Compared with states such as Texas and Florida, Michigan isn’t as well known a place to start a business. Texas and Florida have more business-friendly policies, lower taxes, and less red tape. But Michigan’s strengths—including skilled labor and a history of supporting specific industries—can be a major draw for the right kind of business. In 2023, there were more than 900,000 small businesses in Michigan.

Michigan has a strong manufacturing history and a skilled labor pool, and the state government is offering incentives and tax breaks for new businesses—especially those in growing industries such as technology and advanced manufacturing. Working through Michigan’s business landscape can be tricky: the state’s tax system has a mix of state, local, and property taxes that can add up quickly for small businesses, and there’s more bureaucracy and red tape to deal with than in business-friendly states. Also, Michigan still relies heavily on traditional manufacturing, which can make it vulnerable to economic downturns.

Below, we’ll explain how to start a business in Michigan, highlight the advantages and disadvantages, and suggest relevant resources to help you get started.

What’s in this article?

• What sets Michigan apart from other states for entrepreneurs?
  
• How to start a business in Michigan
  
• Advantages and disadvantages of starting a business in Michigan
  
• Resources for starting a business in Michigan
  

What sets Michigan apart from other states for entrepreneurs?

Here’s what sets Michigan apart as a place to start a business:

• Manufacturing heritage: Michigan has a rich history in manufacturing, particularly in the automotive industry. This legacy has led to a highly skilled workforce in engineering, manufacturing, and related fields.

• Tech hubs: Michigan is emerging as a tech hub, particularly in cities such as Ann Arbor and Detroit. This growing tech scene provides opportunities for startups and businesses in software development, mobility technology, and other innovative sectors.

• Freshwater coastline: Michigan has the longest freshwater coastline in the United States, offering unique recreational and tourism opportunities. Entrepreneurs can use these natural resources to develop businesses in outdoor recreation, hospitality, and tourism industries.

• Proximity to major markets: Michigan’s key location provides easy access to major markets in the Midwest and Northeast. This proximity can be advantageous for businesses targeting these regions, reducing transportation costs and time to market.

• Research universities: Michigan is home to several renowned research universities such as the University of Michigan and Michigan State University. These institutions encourage innovation and provide a pipeline of talent and potential collaboration opportunities for businesses.

• Focus on sustainability: Michigan has made major strides in promoting sustainability and clean energy initiatives. Entrepreneurs in these sectors can benefit from supportive policies, incentives, and a growing market demand for sustainable solutions.

• Strong community: Michigan offers a strong sense of community and a collaborative spirit, particularly among entrepreneurs and small-business owners. This supportive network can be invaluable for new businesses seeking mentorship, resources, and partnerships.

How to start a business in Michigan

Here’s a step-by-step look at how to start a business in Michigan:

Craft your business identity

Choose your desired business name. Confirm this name is not already in use by checking the Michigan Department of Licensing and Regulatory Affairs’ (LARA’s) business entity search. If you plan to operate under a name that is different from your legal business name, you might need to file an Assumed Name Certificate with your county clerk’s office. It can also be helpful to conduct a trademark search to preempt potential legal conflicts.

Select your business structure

Determine which business structure best suits your needs. Consider working with legal and financial experts to help you settle on the optimal structure.

• If you’re an individual entrepreneur, a sole proprietorship is the simplest business structure you can choose, but it comes with personal liability for business debts.

• If you’re starting a shared venture, you can form a partnership, which involves shared ownership and liability among partners.

• A limited liability company (LLC) provides personal liability protection while allowing for flexible management.

• Corporations (S corps or C corps) offer the strongest liability protection but entail more complex formalities.

Establish your business presence

Depending on your business structure, you’ll face different business registration requirements and filing fees, which you can pay online or by mail.

• Sole proprietorships and partnerships are not required to register with the state but might need to file a “doing business as” (DBA) name.

• LLCs and corporations must submit formation documents to LARA.

Acquire your Employer Identification Number (EIN)

Secure your EIN through the IRS website. An EIN is like a Social Security Number for your business, and it’s required for tax purposes and to open a business bank account.

Separate your finances

Opening a business bank account separates your personal and business finances, giving you accounting accuracy and liability protection. Compare banks to find the best account option for your business.

