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Advantages of Starting a Business in Michigan

Michigan is, generally speaking, a business-friendly state. It has a lot to offer for aspiring entrepreneurs. Boasting a diverse workforce and a low cost of living, Michigan is an underrated business oasis, where ambitious individuals from all walks of life have a real shot at success. Entrepreneurs are pleased to discover a variety of advantages, ranging from desirable tax setups to foreign direct investments and everything in between. Top benefits worth noting include:

No Local Sales Tax

Many would-be entrepreneurs analyze state-based sales taxes closely when determining where to start their businesses, and with good reason — this can have a huge financial impact.

What is often forgotten when examining state taxes is that a seemingly impressive tax structure at the state level can still leave the door open to high costs from local municipalities. This is not an issue in Michigan, where, while the state tax is a reasonable 6 percent, there are no local sales taxes to contend with. Better yet, the state offers a small business alternative credit.

Excellent Foreign Direct Investment Opportunities

Strong global connections are at the heart of Michigan’s most inspiring business success stories. As a top three state for foreign direct investments (FDI), Michigan has become a strong site for a variety of significant projects, ranging from manufacturing operations to IT.

Top investing countries that influence the Michigan economy include the United Kingdom and South Korea. Detroit takes this to the next level; according to the respected resource Site Selection, this city is a top metro area for FDI projects. This is advantageous not only for local workers, but also, for the many businesses that get a boost from FDI projects.

Low Cost of Living

Cost of living should be a major consideration when determining where to start a business, particularly if these are individually owned and operated. This is a major advantage of living, working, and running a business in Michigan, where the cost of living is about 10 percent lower than the national average. As such, Michigan is the nation’s fourth most affordable state.

Michigan’s low cost of living is compelling for many types of business owners, but especially of note to those launching sole proprietorships, general partnerships, and limited liability companies (LLCs). With these individuals and their families, it is especially important to stretch business earnings as far as possible. One of the advantages of starting an LLC in Michigan is that low cost of living can keep your personal and business expenses lean until your new business picks up and becomes profitable.

Supply Chain Access

Today’s complex and often dysfunctional supply chain is a huge source of concern for modern businesses, which have put up with unprecedented disruptions these past few years. While Michigan businesses are by no means immune to these issues, the state does offer a competitive advantage: a centralized location that provides excellent access to many parts of the nation, not to mention a significant share of Canada’s major cities.

With numerous commercial airports and deep water ports — not to mention an extensive network of freight railroads — it’s clear that Michigan is well connected. Its status as a Great Lakes state certainly helps. Strong ties to various cities grants Michigan a huge competitive advantage as supply chain fluctuations bring a huge source of uncertainty in other locations.

Rapid Growth

If you were reading this guide a decade ago, your takeaways might not be all that optimistic. In the 2000s and early 2010s, things looked rather bleak for Michigan as a whole and especially in Detroit. At the time, Michigan suffered one of the weakest economies in the nation — and this was in the midst of the already significant struggles of the Great Recession.

Impressively, however, the state has staged a remarkable recovery. In just over a decade, Michigan has gone from one of the weakest states — economically speaking — to boasting an economy that is quickly on the rise. Outlets such as Bloomberg have even recognized Michigan as having the best economy among states with higher populations.

Low LLC Fees

If you plan on starting an LLC, you may be excited about the prospect of achieving solid liability protection (and greater industry respect) at a reasonable cost. In some states, however, simply filing your LLC’s articles of organization will set you back hundreds of dollars. What’s more, you may need to continue paying hundreds every year as you complete the required annual reports.

In Michigan, both LLC filing and annual fees are quite low as compared to other states. In most cases, you can complete this essential step with just a $50 fee, followed by another $25 for the annual report. This is a low barrier to entry and excellent news for many aspiring business owners.

Downsides to Starting a Business in Michigan

Michigan offers a wealth of opportunities for aspiring business owners, but the state is far from perfect. There are some definite challenges worth considering and, while some are present in many states, a few are unique to Michigan. Depending on your situation, however, these concerns may actually be reframed as opportunities — or they may simply not be that big of a deal.

State Taxes

While the Michigan state taxes are generally regarded as reasonable, they still exist — and for many, that’s reason enough to avoid starting a business in Michigan. After all, in many states, no state tax is levied at all.

From a business perspective, the two main taxes that matter include the Michigan business tax and the corporate income tax (CIT). The former encompasses both a tax of 4.95 percent on local businesses and a rate of 0.8 percent for the accompanying modified gross receipts tax.

As you make plans for paying business taxes, keep in mind that Michigan’s C corporations must pay a flat tax of 6 percent. Meanwhile, several states manage to come in under 5 percent, while some are able to bypass these altogether.

Workforce Less Educated Than Neighboring States

While Michigan is home to several highly regarded colleges and universities, there is definitely room for improvement in regards to state-level academia. The state’s public school system typically ranks in the bottom half of the nation. Depending on the industry, this can be problematic, as it could make it more difficult to hire skilled employees.

Efforts are underway to address barriers to education, but these take years to implement — and even longer to see results. If any state is capable of turning things around, however, it’s Michigan. For now, however, businesses with a strong need for highly educated employees may have better luck hiring elsewhere.

Achieve Your Entrepreneurial Dreams in Michigan

There’s no denying that Michigan is open for business. While there are a few significant challenges to take into account, this remains a wonderful place to pursue your most ambitious goals as a budding entrepreneur.

No matter where you set up shop, you will need to complete an extensive process that includes an abundance of paperwork, not to mention fees, licenses, and certificates. It’s always worth your while to seek guidance, so you can clear these hurdles and get started with pursuing your entrepreneurial dreams.

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