How to Form a Professional Corporation in Michigan (2024 Guide)

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
Last updated: 
WebinarCare offers informative content for educational purposes only, not as a substitute for professional legal or tax advice. We may earn commissions if you use the services we recommend on this site.
WebinarCare is led by Steve Bennett, a seasoned expert in the business world. He's gathered a team that's passionate about giving you reliable advice on everything from starting a business to picking the right tools. We base our tips and guides on real-life experience, ensuring you get straightforward and proven advice. Our goal is to make your business journey smoother and more successful. When you choose WebinarCare, you're choosing a trustworthy guide for all things business.
Forming a Professional Corporation in Michigan

If you would like to start and learn how to form a corporation in Michigan, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in Michigan are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in Michigan or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

What is a Professional Corporation in Michigan?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the Michigan. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in Michigan, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Michigan

To form a Professional Corporation in Michigan for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Resident Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an Annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Michigan, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in Michigan

After you have decided to form a professional corporation in Michigan, you must choose a name for your corporation. Here are some pointers to consider when naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • Limit of restricted words that need a license.
  • A unique name is needed with no match
  • No confusion with a government entity name.

In Michigan, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 6 months. You must file a name reservation application in the Michigan Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for Michigan DBA (doing business as). This way, you can run a clinic or law firm under your name.

Recommended: Unlock your business’s full potential with LegalZoom’s DBA service, providing a hassle-free experience that allows you to focus on what matters most – turning your passion into profit. We recommend –

LegalZoom – Starts at $99 + filing fees

Step 3: Choose the Michigan Resident Agent

The next step in forming a professional corporation is hiring a Resident Agent, who accepts legal paperwork for your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Michigan. Forming a professional corporation for your service will be easier if you have Resident Agent in Michigan.

Alternatively, you can serve as your own Resident Agent if you have the time. Usually, in Michigan, a Resident Agent costs is ranging from $50 – $150. To make it easier, you can hire Michigan Resident Agent Services for your professional corporation.

Webinarcare Editorial Team reviewed some of the Best Registered Agent Services available and provided features with their formation packages as an add-on.

LLC Service

Rating & Pricing

Top Features

Learn More

#1 Recommendation

$299 Per Year

  • Free LLC Formation

  • RA service in all states

  • Legal consultation

$125 Per Year

  • Flat price for RA service

  • LLC formation package

  • Fast service

Step 4: File the Articles of Incorporation in Michigan

After you hire a Resident Agent to form a professional corporation, the next step is to file the Michigan Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Resident Agent contact information, should be written. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

Filing the Articles of Incorporation in Michigan may be done with three ways, online, by mail and in-person. The Articles of Incorporation fee may vary from different state. However, in Michigan, it costs $60 for filing online, in person, and by mail. Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything. . For offline filing, Send the form by mail to Michigan Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licensing Bureau — Corporations Division, P.O. Box 30054, Lansing, MI 48909. Drop it off in person at 2501 Woodlake Circle, Okemos, MI.

Step 5: Write an Operating Agreement in Michigan

An operating agreement in Michigan is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

Step 6: Designate the PC Board of Directors in Michigan

The next step is to form the first board of directors for your PC in Michigan. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the Michigan Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In Michigan, you must have Three directors in forming your Professional Corporation.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with Michigan Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

  • Name and Purpose of the Corporation
  • Registered Office and Agent
  • Shareholders
  • Board of Directors
  • Officers
  • Committees
  • Indemnification and Insurance
  • Conflict of Interest
  • Records and Reports
  • Amendments
  • Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in Michigan.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in Michigan. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

The application of an EIN in Michigan can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

Recommended: With LegalZoom’s EIN service, obtaining your business’s crucial tax ID becomes a breeze, saving you time and effort by handling the complexities so you can quickly set sail on your entrepreneurial voyage. We recommend –

LegalZoom$79 (Standard Fee)

Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in Michigan for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in Michigan easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in Michigan

Before your professional corporation operates in Michigan, you must have Michigan Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in Michigan ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in Michigan

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the Michigan tax classification for the taxes that an LLC in Michigan must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in Michigan.

  • Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
  • Michigan Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
  • Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
  • Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
  • Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
  • Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in Michigan

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in Michigan

In Michigan, you must submit a report. The owners’ and Resident Agent’s names and contact details are listed in the Annual Report. Also, it should include all of your yearly financial activity. You must submit the report every 1 year (15th Feb) in the Michigan Secretary of State.

