The taxes an LLC pays in Michigan depend first on how the LLC is treated for federal tax purposes. Most Michigan LLCs are pass-through entities, which means the business itself owes no state income tax; the owners pay Michigan’s flat 4.25% individual income tax on their share of the profit.1Michigan Legislature. Michigan Code MCL 206-51 – Tax Rate An LLC that elects C corporation treatment pays Michigan’s 6% Corporate Income Tax at the entity level instead. On top of income tax, expect self-employment tax on pass-through profits, sales and use tax if you sell goods, employment taxes if you have workers, and a $25 annual filing with the state regardless of how the LLC is classified.
Federal Classification Decides What Michigan Taxes Apply
A single-member LLC defaults to a disregarded entity, meaning business income lands on Schedule C of your personal Form 1040.2Internal Revenue Service. About Limited Liability Company – Possible Repercussions3Internal Revenue Service. LLC Filing as a Corporation or Partnership4Internal Revenue Service. About Form 8832, Entity Classification Election5Internal Revenue Service. About Form 2553, Election by a Small Business Corporation
That federal choice carries directly into Michigan. Disregarded entities, partnerships, and S corporations funnel their income to the owners’ personal returns. C corporations pay Michigan’s entity-level CIT. The sections below follow that split.
Michigan Income Tax on Pass-Through LLCs
If your LLC is a disregarded entity, partnership, or S corporation, the LLC owes no Michigan income tax on its profits. Each owner reports their share on Form MI-1040 and pays the flat 4.25% rate on taxable income after state adjustments and exemptions.1Michigan Legislature. Michigan Code MCL 206-51 – Tax Rate The number flowing in comes from the federal return: Schedule C for a single-member LLC, the K-1 figure for a partnership or S corporation.
Quarterly Estimated Payments
Pass-through income has no withholding, so Michigan requires estimated payments any year you expect to owe more than $500 after credits and withholdings.6Michigan Department of Treasury. 2026 Michigan Estimated Income Tax for Individuals Use Form MI-1040ES, with deadlines of April 15, June 15, September 15, and January 15 of the following year.
To avoid an underpayment penalty, total payments and withholdings for the year must reach at least 90% of your current-year tax or 100% of last year’s. If your prior-year adjusted gross income topped $150,000 ($75,000 if married filing separately), that prior-year safe harbor rises to 110%.6Michigan Department of Treasury. 2026 Michigan Estimated Income Tax for Individuals A strong year catches a lot of owners here.
Withholding on Nonresident Members
If an LLC member lives outside Michigan, the LLC itself must withhold Michigan income tax at 4.25% on that member’s share of LLC income.7Michigan Legislature. Michigan Code 206-351 – Deducting and Withholding Tax on Compensation It applies to allocated profit, not to cash distributions, so the obligation exists even in a year the LLC pays nothing out. The nonresident member then claims the withheld amount as a credit on their own MI-1040.
Self-Employment Tax
For a disregarded entity or partnership LLC, your share of profit is subject to federal self-employment tax on top of income tax. The combined rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare.8Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax The Social Security portion stops at the first $184,500 of net self-employment income for 2026; Medicare keeps running with no cap.9Social Security Administration. Social Security Contribution and Benefit Base
In practical numbers, an LLC owner with $100,000 of pass-through profit owes roughly $14,130 in self-employment tax before any income tax calculation. Half of that is deductible against adjusted gross income, which trims the income tax bill, but the initial hit is real.
This is the main reason owners of profitable LLCs consider the S corporation election. With an S-Corp, only a reasonable salary paid to the owner-employee goes through payroll taxes; profit distributed above that salary avoids the 15.3% charge.10Internal Revenue Service. S Corporation Employees, Shareholders, and Corporate Officers The cost is payroll complexity and the IRS expectation that the salary genuinely reflects the work.
Michigan Corporate Income Tax for C Corporation LLCs
An LLC that elects C corporation status pays Michigan’s Corporate Income Tax at a flat 6% on business income apportioned to Michigan.11Michigan Legislature. Michigan Code MCL 206-623 – Corporate Income Tax Levy and Imposition The CIT base starts from federal taxable income with Michigan adjustments. If the expected CIT liability tops $800, quarterly estimated payments are required.
