How to Start a Construction Company in Michigan | Essential Guide

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Michigan Construction Company

Starting a construction company in Michigan can be lucrative and rewarding for anyone with the right skills, resources, and determination. With a strong demand for quality construction services and a consistently growing population of 10,135,438 (2024 data), there is always room for new Limited Liability Companies to thrive in this industry. However, starting a construction company is a challenging task and requires careful planning, dedication, and hard work.

In this article, Webinarcare Editorial Team will discuss the necessary steps to Start a Construction Company in Michigan and provide valuable tips for ensuring your success in this competitive industry.

How to Start a Construction Company in Michigan

What is a Construction Company?

A construction company in Michigan is a business that specializes in the planning, design, and execution of construction projects. These projects can range from residential homes to commercial buildings and infrastructure projects such as roads, bridges, and utility systems. Michigan construction companies must adhere to local building codes, regulations, and licensing requirements to ensure their projects are safe, efficient, and compliant with state standards.

Michigan construction companies often offer various services, including general contracting, design-build, and specialized construction services. They collaborate with various stakeholders, such as architects, engineers, developers, and property owners, to bring projects to life. By employing skilled tradespeople, project managers, and other professionals, construction companies in Michigan work to deliver high-quality, durable structures that meet their client’s needs and contribute to their community’s development and growth.

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It is suggested that you speak with a legal professional before you begin setting up a construction company. They’ll understand what’s best for you and your future company. To safeguard your personal assets from business debts, you can always start an LLC in Michigan.

– WEBINARCARE EDITORIAL TEAM

How to Start a Construction Company in Michigan

To launch a construction business, you must follow the guidelines that include researching the construction industry, developing a business plan, registering your business, securing funding, purchasing equipment and material, hiring a skilled team, and marketing your construction company.

Step 1: Research the Construction Industry

Before diving into starting your construction company, it’s essential to understand the local construction industry in Michigan. Research your area’s market trends, major players, and potential competition. This will help you identify gaps in the market that your company can fill and allow you to make informed decisions about the types of services you want to offer.

Some key areas to research include:

  • Types of construction projects in demand (residential, commercial, etc.)
  • The average cost of construction projects in your area
  • Local building codes and regulations
  • Key stakeholders in the industry (architects, developers, etc.)
  • Licensing and certification requirements for contractors in Michigan

Step 2: Develop a Business Plan

A well-thought-out business plan is crucial for the success of any new business, including a construction company. Your business plan will act as a roadmap for your company’s growth and development, helping you make informed decisions and keep your business on track.

Some key elements to include in your construction company business plan are:

  • Company Overview: Describe your company’s mission, vision, and goals. Include the legal structure of your business (LLC, corporation, sole proprietorship, etc.) and your company’s name and location.
  • Market Analysis: Summarize your research on the local construction industry, including the target market, competition, and growth opportunities.
  • Services Offered: Clearly define the types of construction services your company will offer, such as general contracting, design-build, or specialized construction services.
  • Marketing and Sales Strategy: Outline how to attract and retain clients and your strategies for generating leads and closing sales.
  • Management and Organization: Detail the roles and responsibilities of your management team and any key personnel you plan to hire.
  • Financial Projections: Provide a realistic estimate of your company’s financial performance over the next few years, including projected income, expenses, and profits.

Step 3: Choose a Business Name

Selecting a name for your Michigan construction company is essential to forming. Your business name should be unique, memorable, and reflective of your products or services. There is a complete guide on Michigan Business Name Search for you to have a proper Michigan construction business name. 

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

You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for Michigan DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA, you can file it in three methods, online, by mail, and in person filing.

However, before filing a DBA, you should know that you need to renew your DBA every five years, which costs $25 for LLCs and $10 for LPs.

You can check the availability of your desired business name by searching the Michigan Department of Licensing and Regulatory Affairs‘s website.

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Step 4: Register Your Construction Company

Register your business with the appropriate government agencies before officially starting your construction company in Michigan and obtain any necessary licenses and permits. 

