Starting a Professional Corporation in Michigan 2024: Ultimate Guide

How to Start a Professional Corporation in Michigan

Licensed professional? Level up your business with Michigan professional corporation! Enjoy unique benefits like Michigan LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in Michigan with your professional corporation today!

This guide will review the requirements for starting a professional corporation in Michigan, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.

What is a Professional Corporation

A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in Michigan is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in Michigan.

The primary purpose of Michigan Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, Michigan professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in Michigan.

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Who Can File Under Professional Corporation Laws

Under Michigan Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in Michigan, the following professionals can typically form a professional corporation:

  • Physicians and Surgeons
  • Dentists
  • Chiropractors
  • Optometrists
  • Podiatrists
  • Certified Public Accountants
  • Architects
  • Engineers and Land Surveyors
  • Psychologists
  • Marriage and Family Therapists
  • Clinical Social Workers
  • Professional Clinical Counselors
  • Veterinarians
  • Attorneys
  • Speech-Language Pathologists
  • Pharmacists
  • Registered Nurses
  • Physical Therapists
  • Occupational Therapists
  • Acupuncturists

Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.

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Structure of a Professional Corporation

  • Shareholders: Michigan Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
  • Directors: The directors of a professional corporation in Michigan are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
  • Officers: The officers of Michigan Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.

Starting a Professional Corporation in Michigan: A Guide

Here is a detailed guide to starting a professional corporation in Michigan that you should follow.

Step 1: Appointment of Resident Agent

The first step in forming a Professional Corporation is appointing Resident Agent in Michigan. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in Michigan and be available during regular business hours.

We compiled the list of the best registered agent services in Michigan to help you choose the one you can rely on.

Step 2: Choosing the Name of the Corporation

Selecting a name for your Michigan Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.

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Step 3: Drafting of By-laws

By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.

Step 4: Appointment of Board of Directors

The board of directors oversees the management and operations of the Michigan Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.

Step 5: Conduction of Board Meetings

Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.

Step 6: Issuance of Corporate Shares

Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.

Step 7: Comply with State Requirements

Forming Michigan Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.

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Step 8: Filing of Statement of Information

Michigan professional corporations must file an annual report with the Michigan Secretary of State. This document includes essential information about the corporation, including its name, address, Resident Agent, and directors.

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the Michigan Department of Treasury, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Step 10: Opening of a Bank Account

Finally, open a separate bank account for the Michigan Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in Michigan

Here are some of the most common fees when starting a professional corporation in Michigan.

  • State Laws and Regulations: To form a professional corporation in Michigan, it is crucial to comply with the state laws and regulations governing professional corporations. The Michigan Compiled Laws Chapter 450 and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
  • Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in Michigan is to draft and file the Articles of Incorporation with the Michigan Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Articles of Incorporation requires a filing fee currently $60 for most professions. However, it is essential to check with the Michigan Secretary of State for the specific fee associated with your profession.
  • Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in Michigan. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the Michigan Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Articles of Incorporation requires a reservation fee of Not available online and $10 mail.
  • Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in Michigan. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Articles of Incorporation must be filed with the Michigan Secretary of State, accompanied by the appropriate filing fee.
  • Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in Michigan may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the Michigan Secretary of State every May 15th of filing the Articles of Incorporation. The filing fee for this form is $25.
    • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
    • Resident Agent Fee: Hiring of Resident Agent service will likely involve an annual fee of $50 – $150, which can vary depending on the service provider.
    • Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.

Advantages of a Professional Corporation

  • Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
  • Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
  • Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
  • Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.

Disadvantages of a Professional Corporation

  • Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
  • Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
  • Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.

Taxation of Professional Corporations

Here are the taxes that your professional corporation must pay in Michigan:

Federal income tax

A professional corporation in Michigan is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.

State taxes

Michigan Professional Corporation is also subject to state taxes, such as the Michigan franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in Michigan.

Tax deductions and exemptions

A professional corporation in Michigan can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.

