Michigan Limited Liability Company Act: Formation and Management

The Michigan Limited Liability Company Act, enacted as Public Act 23 of 1993, is the state statute that governs how LLCs are formed, operated, and dissolved in Michigan. It sets the paperwork you file, the roles inside the company, the liability shield members rely on, and the annual filings that keep the entity in good standing. It applies to domestic LLCs formed in Michigan and to foreign LLCs registered to do business here.¹

Forming an LLC Under the Act

A Michigan LLC comes into existence when Articles of Organization are filed with the Department of Licensing and Regulatory Affairs (LARA). Section 450.4202 allows one or more people to file, and signers do not have to become members of the company.² LARA publishes the form as CSCL/CD 700.³

The form asks for the company’s legal name, a statement of purpose, the LLC’s duration (leaving it blank means the company exists indefinitely), the name of a resident agent and the street address of the registered office, and each organizer’s signature and printed name.³

The name has to be distinguishable from every other active entity on file in Michigan, and that check reaches beyond other LLCs. Section 450.4204 compares your proposed name against active corporations, nonprofit corporations, limited partnerships, and reserved or assumed names under those statutes.⁴ A different sequence of letters or numbers is what makes a name distinguishable, so small tweaks like adding “The” usually will not clear review.⁵ Search the LARA entity database before you commit.

Every LLC must keep a registered office in Michigan and a resident agent at that address to accept service of process and official notices. The agent must be an individual who lives in Michigan or a company authorized to do business in the state, and the registered office needs a physical street address. A P.O. box will not do. If the agent moves or changes, update the record with LARA. If a plaintiff or the state cannot reach the company through its agent, the LLC risks default judgments and missed deadlines.

You file the articles through the MiBusiness Registry Portal, by mail, or in person.⁶ The standard fee is $50.³ Expedited processing is available on top of that fee, running from $50 for 24-hour service to $1,000 for one-hour same-day service.⁷ After approval, LARA returns a stamped copy that proves the LLC legally exists.

Choosing Between Member-Managed and Manager-Managed

Michigan LLCs are member-managed by default. Under Section 450.4401, if the articles do not say otherwise, all members handle management and each is treated as a manager under the Act, including the authority to bind the company.⁸

If you want to keep ownership and daily control in different hands, the articles can delegate management to one or more managers under Section 450.4402. That structure fits companies with passive investors. Delegating management in the articles also puts third parties on notice that managers, not members, are the ones with authority to act for the company.⁸ The choice controls who can sign contracts, take on debt, and make binding commitments.

The Operating Agreement

The operating agreement is the internal contract among members that governs how the LLC actually runs. Section 450.4102 defines it as a written agreement covering the company’s affairs and the conduct of its business, and it can include provisions written into the articles of organization.⁹ You do not file it with LARA.

Without one, the Act’s default rules control profit sharing, voting, and most governance questions. Defaults tend to be fine for a simple single-member company. For multi-member LLCs they are usually where trouble begins. A written agreement lets members customize how profits and losses are allocated, set vote thresholds for major decisions, restrict transfers of interests, spell out buyout terms, and decide what happens when someone wants out.

Keep the agreement current. Courts generally hold the company to what the written agreement says, not to how members have been running things informally. An amendment should identify the section being changed, state the new language, and be signed by the members.

Liability Protection and Its Limits

The reason most people form an LLC is the liability shield. Section 450.4501(3) provides that a member or manager is not liable for the company’s acts, debts, or obligations except as otherwise provided by law or the operating agreement.¹⁰ If the LLC is sued or cannot pay its debts, creditors generally cannot reach members’ personal assets.

The shield is not absolute. Courts can pierce it when members treat the LLC as a personal account, commingle funds, or ignore basic formalities. The operating agreement can also expand liability past the statutory default, so read yours before you sign. And the shield never covers your own wrongful conduct; it only insulates you from the entity’s obligations.

What Managers Owe the Company

Anyone managing a Michigan LLC has real duties. Section 450.4404 requires managers to act in good faith, exercise the care that a reasonably prudent person would use in a similar role, and act in a manner they reasonably believe serves the company’s best interests.¹¹ In a member-managed LLC, every member is subject to these duties because the Act treats members as managers.