Hire a Resident Agent

A Resident Agent is a person or entity responsible for receiving legal documents and official notices for your construction business. The qualifications of a Resident Agent vary depending on the jurisdiction, but generally, they must meet the following criteria:

  • Age: The Resident Agent must be at least 18 years old.
  • Residency: The Resident Agent must reside where the company is registered or authorized to do business in that state. In some jurisdictions, a domestic corporation or limited liability company (LLC) can act as its Resident Agent if it has a physical address in Michigan.
  • Physical Address: The Resident Agent must have a physical street address, not just a post office box, where the company is registered. This is where they will receive official correspondence and legal documents on behalf of the company.
  • Availability: The Resident Agent must be available during normal business hours (9 a.m. to 5 p.m., Monday through Friday) to receive and sign official correspondence and legal documents.
  • Good Standing: If the Resident Agent is a business entity, it must be in good standing with the state and not be in default, suspended, or revoked.
  • Compliance: The Resident Agent should know Michigan requirements and deadlines for the company, such as Annual Reports and Michigan franchise tax filings, and ensure that the company stays compliant. 

You can serve as your Resident Agent, appoint a friend or family member, or hire a Professional Michigan Resident Agent Services.

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File For Articles of Organization or Articles of Incorporation

If you form an LLC for your construction company, you must file the Michigan Articles of Organization, which costs $50. However, you must file the Articles of Incorporation if you form Michigan Corporation for your construction company. The Articles of Incorporation filing fee costs $60 for filing online, in person, and by mail. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: 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.  
  • 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

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Create an Operating Agreement

Operating Agreement is a document that contains all of your company’s organizational details. Drafting an operating agreement in Michigan is optional. Yet, having one as an internal document is strongly advised. 

Recommended: Creating an Operating Agreement is like having a personal legal guide at hand; it’s efficient, thorough, and ensures the smooth and compliant operation of your business. With LegalZoom’s operating agreement, it will protect your rights as an owner, keeping misunderstandings at bay and your business on the path to success. That’s why we recommend using –

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Obtain an Employer Identification Number

You must first obtain Michigan Employer identification number (EIN) from the IRS if you will open a bank account or hire an employee for your Michigan construction company. 

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.

Recommended: Professional services have the EIN included in their LLC formation package. We recommend using –

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Step 5: Obtain the Necessary Licenses and Permits

Starting a construction company in Michigan requires several licenses and permits. Some of the most common licenses and permits you’ll need include the following:

  • Business License: Your local city or county government may require Michigan Business License. The business license fee in Michigan ranges from $50 – $300.
  • Contractor’s License: A contractor’s license is required in most states for construction businesses that perform specific types of work, such as general contracting, electrical, plumbing, HVAC, or other specialized trades. Requirements for obtaining a contractor’s license may include passing an exam, providing proof of experience, and obtaining bonding and insurance.
  • Building Permits: Construction projects typically require permits issued by the Michigan building department. Building permits ensure the construction project complies with local building codes and regulations.
  • Occupational Licenses: Some states may require occupational licenses for specific types of work, such as asbestos abatement, lead paint removal, or the installation of fire protection systems. Check with your state’s licensing board to determine if any special licenses are required for the work your construction company will perform.
  • Michigan Sales Tax Permit: A sales tax permit from the Michigan Department of Treasury allows you to collect sales tax. Currently, the Michigan sales tax rate is 6.00%.
  • Environmental Permits: Depending on the nature of your construction projects, you may need to obtain environmental permits, such as stormwater discharge or air quality permits.

Step 6: Secure Funding

Starting a construction company requires significant capital to cover equipment, materials, and labor costs. To secure funding for your Michigan business, you must explore various financing options and determine the best fit for your needs.

When seeking funding, be prepared to present your business plan and financial projections to potential lenders or investors. This will demonstrate your commitment to your company’s success and help build their confidence in your ability to repay the loan or generate a return on their investment.

However, consider applying for your construction company’s Michigan Small Business Loans.

Step 7: Purchase Equipment and Materials

Once you have secured funding for your Michigan construction company, you must purchase the necessary equipment and materials to begin operations. This may include items such as:

  • Construction vehicles (trucks, excavators, etc.)
  • Power tools and hand tools
  • Safety equipment (hard hats, safety goggles, etc.)
  • Building materials (lumber, concrete, etc.)
  • Office equipment and supplies (computers, printers, etc.)

Invest in high-quality equipment and materials, as this will help you deliver exceptional results to your clients and build a strong reputation in the industry. Consider purchasing insurance for your equipment, as this can help protect your investment in the case of theft, damage, or accidents.