Alternatives to Professional Corporations in Michigan

If you decide that a professional corporation is not for you, then you might consider the following alternatives.

  • Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
  • Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
  • Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
  • S-corporations: Starting an S Corp in Michigan avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

What is a professional corporation in Michigan?
A professional corporation in Michigan is a special type of corporation that is formed by people belonging to a profession that requires a license to operate.
Who can form a professional corporation in Michigan?
Certified public accountants, doctors, dentists, health care professionals, and attorneys can form a professional corporation in Michigan.
How many people are required to form a professional corporation in Michigan?
At least 1 person is required to form a professional corporation in Michigan.
Can a professional corporation in Michigan have shareholders?
Yes, a professional corporation in Michigan can have shareholders.
What is the liability protection offered by a professional corporation in Michigan?
A professional corporation in Michigan offers limited liability protection for all its shareholders.
What is the filing fee to form a professional corporation in Michigan?
The filing fee to form a professional corporation in Michigan is $60.
What is the minimum share capital requirement for a professional corporation in Michigan?
There is no minimum share capital requirement for a professional corporation in Michigan.
How long does it take to form a professional corporation in Michigan?
It can take between 7-10 business days to form a professional corporation in Michigan.
What are the Articles of Incorporation and how to file them for a professional corporation in Michigan?
Articles of Incorporation are legal documents that must be filed with the State of Michigan to form a corporation. A professional corporation must fill out an Articles of Incorporation form, pay the necessary fee, and file it with the Michigan Department of Licensing and Regulatory Affairs within a prescribed period.
Can a foreign corporation register as a professional corporation in Michigan?
Yes, a foreign corporation can register as a professional corporation in Michigan as long as it meets the state requirements and complies with Michigan’s laws, regulations and filing process.
Do all shareholders of a professional corporation in Michigan need to be licensed in the same field?
Yes, all shareholders of a professional corporation in Michigan must be licensed in the same field.
Can a professional corporation in Michigan provide services outside the state?
Yes, a professional corporation in Michigan can provide services outside the state of Michigan.
What taxes does a professional corporation in Michigan need to pay?
A professional corporation in Michigan needs to pay the Michigan Business Tax (MBT) or the Michigan Corporate Income Tax (CIT) depending on their revenue and taxable income.
Can a professional corporation in Michigan own other businesses?
Yes, a professional corporation in Michigan can own other businesses.
Can a professional corporation in Michigan have a board of directors?
Yes, a professional corporation in Michigan can have a board of directors.
What is the frequency of meetings required for a professional corporation in Michigan?
The frequency of meetings required for a professional corporation in Michigan depends on the Board of Directors and the company’s bylaws.
What is the registered agent of a professional corporation in Michigan?
The registered agent is the person who is authorized to accept legal documents, service of process, and official mail on behalf of a professional corporation in Michigan.
What is the role of the professional association in Michigan?
A professional association in Michigan is a trade organization that represents the interests of a particular profession in the state.
What is the difference between a professional corporation and a limited liability company in Michigan?
A professional corporation is specifically designed for licensed professionals in Michigan, while a limited liability company can be formed by anyone and is not profession-specific.
What is a Statement of Information, and when is it due for a professional corporation in Michigan?
A Statement of Information is a report detailing the essential information about a professional corporation in Michigan. It must be filed within 2 months and 15 days of the professional corporation’s anniversary date each year.
What is the annual report fee for a professional corporation in Michigan?
The annual report fee for a professional corporation in Michigan is $25.
What happens if the annual report for a professional corporation in Michigan is not filed on time?
If the annual report for a professional corporation in Michigan is not filed on time, the corporation might go into default, and the state may impose a penalty.
What is the difference between a domestic and a foreign corporation in Michigan?
A domestic corporation is formed within the state of Michigan and is subject to the laws and regulations of the state, while a foreign corporation is established in another state or country and would like to operate within Michigan.
Can trustees or fiduciaries form a professional corporation in Michigan?
No, trustees or fiduciaries are not eligible to form a professional corporation in Michigan.
Is a professional corporation in Michigan required to have a tax identification number (TIN)?
Yes, a professional corporation in Michigan is required to have a tax identification number (TIN).
Can a professional corporation in Michigan be divided into multiple classes of stock?
Yes, multiple classes of stocks can be created for a professional corporation in Michigan, as long as they align with the state regulations.
Do all professional corporations in Michigan need to have professionals involved in operations?
It is advisable for a professional corporation in Michigan to have professional involvement in operations, but not necessary.
What are the annual capitalization requirements for a professional corporation in Michigan?
There are no annual capitalization requirements for a professional corporation in Michigan.
