Besides the need to file an annual statement form for your LLC in Michigan, you will also need to file various tax returns in Michigan.
State Business Tax
The Michigan Business Tax (MBT) imposes a 4.95% business income tax, was passed into law in 2007, and was adopted in 2008. It also has a modified gross receipts tax of 0.8%. LLCs are pass-through tax entities, and these taxes are not paid by the LLC but by its members.
New LLCs are required to register online for state business taxes. If the annual tax liability of the LLC exceeds $800, then quarterly estimates of the tax need to be filed. If the gross receipts are less than $350,00 then the LLC does not need to file or pay MBT, unless it is a financial institution or insurance company.
An LLC can opt to be treated like a corporation for tax purposes in the state of Michigan but must file an IRS Form 2553. When taxed as a corporation, the company files a separate tax return and this is known as Corporation Income Tax. Any LLC that is taxed like a corporation pays a corporate tax of 6% on taxable income. This is a flat rate and the LLC must file a Form 4891 tax return with the Michigan Department of Treasury annually.
Sales Tax
In Michigan, sales tax for retail sales is 6% on the total price of the product, including handling and shipping costs. Most LLCs report and pay their sales tax quarterly, but it can be done monthly or annually, depending on the business circumstances.
Use Tax
LLCs in Michigan that bring taxable items into the state purchased from out of state businesses that don’t collect sales or use taxes, must pay a use tax of 6%, including handling and shipping. Use tax can be reported quarterly, but depending on the LLC, it can also be done monthly or annually.
Withholding tax or employer tax
Any LLC in the state of Michigan that has employees needs to pay state employer tax. When starting the LLC, it must obtain an employer identification code (EIN).
Federal and state income tax must be withheld from the wages of employees in the state of Michigan. Also, if retirement benefits are provided to employees by the LLC, then they must also withhold federal and state tax from the retirement plans. The withholding tax in Michigan is currently at 4.5%. In Michigan, withholding tax can be reported and paid monthly, quarterly, or annually.
There are two types of unemployment tax to be paid in Michigan, state and federal. The rates vary from 0.06 to 10.3 percent and the unemployment tax is paid online to the Michigan Unemployment Insurance on the first $9,000 of each employee’s wages.
Federal unemployment taxes are paid according to the Federal Unemployment Tax Act (FUTA) and the current rate is 6.2% on the first $7,000 of each employee’s wages. Federal unemployment taxes paid before the 31st of January each year qualify for a tax credit of 5.4%. This helps to minimize the taxable burden of the LLC.
Federal income taxes
The owner of the LLC reports the business’s earnings and losses on his personal income tax filing and pays the tax. The LLC does not pay federal or state income tax since it is a pass-through entity.
Self-employment taxes
Depending on the income derived from the LLC, the owner may have to pay a quarterly self-employment tax.
Other taxes in the state of Michigan
There are some products in the state of Michigan that pay an additional state tax. These include tobacco, motor fuel, or international fuel tax.
Link to learn more about taxes in Michigan, and how you can use the services of an accountant and registered business agent to ensure that you stay compliant. These two essential services for any LLC help reduce your administrative burden by receiving compliance notices, ensuring they are filed and paid on time, and doing employee tax withholding and payrolls.