Step 8: Hire a Skilled Team

Your Michigan construction company’s success will largely depend on your team’s skills and expertise. Hire individuals with experience and knowledge in the construction industry to build a strong workforce. This may include:

  • Project managers
  • Construction laborers
  • Skilled tradespeople (electricians, plumbers, etc.)
  • Architects or engineers
  • Administrative staff (accountants, receptionists, etc.)

In addition to hiring qualified employees, invest in ongoing training and development programs to help your team stay current on industry trends, technologies, and best practices. This will improve the quality of your services and help you attract and retain top talent in the competitive construction industry.

Step 9: Market Your Construction Company

You must develop a comprehensive marketing strategy to attract clients and grow your Michigan construction company. This may include building a professional website that showcases your services, portfolio, and testimonials from satisfied clients; creating and distributing print materials, such as brochures, business cards, and direct mail advertisements; networking with industry professionals, such as architects, developers, and real estate agents, to generate leads and referrals, and utilizing social media and digital marketing strategies to reach a wider audience and drive traffic to your website.

By consistently promoting your Michigan construction company and showcasing your expertise and quality work, you can build a strong reputation in the Michigan construction industry and attract a steady stream of new clients.

Benefits of Forming a Construction Company

Forming a Construction LLC is best for a start-up company since it offers the following advantages.

Limited Liability Protection

LLC provides limited liability protection to its owners, also known as members. This means that the personal assets of the LLC members are separate from the company’s debts and liabilities. In the construction industry, where accidents, property damage, and contractual disputes occur, limited liability protection is crucial to protect business owners’ assets.

Pass-through Taxation

An LLC typically offers pass-through taxation, meaning the company’s profits and losses are reported on the owner’s tax returns. This avoids the double taxation corporations may face, where the company and its shareholders are taxed separately. Pass-through taxation can lead to potential tax savings for the Michigan construction company’s owners.

Flexibility in Management

LLCs have a more flexible management structure than corporations. They do not require a board of directors, and the owners can choose how to manage the company through member or manager management. This flexibility allows Michigan construction companies to adapt their management structure as needed.

Simpler Record-Keeping and Compliance

LLCs still require formalities; they typically have fewer record-keeping and reporting requirements than corporations. This can save time and resources for Michigan construction companies, allowing them to focus on their core business operations.

Credibility

Forming an LLC can provide the Michigan construction company with increased credibility and professionalism in the eyes of clients, vendors, and financial institutions. This can be beneficial in securing contracts and building a positive reputation in the industry.