FAQs

What is a professional corporation in Michigan?
A professional corporation in Michigan is a corporation formed by professionals, such as doctors, dentists, architects, and accountants.
How do I form a professional corporation in Michigan?
To form a professional corporation in Michigan, you need to file articles of incorporation with the Michigan Department of Licensing and Regulatory Affairs (LARA).
Who can form a professional corporation in Michigan?
Only licensed professionals in Michigan can form a professional corporation in the state.
Can a professional corporation in Michigan be owned by non-professionals?
No, a professional corporation in Michigan can only be owned by licensed professionals.
How many shareholders can a professional corporation in Michigan have?
A professional corporation in Michigan can have up to 75 shareholders.
Do shareholders in a professional corporation in Michigan have limited liability?
Yes, shareholders in a professional corporation in Michigan have limited liability protection.
How is a professional corporation in Michigan taxed?
A professional corporation in Michigan is taxed like any other corporation, with profits being taxed at the corporate level and dividends being taxed at the individual level.
What is the benefit of forming a professional corporation in Michigan?
Forming a professional corporation in Michigan can give licensed professionals protection against personal liability.
Are there any special requirements for forming a medical professional corporation in Michigan?
Yes, medical professional corporations in Michigan must also meet additional requirements under the Michigan Medical Corporation Act.
How long does it take to form a professional corporation in Michigan?
It can take several weeks to several months to form a professional corporation in Michigan, depending on a variety of factors.
Can a professional corporation in Michigan change its registered agent?
Yes, a professional corporation in Michigan can change its registered agent by filing a form with LARA.
Is annual reporting required for a professional corporation in Michigan?
Yes, a professional corporation in Michigan must file an annual report with LARA.
How much does it cost to form a professional corporation in Michigan?
The cost of forming a professional corporation in Michigan varies depending on a variety of factors such as filing fees, attorney fees, and more.
Can a professional corporation in Michigan have multiple offices?
Yes, a professional corporation in Michigan can have multiple offices.
Can a professional corporation in Michigan convert to a different legal structure?
Yes, a professional corporation in Michigan can convert to a different legal structure by filing appropriate paperwork with LARA.
Can a professional corporation in Michigan own real estate?
Yes, a professional corporation in Michigan can own real estate.
Can a professional corporation in Michigan have a DBA (doing business as)?
Yes, a professional corporation in Michigan can use a DBA as long as it complies with the state’s DBA laws.
Can a professional corporation in Michigan have non-professional employees?
Yes, a professional corporation in Michigan can have non-professional employees.
Who can be an officer in a professional corporation in Michigan?
Any licensed professional in the corporation can be an officer in a professional corporation in Michigan.
Can a professional corporation in Michigan have only one shareholder?
Yes, a professional corporation in Michigan can have only one shareholder.
Are there any residency requirements for shareholders in a professional corporation in Michigan?
No, there are no residency requirements for shareholders in a professional corporation in Michigan.
Are there any restrictions on the types of professionals that can form a professional corporation in Michigan?
No, any licensed professional can form a professional corporation in Michigan.
What is the difference between a professional corporation and a limited liability company (LLC)?
The main difference between a professional corporation and an LLC is that a professional corporation is a corporation owned by professionals, while an LLC is owned by members.
Can a professional corporation in Michigan operate outside of the state?
Yes, a professional corporation in Michigan can operate outside of the state as long as it meets the requirements of the state where it is operating.
Can a professional corporation in Michigan provide non-professional services?
Yes, a professional corporation in Michigan can provide non-professional services as long as the services do not require a professional license.
Can subsidiaries of a professional corporation in Michigan also be professional corporations?
Yes, subsidiaries of a professional corporation in Michigan can also be professional corporations.
Can a professional corporation in Michigan issue stock?
Yes, a professional corporation in Michigan can issue stock to its shareholders.
Can a professional corporation in Michigan be voluntarily dissolved?
Yes, a professional corporation in Michigan can be voluntarily dissolved by filing a statement of dissolution with LARA.
How can I find more information about forming a professional corporation in Michigan?
You can visit the Michigan LARA website or consult with an attorney for more information about forming a professional corporation in Michigan.
What types of professionals can form a professional corporation in Michigan?
Some of the professionals who can form a professional corporation in Michigan include lawyers, doctors, dentists, architects, and engineers.
Does Michigan require me to have insurance to form a professional corporation?
Michigan does not require you to have insurance to form a professional corporation, but it is a good idea to have liability insurance.
Are there any requirements for naming my professional corporation in Michigan?
Yes, in Michigan, a professional corporation’s name must end with “PC” or “P.C.” to indicate that it is a professional corporation.
What is a registered agent, and do I need one for my professional corporation in Michigan?
A registered agent is a person or entity who accepts legal documents on behalf of your professional corporation. Yes, you need a registered agent for your professional corporation in Michigan.
Can non-professionals own shares in a professional corporation in Michigan?
No, non-professionals cannot own shares in a professional corporation in Michigan.
Is there a limit to the number of professionals who can be in a professional corporation in Michigan?
No, there is no limit to the number of professionals who can be in a professional corporation in Michigan.
Does Michigan recognize professional corporations from other states?
Yes, Michigan allows professional corporations formed in other states to do business in Michigan, provided they follow Michigan’s laws and requirements.
What are the fees associated with starting a professional corporation in Michigan?
The fees associated with starting a professional corporation in Michigan include a filing fee and an annual report fee.
Can I form a professional corporation by myself, or do I need legal assistance?
You can form a professional corporation by yourself, but it is recommended that you consult with an attorney to ensure that you meet all requirements and protect your interests.
Do all professionals in the corporation have to have the same degree/license in Michigan?
No, professionals in the corporation do not necessarily have to have the same degree or license in Michigan.
Do I need to have a board of directors in my professional corporation in Michigan?
Yes, you need to have a board of directors in your professional corporation in Michigan.
What is the tax rate for a professional corporation in Michigan?
The tax rate for a professional corporation in Michigan varies based on its income, with a maximum tax rate of 6%.
Can I convert my existing business into a professional corporation in Michigan?
Yes, you can convert your existing business into a professional corporation in Michigan.
Can I have an office outside of Michigan for my Michigan professional corporation?
Yes, you can have an office outside of Michigan for your Michigan professional corporation.
What are the advantages of forming a professional corporation in Michigan?
The advantages of forming a professional corporation in Michigan include limited personal liability, tax advantages, and the ability to share profits and decision-making.
What are the disadvantages of forming a professional corporation in Michigan?
The disadvantages of forming a professional corporation in Michigan include high formation costs and ongoing paperwork requirements.
Can I dissolve my professional corporation in Michigan if I no longer need it?
Yes, you can dissolve your professional corporation in Michigan if you no longer need it.
Do I need to renew my professional corporation every year in Michigan?
Yes, you need to file an annual report and pay an annual fee to renew your professional corporation in Michigan.
What do I do with my professional corporation’s assets if I decide to dissolve it?
If you decide to dissolve your professional corporation in Michigan, you must distribute your assets according to the state’s laws and your corporation’s bylaws.
Can I merge my existing company with a Michigan professional corporation?
Yes, you can merge your existing company with a Michigan professional corporation.
Will I need to obtain any licenses or permits to begin operating my professional corporation in Michigan?
Depending on what kind of professional corporation you have, you may need to obtain necessary licenses and permits to operate it legally within Michigan.
How can I change the officers or directors of my professional corporation in Michigan?
You can change the officers or directors of your professional corporation in Michigan by amending your articles of incorporation.
Who is responsible for compliance with professional regulations in a Michigan professional corporation?
Each individual licensed professional in your Michigan professional corporation is responsible for compliance with professional regulations.
Can a professional corporation in Michigan make political contributions?
Yes, professional corporations in Michigan can make political contributions under certain conditions.

