected by the shareholders and meet periodically (as a “Board”) to make key decisions and set the strategic direction of the company.
The Board of Directors appoints “officers” who are responsible for carrying out the Board’s initiatives and managing the corporation’s day-to-day activities. Directors and officers can be (and often are) the same people. Before forming your corporation you should determine who your initial director(s) will be.
Step Two) Choose a Name
One of the most important aspects of the incorporation process is naming your business. There are three major elements to consider when choosing a name:
When naming a professional corporation in the state of Michigan, you will need to include the words “professional service corporation” or the abbreviation “PSC.” Your professional corporation’s name also cannot include any words or abbreviations that indicate other business types, like the phrase “limited liability company” or the initials “LLC.” You also are not allowed to include words that refer to certain types of businesses (like “bank” or “law office”) unless your business fits those descriptions.
In addition to the legal considerations, you might want to identify your line of business or your mission in your company name. For example, you can display any closely held values in your name, like using the word “green” for environmentally friendly businesses.
A Name You’re Proud of
Keep in mind that this is your business, so you should choose a name that you’re proud of, and that you enjoy sharing with potential customers. You should also make sure it sounds good when spoken aloud, and also looks good when written down.
Check Whether Your Preferred Name is Available
Visit the Michigan Department of Licensing and Regulatory Affairs (LARA) website to check whether it is already in use. If it’s not unique enough, you may need to tweak it or come up with a new name altogether.
Consider reserving a name
For a $10 fee, you can instantly reserve a name online for up to six months. This will ensure that your name is not taken by another company during the incorporation process.
Step Three) Select a Registered Agent
Michigan professional corporations must designate a person or business to receive legal notices on behalf of the company. This important point of contact is known as the registered agent. You will be required to list the registered agent’s name and address when filing the Articles of Incorporation in step four.
Who can be my registered agent?
A registered agent must have a physical address within the state of Michigan where mail and legal notices can be served during regular business hours. You can hire a service to act as your registered agent, serve as your own registered agent, or even use an accountant or other business professional’s address – with their consent, of course.
The Michigan Secretary of State says that,
A registered office and resident agent must be included in the Articles of Incorporation. A resident agent is someone appointed by the corporation to receive any documents, notices, or demands served upon the corporation. For profit and professional service corporations, the resident agent may be either an individual resident in this state whose business office or residence is identical with the registered office; a domestic corporation or a limited liability company; or a foreign corporation or limited liability company authorized to transact business in this state that has a business office identical with the registered office.”
We recommend hiring a professional service to act as your registered agent. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off the public record. For a list of the top 5 registered agent services, check out our guide.
Step Four) Complete Your Articles of Incorporation
This is THE document that formally registers your professional corporation with the state of Michigan. You can file your Articles of Incorporation in Michigan either by submitting a paper form or online through the LARA Corporations Online Filing System.
Keep in mind that you are acting as the incorporator when you fill out and submit the Articles of Incorporation. You should sign as the incorporator before submitting the document.
|Cost to File||Non-refundable fee of $10 plus an Organization Fee (minimum of $50) based on number of authorized shares; expedited services range from $50 to $1000|
|Time to Complete Filing||Typically 3-5 business days for standard review; 24 hour, same day, 2 hour, and 1 hour expedited review options are also available for a fee|
|Agency||Michigan Department of Licensing and Regulatory Affairs|
Michigan Department of Licensing and Regulatory Affairs
|Agency contact info for filing questions||(517) 241-6470|
Step Five) Establish a Corporate Record
Professional corporations are required under Michigan law to document and keep a permanent record of all important company decisions.
The official corporate record may be kept at the professional corporation’s principal place of business, or stored in a safe location elsewhere. You should take the opportunity to set up a secure digital or physical location for storing company records as soon as possible.
Step Six) Designate a Board of Directors
The incorporator is responsible for selecting initial director(s) of the professional corporation. The incorporator should record initial director appointments in a signed document and file it to the corporate record. This document is known as the “incorporator’s statement.” A sample incorporator’s statement can be found here.
The initial directors will serve until new directors are elected at an annual shareholder meeting, or as otherwise indicated in the bylaws. The incorporator may also serve as an initial director. Keep in mind that your directors must all share the same profession as the one the professional corporation was formed for.
Step Seven) Create Corporate Bylaws
Corporate bylaws set out the rules and procedures for how the professional corporation will operate. Some important topics typically covered in the bylaws include:
- How shareholders will conduct votes
- The total number of directors and how each director will be elected
- How often the board of directors will meet
- The types of officer roles that will be appointed
- Procedures for resolving internal disputes
Under Michigan law, your professional corporation’s bylaws must be adopted by the initial incorporators, shareholders, or board of directors.
Bylaws help your business run smoothly, and are sometimes required by financial institutions for opening business bank accounts or acquiring loans.
Either the incorporator or the initial directors may prepare the company bylaws. The bylaws should be recorded in an internal company document, signed by the incorporator or a director, and filed to the corporate record. The bylaws are not filed with the state of Michigan.
Popular Strategies for Preparing Bylaws:
- Use a free online template. Northwest Registered Agent has a great free template you can download.
- Hire a lawyer to draft the bylaws. If your business has investors, is already profitable, or has multiple co-owners, we strongly encourage you to hire a lawyer experienced in Michigan corporate law to help you draft suitable bylaws. Look through Avvo’s directory of KY attorneys you can work with.