FAQs

What is required to start a construction company in Michigan?
To start a construction company in Michigan, you need to obtain a business license, register with the state and obtain the necessary insurance and bonding.
Is there a requirement for certain educational attainment or licensing to start a construction company in Michigan?
Yes, you need to have a State of Michigan Contractor’s License to provide skilled trades services if the total value of services performed on residential projects on an annual basis exceeds $600 or more.
What is the cost for obtaining a contractor’s license in Michigan?
The cost for obtaining a license is a $195 application fee, and there are additional testing, bonding, and insurance costs that can vary.
What are the steps involved in obtaining a Michigan Contractor’s License?
For obtaining a Contractor’s License in Michigan, individuals will need to pass a required examination, pay all required fees and possess a valid Certificate of Liability insurance and a Surety Bond for at least $25,000.
How long does it take to obtain a Michigan Contractor’s License?
It can take about a month or so to obtain a Michigan Contractor’s License.
What type of liability insurance is required for a construction company in Michigan?
A minimum of $100,000 in Motor Vehicle Liability, a minimum of $300,000 bodily injury or property damage, $600,000 aggregate for injuries or damages on any one project, and $10,000 for property damage.
What is the process to file for a business license in Michigan?
The Lansing-based Corporations, Securities & Commercial Licensing Bureau performs this process. The package and form will vary based on the required permits and licenses.
Is it possible to start a construction company in Michigan without having a physical office in the state?
Yes, you incorporate in Michigan under your current location’s address or in a registered agent’s address in Michigan.
What are the challenges that come with starting a construction company in Michigan?
Slow housing markets, limited availability of skilled workers, changing market demands, climbing materials costs, and getting approved for loans.
How can one identify construction trends in Michigan’s market and go about staying abreast of the news?
You can identify construction trends by checking online for building permits issued in Michigan or contact professional associations such as The Associated General Contractors of Michigan for market activity research.
Do you need to create and register your business with the Michigan Secretary of State’s offices first before proceeding with starting a construction company there?
Yes, you need the paperwork and a Federal ID number listed on Michigan’s Secretary of State
Is it beneficial to specialize in residential or commercial properties before beginning a Construction Business in Michigan?
Some individuals who plan to engage in this market can strengthen the focus by emphasizing either commercial or residential projects.
What are the required permits a construction company needs in Michigan?
A building permit for every city they are constructing a structure in and from the county in which the property is constructed.
Can the same license be used for different types of services to offer as part of Construction company?
Yes, if the offer services encompass less than three trades.
Should you include specifics that relate to your services & equipment in activities like solicitation, website, or brochures for the Michigan construction market?
Yes, specifically if based in underserved Trade or a Service.
How can one determine the best options for loans a Construction company can secure in Michigan?
Check in with Small Business Administration (SBA) lenders and traditional banks on what they offer and their varied loan management terms.
Is a Business Plan necessary in applying for a loan in Michigan establishing a construction company?
A business plan, while not required, will support the administrator in assigning valuable assessment status within the approval process.
Does a proprietor need State’s License if contracting above or below a specific amount for private constructions?
Licensing limits solely refer to residential work projecting values exceeding $600.
Would various licenses of alternate company team members be possible when laboring beneath their individual abilities on a Michigan project?
If greater than three specific quality trades person is off the limits; on single-family or non-residential construction craftspeople can work concerning internal alterations.
What trades are allowed to perform roofing if the Michigan builder plan authorized testing space to authenticate their capabilities?
Roofing, plumbing, electrical work, lath & plaster, cement masonry stone work, and heat.
What operation necessitates licensing to remodel or improve a pool or spa based in the state of Michigan?
Operators producing full products turnkey, completely replacing a basic pool removing a cut-out, in-ground administration of discharge water plumbing.
How to ensure one is officially benefiting from discounts offered as a verified contractor within material venues in Michigan?
Create an account prior to purchase showcasing certification reports on Company Letterhead or through digital materials.
Does Michigan enumerate signed, mandatory, proposals thereby allowing building material owners to collect payment for supplies and labor?
Projects such as this can all depend on long-term agreements that disclose any upgrades or updates for property improvements yet to become agreed upon if construction has halted.
Are penalties regulated upon failing to take out worker’s compensation insurance in Michigan as a potential liability for establishing a construction organization?
Yes, and removing worker’s insurance coverage guarantee is deemed illegal.
How long can someone pursue Michigan Mechanic and Infrastructure Liens?
Michigan Mechanic and Infrastructure Liens generally seven years past the last personal pursuit designation period.
Would new requirements necessitated under the CECL mark affect a Building company’s rate on a stock quote history in Michigan?
There hasn’t been a decisive outcome per time, but listings could change depending on the charges produced over years.
Where or how does Workers Compensation Agreements vary in terminology thereby providing vital specifics under legislation what Michigan company curtails warranties?
Submit a health question within a meeting addressing the paid leave section or watch policy.
What qualifications need to establish the reputation of your building company and garner a better rating in Michigan?
A perspective should exhibit a trademark web address, social stance discussions on pricing and specifications for buildings with all associates, and personalized preferences from customers benefiting suppliers locally.
What licenses do I need to start a construction company in Michigan?
You need to have a builder’s license and a business license in Michigan to start a construction company.
How can I apply for a builder’s license in Michigan?
