What laws will affect me?

Which tax forms will I

have to file? 

What Legal Structure is Best

For My Business?

Follow the links in this article to register your business in Michigan and to download needed IRS forms and helpful IRS publications.  Determine what type of organizational structure is best for your business. 

Legal Business Structures

Whether you are going into business alone or with others it is advisable to consult a lawyer and an accountant to determine which business structure is best for you. Such decisions should not be made without obtaining all needed information.  The size of the business is a big factor in selecting the legal structure.   If you personally are the business, then a sole proprietorship may be appropriate.  Incorporation should be considered if the business has enough assets to warrant the costs of incorporation and the added governmental regulation and reporting.  Choose the legal structure that meets the needs of the business at present.  Do not undertake a more complex legal structure than is necessary. You can always change structures as the business grows. 

Sole Proprietorship

A sole proprietorship is an unincorporated business that is owned by one person.  It is the simplest form of business structure to start and maintain. There is no legal separation between the individual and the business.  A sole proprietor gets 100 percent of the profits and is personally responsible for 100 percent of the debts and liabilities of the business.  The income and expenses of the business are reported on the owner’s individual 1040 tax return (on a separate schedule).  A sole proprietorship avoids the expense of forming a partnership or corporation however does not have the liability protection that other structures offer.

A sole proprietor who wishes to conduct business under a name other than their real name must file a Certificate of Assumed Name or “Doing Business As (DBA) in each county where they do business. Examine the advantages and disadvantages of sole proprietorship.  Use the information in the chart below to help you determine some of the tax forms you may be required to file as a sole proprietor.

Sole Proprietorship

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General Partnership

A partnership is the entity created when two or more persons join to carry on a business.  Each person contributes money, labor, and skills, and each shares in the profits and losses of the partnership.  Partnerships, like sole proprietorships, are subject to little regulation and are easy to establish.  A formal partnership agreement is recommended in order to address potential conflicts before they arise.  A general partnership, like a sole proprietorship, must file an assumed name certificate (DBA) with the county clerk's office in the counties in which the business operates.

Partnerships are required to file an annual information return (form 1065) to report the income, deductions, gains, and losses, from their operations, but the partnership does not pay income tax. It "passes through" any profits or losses to its partners.  Each partner includes their share of the partnership's income or loss on their individual 1040 tax return and each partner has unlimited liability for the debts of the business.  Use the information in the charts below to help you determine some of the forms that you may be required to file.

Limited Partnership

There are two types of partners in a limited partnership.  General partners have the same powers and liabilities as partners in a general partnership.  However limited partners are not liable for the obligations of the partnership and they do not have a voice in the management of the business.  Limited partners function as investors receiving a share of the profits based on their allocation in the partnership agreement.  In general the reporting for tax purposes is the same as for a general partnership.  In Michigan Limited Partnerships must register with the Bureau of Commercial Services, Corporation Division at (517) 241-6400 or visit the Bureau Website – www.michigan.gov/corporations

Partnerships

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