Managers may rely on financial data, legal opinions, and expert reports if they reasonably believe the source is competent and reliable. That safe harbor disappears once the manager actually knows something that makes the reliance unwarranted. A manager who follows these duties is not personally liable for business decisions that turn out badly.¹¹

Loyalty matters just as much. Unless the operating agreement or a member vote says otherwise, a manager has to turn over any profit or benefit personally gained from company transactions or from using company property. A claim for breach of these duties must be brought within three years of when the violation occurred or two years after it was discovered, whichever comes first.¹¹

Transferring a Membership Interest

Unless the operating agreement says otherwise, a member can assign a membership interest in whole or in part. But the assignment does not make the new holder a member. Under Section 450.4505, an assignee is only entitled to receive distributions the original member would have received. The assignee cannot vote, participate in management, or exercise any other membership rights.¹²

Assigning your entire interest ends your status as a member, but it does not release you from prior obligations such as unpaid capital contributions. The operating agreement can change any of these default rules, which is why well-drafted agreements address transfer restrictions, rights of first refusal, and how new members are admitted after a transfer.¹²

Professional Practices and Out-of-State LLCs

Licensed professionals cannot use a standard LLC to practice; they have to form a Professional Limited Liability Company (PLLC) under Article 9 of the Act. Section 450.4904 requires every member and manager of a PLLC to be licensed in at least one of the professional services the company provides. For health care fields covered by the Michigan Public Health Code (medicine, osteopathic medicine, chiropractic, podiatric medicine), all members and managers generally must be licensed in the same profession, with narrow cross-practice exceptions. A professional licensed in another state can be a member or employee but cannot render professional services in Michigan without a Michigan license.¹³ PLLCs also file an annual report listing all licensed members alongside the annual statement, at a higher fee.

An LLC formed in another state that transacts business in Michigan must obtain a Certificate of Authority from LARA before operating here. The Act does not define “transacting business” with a bright-line rule; instead, it lists activities that by themselves do not qualify, and leaves the rest to the statute and case law.¹⁴ Maintaining an office, employing workers, or regularly performing services in Michigan will generally trigger registration. Isolated transactions and passive property holding may not. Operating without a Certificate of Authority can prevent the LLC from enforcing contracts in Michigan courts.

Staying in Good Standing

Every Michigan LLC must file an annual statement with LARA. The fee is $25 and the deadline is February 15.¹⁵ One exception: if the LLC was formed or qualified after September 30, no filing is due the following February 15; the first filing is due the February 15 after that. The statement confirms that the registered office and resident agent information is current. The deadline is earlier than most owners expect, and it is easy to miss.

Miss it long enough and there are consequences. After two years of missed annual statements, the LLC loses good standing and its name becomes available for other businesses to claim.¹⁶ A company out of good standing may be blocked from filing lawsuits in Michigan courts and can run into problems with banks, vendors, and licensing agencies that check entity status.

Reinstatement is available but costs more than keeping current. You file a Certificate of Restoration of Good Standing (a $50 fee) along with each delinquent annual statement ($25 per missed year). File on or after February 15 and you also owe the current year’s statement. PLLCs pay $125 per delinquent year plus the $50 restoration fee.¹⁷

How a Michigan LLC Ends

Section 450.4801 sets out the events that dissolve a Michigan LLC:

An end date in the articles of organization arrives.
An event defined in the articles or operating agreement as a dissolution trigger occurs.
All members entitled to vote agree to dissolve.
A court orders dissolution.
The LLC never began operating, never issued membership interests, and has no debts, and a majority of the organizers vote to dissolve.

After dissolution, the LLC still exists for the limited purpose of winding up: collecting what the company is owed, paying creditors, and distributing whatever is left to members. To end the company on the state’s records, file a Certificate of Dissolution with LARA.¹⁸

1
Michigan Legislature. Michigan Limited Liability Company Act
2
Michigan Legislature. Michigan Compiled Laws 450.4202
3
Michigan Department of Licensing and Regulatory Affairs. CSCL/CD 700 Articles of Organization
4
Michigan Legislature. Michigan Compiled Laws 450.4204 – Limited Liability Company Name Requirements
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Michigan Department of Licensing and Regulatory Affairs. Choosing a Business Name
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Michigan Department of Licensing and Regulatory Affairs. MiBusiness Registry Portal
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Michigan Department of Licensing and Regulatory Affairs. Domestic Profit and Professional Corporations Filing Fees
8
Michigan Legislature. Michigan Limited Liability Company Act – Article 4
9
Michigan Legislature. Michigan Compiled Laws 450.4102
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Michigan Legislature. Michigan Compiled Laws 450.4501 – Members Admission Liability for Acts
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Michigan Legislature. Michigan Compiled Laws 450.4404
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Michigan Legislature. Michigan Compiled Laws 450.4505
13
Michigan Legislature. Michigan Compiled Laws 450.4904
14
Michigan Department of Licensing and Regulatory Affairs. Foreign Limited Liability Company
15
Michigan Department of Licensing and Regulatory Affairs. Annual Reports and Annual Statements
16
Michigan Department of Licensing and Regulatory Affairs. Annual Filings
17
Michigan Department of Licensing and Regulatory Affairs. Restore My LLC
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Michigan Legislature. Michigan Compiled Laws 450.4801 – Dissolution and Winding Up