Step Eight) Hold First Board Meeting
After designating a board of directors and preparing bylaws, the new professional corporation should call for an initial board meeting. The incorporator often arranges and attends this first meeting. During the first board meeting, the initial directors should plan to cover the following topics:
- Review and approve corporate bylaws
- Designate officers to manage day-to-day business affairs
- Choose a bank
- Approve issuance of stock certificates
- Determine whether the company should elect to be taxed as a C corporation or S corporation (see step nine for more details)
Recording Meeting Minutes: a detailed record of all key discussions and decisions during the board meeting should be prepared and distributed to all board members for their review and approval. This record is known as the “minutes.” A copy of the minutes should be sent to each director for review and filed in the company record.
Step Nine) Handle Tax Obligations
You’ll need a federal tax ID number (EIN) to operate a professional corporation in Michigan. You can obtain your EIN from the IRS for free, and it’s a fairly painless and simple process. An EIN enables your professional corporation to hire employees, file corporate taxes, open business bank accounts, and more.
A major decision for any professional corporation is determining whether to be taxed as a C corporation or an S corporation. Take a look at how these two formats differ:
- C Corp: The majority of professional corporations are C corporations, as they are subject to far fewer restrictions than S corps. With a C corp, profits are taxed at the corporate level, and again on the personal tax returns of the shareholders, resulting in what’s commonly referred to as double taxation.
- S Corp: This is only an option if your professional corporation has fewer than 100 shareholders, only issues one class of stock, is not owned by another business entity, and does not have any foreign shareholders. If your corporation meets these requirements, you can select the S corp’s pass-through taxation which eliminates the double taxation issue of C corps. S corp dividends are not taxable.
Michigan imposes a number of state-level taxes on corporations, such as corporation income tax. For more information about Michigan state taxes, you should visit the Michigan Department of Treasury’s website. You should also consider registering for the Department of Treasury’s Michigan Treasury Online website, where you can make electronic filings and payments, maintain your Treasury business account, and more.
Note that your city or county in Michigan may also impose additional taxes on your professional corporation. You should check with your local tax authorities to confirm your corporation’s tax obligations. The four largest cities in Michigan each offer business resources online:
Step Ten) Obtain Business Licenses and Permits
Michigan doesn’t have a general business license requirement, but depending on the nature of your professional corporation’s business activities, you may still need to obtain one or more licenses or permits. You can use Michigan.gov’s State License Search tool to find more information about the requirements for your business. An alphabetical list of professional licenses and permits can also be found on the Bureau of Professional Licensing’s website.
As with taxes, you should also check with the city and county in which your professional corporation is located in order to confirm whether any local licenses or permits are required for your business.
Step Eleven) Acquire Insurance
Michigan requires that almost all employers in the state obtain workers’ compensation coverage for their employees. Your professional corporation can satisfy this requirement by either buying an insurance policy from a private insurance company, applying for self-insured status, or joining a group fund. You should be sure to have this coverage in place if you intend to hire employees for your company. You can find additional information on workers’ compensation in Michigan by visiting the Workers’ Compensation Agency’s website.
In addition, you should also pursue general liability insurance and other more industry-specific types of insurance. Because professional corporations are specialized businesses, you will most likely require insurance policies based on your occupation.
Step Twelve) Open a Business Bank Account
To operate a professional corporation and receive the limited liability protection that comes with it, you have to keep your personal assets entirely separate from your business assets. Due to this requirement, it’s strongly advised that you acquire a business bank account for your corporation.
Get Help Forming a Professional Corporation
The process of forming a professional corporation in any state can be a lengthy one. If you run into any trouble along the way, remember that there are plenty of organizations that can help you navigate the incorporation process.
Online Incorporation Services
If you would like to hire an affordable business incorporation service to create your professional corporation for you, services like LegalZoom and MyCorporation can help you out. These service providers can handle most of the formation process, while still charging much lower rates than a business attorney’s fees.
There isn’t the same level of personalization that a lawyer can provide, but online incorporation services can still be a tremendous help. The only major issue with these service providers is the fact that they can’t provide any actual legal advice, so you need to know what you want ahead of time.
Michigan Business Attorney
There are some situations where hiring a business lawyer is a preferable route to using an online incorporation service. The professional corporation as a business structure can be highly complicated and specialized, and if you want to have the peace of mind that every single step was taken care of by a true expert, hiring a business attorney to form your Michigan professional corporation is the way to go.
If you would like to pursue this route, there are some convenient services that can help you choose the right lawyer for your business. We like to use Avvo, which has extensive reviews and ratings for hundreds of Michigan business lawyers, which can make it much easier to select an attorney who has your best interests in mind, and also has the expertise to get the job done right.
If you need personalized guidance regarding your professional corporation, you can contact the Michigan Small Business Development Center. The Michigan SBDC provides free counseling and training on a variety of topics relevant to small businesses, such as business planning, market research, raising capital, and financial management. The Michigan SBDC’s headquarters is located at Grand Valley State University in Grand Rapids, and it also has 11 regional offices and more than 20 satellite offices, so no matter where you are in the state, there’s likely one nearby that can assist you.
If you need additional local business assistance, you can also contact the Michigan District Office of the U.S. Small Business Administration. The SBA provides a number of workshops, events, training, and other resources for small businesses. Visit their website for more information.