Michigan Sole Proprietorship vs LLC:
Fees, Taxes, and Decision Guide (2026)
Michigan is one of the cheapest states for LLC formation and maintenance. $50 to file, $25 annual statement, flat 4.25% state PIT for both structures.
Michigan LLC Fees
$50
Articles of Organization filing fee
$25 / yr
Annual statement fee
4.25% flat
MI state PIT
1-3 days
Standard processing time
5-Year Cost Comparison for Michigan Residents
| Structure | Year 1 | Years 2-5 (each) | 5-Year Total (state-level) |
|---|---|---|---|
| Sole Proprietorship | $0-$25 DBA | $0 | $0-$25 |
| Michigan LLC | $75 | $25 | $175 |
State PIT 4.25% applies to business profit under both structures. Local city PIT typically 1.0% to 2.5% also applies equally.
Michigan-Specific Considerations
$50 filing fee is among the lowest nationally
Michigan's $50 filing fee for Articles of Organization is one of the lowest in the country, tied with Arizona, Hawaii, Iowa, Kentucky, Mississippi, Missouri, New Mexico, and Colorado at $50 or less. Combined with the $25 annual statement, Michigan is one of the cheapest states for ongoing LLC maintenance.
Flat 4.25% PIT applies to both structures
Michigan personal income tax is a flat 4.25% on net business income. Applies identically to sole proprietors (Schedule C) and pass-through LLC members. Most cities also impose a local income tax (typically 1.0% to 2.5%) on residents, applied to business income equally.
Annual statement due 15 February
Michigan LLCs file an Annual Statement with the Department of Licensing and Regulatory Affairs (LARA) by 15 February each year. Filing fee is $25. Failure to file by 15 May (3 months late) triggers a $5 monthly late penalty up to $50 maximum.
Sole prop Certificate of Assumed Name
Sole proprietors using a name other than their legal name file a Certificate of Assumed Name with the county clerk where the business operates. Filing fee varies by county ($10 to $25). LLCs use the registered LLC name directly.
Specific Recommendations for Michigan Residents
Stay sole prop if...
- Revenue under $25k and low-risk work
- You really do not want even $25/year in compliance
Form a Michigan LLC if...
- Revenue above $30k - $75 first-year cost is minimal
- Physical services or any meaningful liability exposure
- You want the cheapest LLC liability protection in the Midwest
Sources: Michigan Department of Licensing and Regulatory Affairs (LARA); Michigan Department of Treasury - Individual Income Tax.
Not legal or tax advice. Consult a licensed CPA or business attorney admitted in Michigan for specific guidance.