Incorporate in Michigan

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Form Your Michigan S Corporation

Start setting up your Michigan S Corporation now - without any obligation. Save all of your incorporation information until you’re ready to incorporate.

MaxFilings competitive pricing is simple and straight forward - it includes all Michigan fees and other charges. There are absolutely no “hidden charges” to surprise you later.

A Michigan S Corporation is simply a standard corporation that becomes an S Corporation when its shareholders elect special tax status with the Internal Revenue Service (IRS) by filing an IRS Form 2553 (after filing its official documents with Michigan).

Like a Michigan C Corporation, a Michigan S Corporation is recognized by the law as an individual entity, separate from its shareholders (owners), many times treated as a human being.

Michigan C corporation shareholders enjoy limited liability for the debts, obligations and liabilities incurred by the business as well as liability stemming from possible legal action. Protection of shareholders’ personal assets is one of the major reasons Michigan business owners choose to incorporate. Normally, shareholders cannot lose more than the amount they invested in the corporation. If the corporation goes bankrupt, the shareholders will not be liable for its debts. Should someone sue the corporation and the corporation is found liable, they can take the corporation’s property to satisfy the judgment but if that property does not satisfy the judgment, they will not be able to take a shareholder’s personal assets, i.e. home, car, or bank account. There are exceptions to shareholders’ limited liability to keep in mind. For example an exception to a shareholder's limited liability occurs when the corporation has recklessly harmed people or has been used to perpetuate a fraud.

Michigan S Corporation Taxation

Unlike a Michigan C Corporation, a Michigan S Corporation does not itself pay any income taxes. While an S Corporation with more than one shareholder does file tax returns, the individual shareholders (owners) must include their share of the corporation’s income or loss on their personal tax returns, just as is done in sole proprietorships, partnerships and Limited Liability Companies (LLC’s).

Why Form a Michigan S Corporation?

Michigan S Corporations are for those who want the limited liability and the more formal structure of a corporation but with pass-through taxation of the business profits.

Official documents must be filed with Michigan in order to form a Michigan S Corporation. The IRS Form 2553 must also be filed with the IRS. MaxFilings can help you with this. Start setting up your S Corporation now >>

Some Points to Consider When Forming a Michigan S Corporation

• Official documents must be filed with Michigan in order to form a Michigan corporation and state filing fees must be paid
• A an IRS Form 2553 electing special tax status must be filed with the IRS
• A Michigan S Corporation is considered by the law to be an individual entity, separate from its owners (shareholders)
• There can be some limitations as to the kind of business a Michigan S corporation is allowed to conduct
• You must hold and keep minutes that document meetings of the stockholders and board of directors
• A Michigan S Corporation cannot have more than 100 shareholders and S Corporation shareholders cannot be other corporations, Limited Liability Companies (LLC’s), partnerships, certain trusts, or non-resident aliens

Limited Liability

• Michigan S Corporation shareholders normally enjoy limited liability and can lose no more than the amount they invested in the corporation
• Michigan S Corporation shareholders cannot normally be held liable for legal judgments against the corporation or for any of the corporation’s debts or obligations
• Protection of Michigan S Corporation shareholders’ personal assets is one of the major reasons Michigan business owners choose to incorporate
• There are exceptions to shareholders’ limited liability where shareholders can be held liable

Raising Capital

• A Michigan S Corporation can get additional capital easier than some of the other types of business since you can issue and sell stock or a variety of other financial instruments as evidence of interest in the corporation
• The sale of stock is sometimes subject to state and federal securities laws
• Ownership can be transferred by selling stock in the corporation
• While voting rights can differ, a Michigan S Corporation can have only one class of stock

Taxation

• MichiganS Corporations are normally audited less frequently than sole proprietorships and partnerships
• MichiganS Corporations enjoy pass-through taxation so shareholders avoid so-called double taxation
• A Michigan S Corporation files informational tax returns but pays no income tax itself
• Michigan C corporation shareholders report their share of both income and losses on their personal tax returns so they are able to use losses to offset other income
• Income and losses must be allocated based upon ownership percentages
• Owners’ self employment taxes do not apply to salaries they are paid by the corporation

 Owners & Employees

• There can be limitations on certain fringe benefits for major shareholders
• Owners working in the business are employees and are therefore eligible for certain fringe benefits such as group insurance plans, retirement and profit sharing plans, and tax-favored stock option and bonus plans
• Employees frequently prefer to work for a corporation that can offer them stock options and stock bonuses
• In a sense a corporation is immortal and perpetual since it does not end with the death of a shareholder owner as do some of the other business types

Public Perception

• The general public normally thinks of corporations as being more substantial than sole proprietorships and partnerships

This information is not an attempt to present all you should know when forming an S corporation in Michigan but rather to present just some of the basic information about Michigan S corporations. While we make every effort to ensure its accuracy, MaxFilings cannot and does not guarantee that all of the information is accurate or complete and/or current and it should therefore be independently verified. And, as always, you should seek the advice of qualified professionals who are familiar with your circumstances as well as applicable federal and Michigan laws.    

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