You can apply for a builder’s license in Michigan by submitting an application to the Michigan Department of Licensing and Regulatory Affairs (LARA).
What are the requirements for a builder’s license in Michigan?
Some of the requirements for a builder’s license in Michigan include being at least 18 years old, having a high school diploma or GED, and having at least 60 months of experience.
How much does a builder’s license cost in Michigan?
The cost of a builder’s license in Michigan varies depending on the type of license you are getting. For a residential builder’s license, the application fee is $195.
Is there any bonding requirement to start a construction company in Michigan?
Yes, in Michigan you need to have a surety bond to start a construction company.
How much does a surety bond cost in Michigan?
The cost of a surety bond in Michigan varies depending on the amount of coverage required, typically between 0.5% to 2% of the bond amount.
Can I use personal savings as capital for my new construction company in Michigan?
Yes, you can use personal savings as capital for your new construction company in Michigan.
Are there any tax incentives for starting a construction company in Michigan?
Michigan offers various tax incentives, such as withholding tax discounts and property tax abatements, to businesses that invest in and create jobs in the state.
Can I get a small business loan to start a construction company in Michigan?
Yes, there are many options for getting a small business loan to start a construction company in Michigan, including banks and other financial institutions.
What are the insurance requirements for a construction company in Michigan?
In Michigan, a construction company is required to have general liability insurance, workers’ compensation insurance, and automobile liability insurance.
How do I register my new construction company in Michigan?
You can register your new construction company in Michigan by filing documents with the Michigan Department of Licensing and Regulatory Affairs (LARA).
Do I need to register for sales tax in Michigan if I am in the construction business?
Yes, if your construction company makes retail sales of tangible property in Michigan, you need to register for sales tax with the Michigan Department of Treasury.
What are the compliance requirements for a construction company in Michigan?
Compliance requirements for a construction company in Michigan vary depending on your business structure, location, and activities. Consult with a professional to determine your specific requirements.
Can I hire subcontractors for my construction company in Michigan?
Yes, you can hire subcontractors for your construction company in Michigan, but make sure they have proper licenses and insurance coverage.
How do I find construction projects to bid on in Michigan?
You can find construction projects to bid on in Michigan by networking with other professionals in the industry, checking local newspapers and online resources, and researching public bid opportunities from state and federal agencies.
What is the prevailing wage law in Michigan?
Michigan’s prevailing wage law requires construction contractors on state-funded projects to pay their workers the prevailing wage rate for the area where the work is being performed.
How do I submit a bid for a public construction project in Michigan?
To submit a bid for a public construction project in Michigan, you typically need to complete all required paperwork and submit it to the issuing agency by a specified deadline.
Are there any environmental regulations for construction companies in Michigan?
Yes, Michigan has many environmental regulations for construction companies, such as air and water quality standards, hazardous waste management, and construction site erosion control.
How do I get certified as a Minority Business Enterprise (MBE) in Michigan?
You can apply for MBE certification in Michigan by submitting an application to the Michigan Minority Supplier Development Council (MMSDC).
What are the benefits of being certified as a MBE in Michigan?
Some of the benefits of being certified as a MBE in Michigan include gaining access to business opportunities with corporations and public agencies that seek to do business with organizations that have a diverse ownership structure.
What are the union requirements for construction companies in Michigan?
Union requirements for construction companies in Michigan depend on various factors, such as the construction industry sector, the type of project, and the geographical location. Consult a professional to determine your specific requirements.
How can I access apprenticeship programs for my construction company in Michigan?
You can access apprenticeship programs for your construction company in Michigan through various providers such as Michigan Apprenticeship Steering Committee, Local Unions and Training Centers.
Can I include prevailing wages in the budget of my construction project in Michigan?
Yes, as prevailing wages are mandatory wages for construction employees on public works projects in Michigan, construction companies need to make these mandatory payments while constructing public structures.
What legal documents do I need to have to start a construction company in Michigan?
The legal documents you need to start a construction company in Michigan may vary by business structure, generally you need Articles of Incorporation or similar documents required to become a legal entity in Michigan, and to open a bank account and get any other licenses as per your state’s requirements.
Can I simultaneously hold licenses for building construction and maintenance work in Michigan?
No, maintenance and construction licenses are separate permits, and usually held by different organizations. You will need to get a different license for each classification.
Can someone legally represent and sign for my construction company during a public bidding process in Michigan?
Yes, but that person needs to be either legally appointed and authorized by owner or empowered with Power of Attorney.
Why would I want to hire a construction attorney in Michigan?
A construction attorney can offer legal guidance and advice in accordance with various Michigan state and federal laws surrounding real estate, permits, organization structures, contract law and so on.
Can I hire an accountant to help manage finances for my construction company in Michigan?
Yes, it is recommended to hire an accountant to help manage finances for your construction company in Michigan especially when going through funding phases or tax circumstances.

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Conclusion

Starting a construction company in Michigan can be challenging yet rewarding for those prepared to invest the time, effort, and resources necessary for success. By following the steps outlined in this article and dedicating yourself to providing exceptional service and quality work, you can create a thriving construction business that stands out in the competitive Michigan market.

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