Get the necessary licenses

Depending on your industry and location, you might need to acquire federal, state, and local licenses and permits. If you intend to sell taxable goods or services, for example, you’ll need a sales tax license. Workers such as contractors, cosmetologists, and healthcare providers need specific professional licenses, too. Use the government’s one-stop business portal to determine the specific licenses and permits required for your venture.

Research tax, insurance, and regulatory obligations

Get any required insurance coverage and gain a full understanding of your legal and regulatory obligations before beginning operations.

• Obtain appropriate insurance coverage to safeguard your business from liabilities, property damage, and unforeseen circumstances.

• Register with the Michigan Department of Treasury, and ensure you understand your tax obligations.

• Familiarize yourself with any additional regulations or requirements specific to your city or county.

Advantages and disadvantages of starting a business in Michigan

Michigan’s affordability, diverse economy, and commitment to innovation make the state an attractive option for businesses across a variety of industries. It has a unique combination of resources, including its abundant supply of fresh water, strong research institutions, and supportive environment for startups. Here are the key advantages and disadvantages of starting a business in Michigan.

Advantages

• Manufacturing sector: Michigan has a rich manufacturing heritage, particularly in the automotive industry, and it has growing sectors in electric vehicles, mobility, and aerospace.

• Freshwater resources: Michigan is surrounded by the Great Lakes, which provide a vast supply of fresh water. This is a major advantage for businesses involved in water-intensive industries such as agriculture, food processing, and breweries.

• Supportive startup environment: Michigan has a supportive environment for startups and entrepreneurs, with various incentives, grants, and programs to encourage innovation and business growth.

• Research and development: Michigan is home to several prestigious research universities, including the University of Michigan and Michigan State University. These institutions promote a culture of innovation and provide businesses with access to cutting-edge research and talent.

• Affordable cost of living: Compared with coastal states, Michigan has a relatively affordable cost of living, with lower housing costs, taxes, and overall expenses.

Disadvantages

• Economic challenges: Michigan has faced economic challenges in recent decades, including the decline of the automotive industry and population loss. Though the state is making progress in diversifying its economy, these legacy issues can still pose challenges for some businesses.

• Aging infrastructure: Michigan’s infrastructure needs major investment and repair, particularly roads and bridges. This can lead to increased transportation costs and logistical challenges for businesses.

• Harsh winters: Michigan has long, cold winters with heavy snowfall, which can disrupt business operations and increase energy costs.

• “Brain drain”: Like many other Midwestern states, Michigan has experienced a “brain drain” of young, educated professionals seeking opportunities in larger cities or coastal areas.

Resources for starting a business in Michigan

These resources can help you as you’re starting your business in Michigan:

State government resources

• Michigan’s business portal: This central portal has information on how to register your business, how to obtain licenses and permits, tax requirements, and other important resources.

• Michigan Small Business Development Center (SBDC): These centers have free business consulting, training, and resources for entrepreneurs at all stages.

• Michigan Economic Development Corporation (MEDC): This organization has programs, incentives, and resources to support business growth and economic development in Michigan.

Local resources

• County economic development offices: Many counties in Michigan have economic development offices with local resources, incentives, and networking opportunities.

• Chambers of commerce: Local chambers of commerce have networking events, business advocacy, and resources for entrepreneurs.

• SCORE Mentors: This mentorship organization provides free mentoring and counseling to small businesses.

• US Small Business Administration (SBA) Michigan District Office: This office has a variety of programs and services such as loans, counseling, and training to support small businesses.

Online resources

• Crain’s Grand Rapids Business: This online platform provides news, information, and resources for Michigan businesses.

• StartupNation: This online community is a resource hub for entrepreneurs and startups.

• Michigan Women’s Marketplace: This organization connects women entrepreneurs with resources and opportunities for growth.

Additional resources

• Universities and colleges: Many Michigan universities and colleges have entrepreneurship centers and programs with resources and support for startups.

• Incubators and accelerators: These organizations provide mentorship, resources, and funding to help startups scale.

• Networking events and groups: Industry-specific events and local business groups can provide valuable networking opportunities and connections.