Starting a Business in Michigan
Even though it has a strong history of manufacturing and engineering businesses, Michigan is expanding into a technological haven for new IT companies. With a stable tax system and a low cost of living, Michigan is a good place to run a business. Michigan businesses can leverage multiple incentive programs to expand business growth. The most common are incentives that are given through tax credits, exemptions, grant/loan programs, and to companies who reside inside designated Renaissance Zones. Starting a business in Michigan can seem overwhelming at times. With all the things to do like getting a Michigan business license, verifying the status of an EIN number, checking on the status of filing a form 518, trying to pay Michigan sales tax or searching for a Michigan sales tax rate, outsourcing help is necessary sometimes.
STEPS TO STARTING A BUSINESS IN MICHIGANThe Michigan Department of Treasury sets parameters on the procedures regarding the collection of sales tax. After you have successfully performed a company name search with the Michigan Secretary of State and selected a name for your business, you can register for a Michigan Seller’s Permit. If you have not already done so with your other administrative tasks, it will also be necessary for you to do a complete analysis of the Business Licenses you will require. There have been changes in laws involving the collection and remittance of sales tax. If you sell products or taxable services to customers outside your home state that meet certain sales tax requirements, then you will have what is considered to be nexus. The three main types of nexus are referred to as affiliate nexus, economic nexus, and click through nexus. If you meet any of these situations, it may be necessary to obtain an SST streamlined sales tax permit. Once you complete all your other obligations, you can look into the different programs to help your business move forward. Below are some of the available incentive programs offered to Michigan businesses:
- Michigan Sales Tax Exemptions are given to any manufacturing company for equipment or machinery that is used in operations. This is applicable to the current 6% sales tax rate. Additionally, all companies that hold inventory will be exempt from local and state property taxes on that inventory. To be eligible all sales tax permitting obligations must be met.
- Michigan offers two different job exemption and reimbursement programs which are the Data Center Tax Exemption Project and the Work Opportunity Tax Credit Program. Sales Tax Exemptions are given to any data center equipment that is used in daily operations. Reimbursements are given to a business that can train workers who historically have difficulties with upward mobility by providing them with the skills and training needed for further development. These incentives can be applied to new hires as well as current employees. The work opportunity program provides credits worth up to $9500 for every full time job created depending on the targeted group.
- The Michigan Renaissance Zone Programs provide various benefits to incentivize businesses to relocate to economically distressed areas. The objective is to stimulate investment and bring growth to these distressed areas. The idea behind the programs is to eliminate state and local taxes (federal tax obligations are still in place) for businesses.
- Another program similar to the Renaissance Program is the Michigan Community Revitalization Program. Businesses are incentivized to invest in historical areas that have been neglected. Various grants or loans are available for investment projects with contribution limits set at 25% of the total project. Loans are capped at $10,000,000 and grants at $1,000,000.