What is the good standing certificate, and does a professional corporation in Michigan need one?
A good standing certificate is a document issued by the state of Michigan, proving the corporation’s active status and compliance with all statutory requirements. A professional corporation in Michigan can request a good standing certificate.
What is a professional corporation?
A professional corporation is a business entity formed by professionals that typically must be licensed and regulated by the state in which they wish to do business, such as doctors, lawyers, and accountants.
In Michigan, which professionals can form a professional corporation?
Professionals such as attorneys, architects, engineers, certified public accountants, and licensed health care providers can form a professional corporation in Michigan.
What are the benefits of forming a professional corporation in Michigan?
There are several benefits to forming a professional corporation in Michigan, such as limiting personal liability for the professional’s actions, potential tax advantages, and increased flexibility in ownership and management.
What are the requirements for forming a professional corporation in Michigan?
To form a professional corporation in Michigan, you will need to file articles of incorporation with the Michigan Department of Licensing and Regulatory Affairs (LARA) and obtain any necessary professional licenses.
What is the fee to file articles of incorporation for a professional corporation in Michigan?
The filing fee is $60 for articles of incorporation for a professional corporation in Michigan.
Do I need a registered agent for my professional corporation in Michigan?
Yes, you are required to have a registered agent for your professional corporation in Michigan. They must be a resident of Michigan or a registered agent service that is authorized to do business in Michigan.
Can an individual own a professional corporation in Michigan?
Yes, an individual can own a professional corporation in Michigan, but they must be a licensed and practicing professional in the field in which the corporation is formed.
Are there any restrictions on the shareholders of a professional corporation in Michigan?
Yes, only licensed professionals in the field for which the corporation is formed can be shareholders of a professional corporation in Michigan.
Can a professional corporation be formed as a nonprofit in Michigan?
No, professional corporations in Michigan are not allowed to be formed as nonprofits.
Is there a minimum number of shareholders required to form a professional corporation in Michigan?
No, there is no minimum number of shareholders required to form a professional corporation in Michigan.
Can out-of-state professionals form a professional corporation in Michigan?
Yes, out-of-state professionals can form a professional corporation in Michigan as long as they are fully licensed and authorized to practice in Michigan.
Can a professional corporation be dissolved in Michigan?
Yes, a professional corporation can be voluntarily dissolved by filing articles of dissolution with LARA.
What are the tax implications of forming a professional corporation in Michigan?
The tax implications of forming a professional corporation in Michigan will depend on the specific details of your corporation’s structure and management. Consult with a tax professional for individualized advice.
What are the reporting requirements for a professional corporation in Michigan?
Professional corporations in Michigan must file annual reports with LARA and maintain certain records and licenses.
Can a professional corporation change the field it practices in Michigan?
Yes, a professional corporation can change the field in which it practices as long as all necessary licenses and requirements are met before doing so.
What happens if a professional corporation does not meet the licensing requirements in Michigan?
If a professional corporation in Michigan does not meet the licensing requirements for its field of practice, it may face disciplinary action from the state.
Can a professional corporation be sued in Michigan?
Yes, a professional corporation in Michigan can be sued for professional negligence or misconduct.
What types of insurance are recommended for professional corporations in Michigan?
Liability insurance is highly recommended for professional corporations in Michigan to protect against professional negligence claims.
Can a professional corporation have non-professional employees?
Yes, a professional corporation in Michigan can have non-professional employees, such as administrative staff.
Is there a limit to the number of shareholders a professional corporation can have in Michigan?
No, there is no limit to the number of shareholders a professional corporation can have in Michigan.
Can a professional corporation be owned by a trust in Michigan?
Yes, a professional corporation in Michigan can be owned by a trust as long as the trustee is a licensed professional in the field of the corporation.
Can a professional corporation convert to a different type of business entity in Michigan?
Yes, a professional corporation in Michigan can convert to a different type of business entity, such as a limited liability company, if permitted by law.
Can a professional corporation practice in multiple states?
Yes, a professional corporation in Michigan can practice in multiple states if it is authorized to do so in each state.
Are there any filings required if a professional corporation changes its registered agent in Michigan?
Yes, a professional corporation in Michigan is required to file a certificate of change for changing its registered agent.
Are there any filings required if a professional corporation changes its business address in Michigan?
Yes, a professional corporation in Michigan is required to file a certificate of change for changing its business address.
Are there any restrictions on the name of a professional corporation in Michigan?
Yes, the name of a Michigan professional corporation must contain the words “professional corporation” or “PC.”
Is there a difference between a professional corporation and a professional limited liability company (PLLC) in Michigan?
Yes, a professional corporation and a PLLC in Michigan are similar business entities, but the structure and management may differ. It is important to speak with a legal advisor to determine which is best for your situation.

