How to Move an LLC to Michigan

An out-of-state LLC can change its state of organization to Michigan through statutory conversion. Michigan conversion is a legal transaction that changes an LLC’s state of organization, the state whose law primarily governs the company. An out-of-state LLC, also called a foreign LLC, that converts to Michigan becomes a Michigan LLC governed by the Michigan Limited Liability Company Act (Mich.

Comp. Laws ch. 450). The LLC is otherwise the same business entity before and after the conversion process. Whether the conversion can proceed also depends on the laws of the state the LLC is leaving. To find out whether your LLC qualifies and what the process involves, request a free analysis of your LLC move.

Some states use the name conversion for the legal procedure that changes an LLC’s state of organization, also called its domicile. In many of those states, a business can complete a conversion to change its domicile or to change its entity type.

The same statutory process can accomplish either goal. Michigan law authorizes one procedure, called conversion, that can change a business’s state of formation or change it into a different entity type. This article deals with conversions that change an out-of-state LLC into a Michigan LLC.

Why Business Owners Move LLCs to Michigan

A Michigan LLC conversion may make sense if a business owner moves to Michigan or if the owners prefer to have Michigan law govern the company. An owner might transfer an LLC to Michigan for any of the following reasons:

• Convenience. Owners who move to Michigan may find that it is more convenient for the LLC to be primarily governed by the jurisdiction where the owners live.
• Reduced reporting. Michigan’s $25.00 annual filing fee is lower than most states, so annual fees may be lower if an LLC that converts to Michigan does most of its business in Michigan and no longer has to file in the original state.
• Tax savings. A business can reduce its overall tax bill by limiting the number of states in which it must pay taxes. Michigan’s tax system is mostly favorable for business, ranking just outside the top ten best states for business tax climate. Conversion to Michigan may result in tax savings, especially if the conversion moves the LLC out of a high-tax state’s taxing authority.
• Legal advantages. Michigan is often rated as one of the Great Lakes region’s best states for businesses. If Michigan law complements the owners’ business plan or management structure, a conversion could help the LLC thrive.
• Easier hiring of professionals. Legal systems and tax rules are mostly state-specific. A business that needs an accountant, lawyer, or other professional needs someone familiar with the right state’s law. Converting an out-of-state LLC to Michigan can help owners who live in Michigan more easily find local professionals with the right expertise.

Michigan LLC Conversion Requirements

Michigan LLC conversion under Mich. Comp. Laws section 450.4709 is not available for every out-of-state LLC. An LLC converting to Michigan must comply with both Michigan law and the current state’s law. Michigan law controls the process and documents filed in Michigan and determines the conversion’s legal effects.

The current state’s law governs whether the LLC can convert to Michigan (the state must authorize conversion), the content of the written plan of conversion if required, the standard under which the LLC’s members or managers must approve the plan of conversion, and the effective date for the conversion.

Eligibility for Michigan LLC Conversion

An LLC considering conversion to Michigan must confirm that it is eligible for the process. The principal requirement is that the current state must authorize LLC conversions. Not all states do. The current state may call the process conversion, domestication, or another name. The important part is that the state must have a statutory procedure that lets an LLC organized in that state change its domicile to a new state.

Business owners must also review the LLC’s articles of organization and operating agreement to ensure there are no provisions that prevent conversion to a new state. If any restrictions are present, the LLC may need to formally amend the documents to allow the procedure.

An out-of-state LLC must also confirm that Michigan lets LLCs engage in the company’s field of business. Michigan allows most business areas. Some states prohibit LLCs from providing professional services, which are services that require a license or comparable authorization. Michigan recognizes professional limited liability companies (PLLCs), which are LLCs that provide professional services.

A professional service under Michigan law is a personal service provided to the public that requires a license or comparable legal authorization, including accounting, surgery, podiatry, professional engineering, and law practice. An out-of-state LLC that offers services that Michigan law considers professional services can convert to a Michigan PLLC. Before doing so, the company must ensure that it and its members have all required licenses and generally comply with Michigan’s PLLC laws.

Required Documents for Michigan LLC Conversion

The Michigan LLC conversion process involves preparing and adopting several conversion documents that must satisfy both states’ requirements. The conversion documents memorialize the terms of the conversion and control the company when the conversion takes effect.

• Plan of Conversion. A Plan of Conversion designed to comply with the requirements of both Michigan law and the law of the state that the LLC is moving from. The plan must include the out-of-state LLC’s name, entity type, and street address (if different from the Michigan LLC’s street address), the Michigan LLC’s name, street address, and principal place of business, the terms and conditions of the proposed conversion (including how the out-of-state LLC’s ownership interests convert into membership interests of the Michigan LLC), the terms and conditions of the Michigan LLC’s articles of organization, and any other provisions with respect to the proposed conversion that the LLC considers necessary or desirable.
• Michigan Certificate of Conversion. The Michigan Certificate of Conversion for filing with the Michigan Secretary of State, Corporations, Securities and Commercial Licensing Bureau (the Corporations Bureau).
• Michigan Articles of Organization. The Michigan Articles of Organization for filing with the Michigan Corporations Bureau. The Articles of Organization establish the LLC as a Michigan domestic entity.
• Conversion Document for Filing in Prior State. Depending on state law, this document may be called articles of conversion, statement of conversion, certificate of conversion, or a similar term.
• Michigan Operating Agreement. A state-specific Operating Agreement to properly structure the LLC as a Michigan LLC, provide rules for profit distributions and decision-making, clarify the federal income tax classification, and help provide maximum liability protection.
• Resolution Authorizing Conversion. A resolution approving the transaction and adopting the Michigan organizational documents as the LLC’s governing documents.

