If you own a small business, this time of year you are making sure your employees are receiving their W-2s and hopefully are getting your taxes organized. But one thing that may get lost on your desk is the Annual Statement or Report you are required to file with the State of Michigan Department of Licensing and Regulatory Affairs (LARA) if you are incorporated or have a renewal of your limited liability company (LLC).
The due date for filing is February 15, and the costs are minimal–$25 for an LLC or profit and professional service corporations, and $75 for professional limited liability companies (PLLCs).
If you have forgotten to file your annual report or statement for a few years, you can restore your LLC or corporation to good standing with the State of Michigan by requesting “Restoration” package from LARA.
In either case, keeping your LLC or corporation in good standing is important because it is designed to protect the business’ owner or owners from potential liability issues. For example, an LLC is a separate business entity that is owned by investors known as members. One of the key benefits of the LLC is that a member’s liability is limited to the amount of their investment in the LLC. Therefore, a member is not personally liable for the debts of the LLC. This is similar to a regular corporation.
If the LLC is structured properly, it will be treated as a partnership for tax purposes, and the income from the LLC is taxed directly to the members at their income tax rates, which may be generally lower than a corporate tax rate. If you are the sole owner of the LLC and don’t have any partners, you will report the income on Schedule C.
When you think about the potential negative impact that could occur if you don’t keep your business entity in good standing, it is well worth it to dig through your pile of mail to find the notice to file your annual report or statement, or even go through the process of restoring it to good standing status.
If you are in business for yourself as a sole proprietor, you should seriously consider establishing the proper business entity, such as an LLC or a corporation. At our law firm, Bloom, Bloom & Associates, we have a lot of experience working with small-business owners to set up the proper business entity, and we would be happy to meet with you to discuss your options.