Also Read

How to Save Money While Forming Michigan Professional Corporation

One key aspect to consider when aiming to save money during the formation process is to streamline administrative procedures. Often, hiring an experienced corporate attorney can help navigate the complex legal requirements, ensuring compliance while minimizing costs. By carefully reviewing the legal documents and streamlining the process, unnecessary expenses can be avoided. Consulting with an attorney who specializes in this area can be immensely valuable and may prove more cost-effective in the long run.

Another critical measure to consider is effective tax planning. Proper tax planning strategies can significantly impact a business’s financial health. It is advisable to consult a trusted tax professional to ensure that the corporation’s taxation structure is optimized to minimize tax burdens. By taking advantage of available tax credits and deductions, significant savings can be achieved while remaining legally compliant.

In addition, it is prudent to explore various funding options that can alleviate some of the financial strains. Establishing a good relationship with banks or credit unions can open up opportunities for favorable loan conditions and lower interest rates. Securing bank loans or lines of credit can provide the necessary capital for the initial startup costs or ongoing operational needs. Moreover, conducting thorough market research to identify potential grant or subsidy programs that support professional businesses can be a lucrative avenue worth exploring, as these funding sources do not have to be repaid.

To maximize savings, it is crucial to adopt frugal spending habits during the initial stages of the professional corporation. Instituting a stringent budgeting plan, both for the operational aspects and personal expenses, is key. By assessing and prioritizing essential expenses and prudent investments, unnecessary expenditures can be curtailed. This disciplined approach to spending will enable the professional corporation to conserve financial resources and establish a solid foundation for future growth.

Implementing cost-cutting technologies and outsourcing certain functions can also result in significant savings. Embracing the digital revolution, especially in administrative and communication areas, can help automate processes and reduce paperwork, resulting in a leaner operation. Even outsourcing select tasks, such as bookkeeping or marketing, to external specialized providers can prove more cost-effective in the long term. Such approaches relieve the burden of hiring full-time staff, allowing the professional corporation to operate within a more flexible cost structure.

Lastly, collaboration and networking within the professional community can provide opportunities for cost-sharing and benefit from collective resources. Establishing partnerships with like-minded professionals can lead to the pooling of skills, expertise, and even physical office spaces, thereby reducing costs for all involved parties.

In conclusion, forming a professional corporation in Michigan does not have to be an overwhelming financial burden. By implementing strategic measures such as streamlining administrative procedures, effective tax planning, exploring funding options, adopting frugal spending habits, utilizing technology, and establishing fruitful alliances, aspiring professionals can save money while achieving their business goals.

Conclusion

In conclusion, forming a professional corporation in Michigan is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.

Leave a Comment