S corporation LLCs are generally not subject to the CIT. The tax reaches entities required or electing to file federally as C corporations, plus financial institutions and insurance companies.12Michigan Department of Treasury. Filing Requirements – Is an S Corporation Subject to the CIT An S-Corp LLC avoids the 6% entity tax, and its owners pay the 4.25% individual rate on the flow-through.
If your C corporation LLC sells into other states, you don’t owe CIT on all your income. Michigan apportions using a single sales factor: the Michigan share of total sales sets the share of adjusted business income subject to the 6% rate.11Michigan Legislature. Michigan Code MCL 206-623 – Corporate Income Tax Levy and Imposition An LLC selling only to Michigan customers runs the 6% against all its adjusted income.
The Flow-Through Entity Tax Election
Michigan offers a flow-through entity (FTE) tax that matters if you itemize federally. The federal SALT deduction has been capped at $10,000 since 2021, which limits how much state income tax you can deduct personally. The FTE tax shifts the Michigan income tax payment from the owners to the LLC itself.
Under the election, the LLC pays Michigan tax at the same 4.25% rate the owners would otherwise owe, and each member claims a refundable credit for their share of what the LLC paid.13Michigan Department of Treasury. Flow-Through Entity Tax – Frequently Asked Questions State tax owed is roughly a wash. The payoff is federal: the entity-level payment is deductible on the LLC’s federal return without hitting the SALT cap.
You make the election by submitting a payment through Michigan Treasury Online, and once made it binds the LLC for three years.13Michigan Department of Treasury. Flow-Through Entity Tax – Frequently Asked Questions The election is open to LLCs taxed as partnerships or S corporations. C corporation LLCs can’t use it, since they already deduct state taxes at the entity level.
City Income Taxes
Twenty-four Michigan cities levy their own income tax, including Detroit, Grand Rapids, Flint, Lansing, and Saginaw.14Michigan Department of Treasury. What Cities Impose an Income Tax If your LLC operates in one, you may owe city tax on income earned there.
Detroit charges the highest rates: 2.4% on resident partnership income, 1.2% on nonresident, and 2.0% on corporate partners. Most other taxing cities run 1% for residents and 0.5% for nonresidents. If your LLC has employees working in a taxing city, you also have to withhold city income tax from their wages. These are separate filings on top of the state obligations.
Sales and Use Tax
Any Michigan LLC selling tangible goods must register for sales tax, which is 6% of the sale price.15Michigan Legislature. Michigan Code 205-52 – Sales Tax Rate Registration happens through Michigan Treasury Online before any taxable sale. You collect the 6% at the point of sale and remit on a monthly or quarterly schedule depending on volume.
Use tax covers the mirror case: your LLC buys tangible goods from an out-of-state vendor that doesn’t charge Michigan sales tax, and you self-assess the 6% on those purchases.
Inventory bought for resale isn’t subject to sales tax at purchase. You give the seller Form 3372, the Michigan Sales and Use Tax Certificate of Exemption, and the responsibility for the exemption rides with you as the purchaser.16Michigan Department of Treasury. Michigan Sales and Use Tax Certificate of Exemption Form 3372 Misuse the certificate and you owe the tax, penalties, and interest.
Employment Taxes
Hiring employees adds two state obligations. First, register with the Michigan Department of Treasury for income tax withholding and deduct 4.25% from each paycheck. Second, contribute to the Michigan Unemployment Insurance Agency fund. The UIA tax applies to the first $9,500 of each employee’s annual wages, with the rate varying by employer based on claims history.17Michigan Department of Labor and Economic Opportunity. Michigan Employer Advisor – January 2026 New employers start at a default rate that adjusts as the state builds an experience record.
Quarterly UIA reporting is required, showing total wages and contributions due. These employment obligations apply no matter how the LLC is classified for income tax.
Annual Statement With LARA
Every Michigan LLC files an Annual Statement with the Department of Licensing and Regulatory Affairs to keep its good standing. The fee is $25 and the deadline is February 15 each year. The statement confirms the LLC’s registered office and resident agent.18Michigan Department of Licensing and Regulatory Affairs. Limited Liability Company Filing Information Letting the filing lapse for too long causes the LLC to lose good standing by operation of law, which blocks contracts, court access, and ordinary business activity. At $25, it’s the cheapest tax item on this list and the easiest one to miss.