Also Read

How to Save Money While Forming Michigan Professional Corporation

One of the first steps in forming a Michigan Professional Corporation is to choose the right business structure for your needs. While a traditional corporation may seem like the most obvious choice, it can also be the most expensive in terms of formation and ongoing maintenance fees. If you’re looking to save money, consider forming a Limited Liability Company (LLC) instead. Not only is an LLC typically less expensive to form and maintain, but it also offers more flexibility in terms of management and taxation.

Another way to save money when forming your professional corporation in Michigan is to do as much of the legwork yourself as possible. While hiring a lawyer or business formation service to handle the paperwork can be convenient, it can also be expensive. By taking the time to educate yourself on the formation process and filing the necessary paperwork on your own, you can save a significant amount of money in legal fees.

In addition to handling the paperwork yourself, you can also save money by shopping around for the best deals on business services. Whether you need to open a business bank account, obtain business insurance, or secure a registered agent, it’s important to compare prices and negotiate with providers to ensure you’re getting the best possible rates. By being a savvy consumer and asking for discounts or promotions, you can save money on essential services for your professional corporation.

When it comes to maintaining your professional corporation in Michigan, there are also opportunities to save money over the long term. This includes saving money on taxes by taking advantage of deductions and credits available to small businesses. By keeping detailed records of your business expenses and seeking guidance from a tax professional, you can identify potential tax savings opportunities and lower your overall tax liability.

Additionally, consider implementing cost-saving measures in your day-to-day operations to help you keep more money in your pocket. This can include negotiating with suppliers for better prices, implementing energy-saving measures to reduce utility costs, and outsourcing non-core functions to lower-cost providers. By being proactive about finding ways to trim expenses, you can maximize your professional corporation’s profitability and ensure long-term financial success.

In conclusion, forming a professional corporation in Michigan doesn’t have to break the bank. By choosing the right business structure, doing as much of the work yourself as possible, shopping around for the best deals on essential services, taking advantage of tax savings opportunities, and implementing cost-saving measures in your operations, you can save money throughout the formation and maintenance process. Remember, being a smart and savvy business owner is key to keeping your professional corporation’s costs low and its profits high.

Conclusion

Michigan Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in Michigan.

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