The Certificate of Conversion accepts electronic signatures under Michigan law. The Michigan Corporations Bureau allows e-filing for electronically signed documents. The Articles of Organization also allow both e-signing and e-filing through the Michigan Corporations Bureau.

The LLC also completes several administrative tasks to implement the conversion.

• conducting a preliminary name search with the Michigan Secretary of State to determine whether the LLC’s name is available in Michigan (if the name is unavailable
• a slight name change may be required)
• obtaining signatures on the Certificate of Conversion
• obtaining signatures on the Articles of Organization
• filing both documents with the Michigan Corporations Bureau
• filing conversion documents with the Secretary of State or equivalent agency for the state that the LLC is moving from

Cost of Moving an LLC to Michigan

The cost of moving an LLC to Michigan depends on the scope of work involved. The documents and filings described above require professional preparation to comply with both states’ requirements, and coordinating submissions with two separate state agencies adds further complexity. To find out what your specific move will cost, request a free analysis of your LLC move.

In addition to professional service costs, the Michigan Secretary of State charges filing fees for the conversion documents. The $75.00 total fee includes $25.00 for the Certificate of Conversion and $50.00 for the Articles of Organization.

The Michigan Corporations Bureau combines the two documents into a single form titled Certificate of Conversion (For use by an LLC Converting into a Business Organization). Once officially moved to Michigan, the LLC will incur a yearly fee of $25.00 for filing its annual report.

The LLC’s current state will also charge a filing fee for the document that state requires for LLCs converting to another state. For example, Michigan’s filing fee is $25.00 for LLCs changing domicile from Michigan to a new state.

An out-of-state LLC that converts to Michigan will also incur labor costs and, if applicable, registered agent fees. Labor costs are the amounts charged by the service provider the LLC retains to manage the Michigan conversion.

Service providers may charge a flat fee or charge by the hour, with fee amounts varying by provider. Work that goes into a conversion includes obtaining and organizing information, drafting the conversion documents, communicating with the business owners and state agencies, and filing conversion documents with state agencies.

Michigan law requires every Michigan LLC to have a registered office and registered agent on file with the Michigan Secretary of State. The registered agent must be an individual Michigan resident or a business entity with legal authority to do business in Michigan.

Using a commercial registered agent helps avoid making a member’s or manager’s information publicly available and also helps keep the LLC’s legal matters organized and consistent. Michigan commercial registered agents customarily charge around $100.00 to $200.00 per year for providing the service.

Processing Time for Michigan LLC Conversion Filings

A Michigan LLC conversion proceeds in several steps. The length of the process depends on how long each step takes.

Each step depends on the responsible person’s turnaround time: the business owners’ time to organize the necessary information, the service provider’s time to review the information and prepare the conversion documents, the owners’ time to approve and sign the draft documents (or request revisions), the service provider’s time to file the final conversion documents with state agencies, and the state agencies’ time to accept and process the filed documents.

The Michigan Corporations Bureau’s expedited processing rates start at $50.00 for 24-hour service and go as high as $1,000.00 for same-day review within one hour of receipt. The conversion becomes effective when the Certificate of Conversion is endorsed “filed” by the Michigan Secretary of State.

Moving an LLC Out of Michigan

Michigan permits outbound LLC conversion under Mich. Comp. Laws section 450.4708. A Michigan LLC can convert to another state’s jurisdiction, provided that the destination state also authorizes the procedure.

Michigan Outbound Conversion Requirements

A Michigan LLC that converts to another state must file a Certificate of Conversion with the Michigan Secretary of State. The outbound filing must include a plan of conversion approved by the LLC’s members or managers in accordance with Michigan law.

The plan of conversion must include.

• the LLC’s current name and street address (if different from the street address after conversion)
• the LLC’s name
• entity type
• street address and principal place of business after the conversion
• the statute that will govern the LLC’s internal affairs after the conversion
• the terms and conditions of the proposed conversion
• the terms and conditions of the organizational documents that will govern the LLC after conversion
• any other provisions with respect to the proposed conversion that the LLC considers necessary or desirable

Filing Fees for Moving an LLC from Michigan

The Michigan Secretary of State charges a filing fee of $25.00 for the Certificate of Conversion for an outbound conversion. The destination state will charge separate filing fees for its formation and conversion documents.

Legal Effect and Benefits of Michigan LLC Conversion

An out-of-state LLC that completes the Michigan LLC conversion process is still the same entity with the same original date of formation. The most important legal change is that after the conversion is effective, the LLC becomes a Michigan LLC governed by the Michigan Limited Liability Company Act.

Michigan conversion is typically the easiest and most cost-effective way to relocate an LLC formed in another state to Michigan. Conversion offers multiple advantages over alternate methods of moving a business to another state.

• Same entity. An out-of-state LLC that completes a Michigan LLC conversion continues to be the same company throughout the process. The LLC’s taxpayer history stays the same, and it can continue using the same Employer Identification Number (EIN).
• Same property rights. The Michigan LLC has the same property rights that the out-of-state LLC had before the conversion. The same entity still owns any real estate or other LLC assets, so the conversion is not treated as a transfer. There is no need to create deeds or other transfer documents.
• No need for asset transfers. The out-of-state LLC’s assets and liabilities survive the conversion and become the assets and liabilities of the Michigan LLC. There is no need to record new deeds or assign assets to the Michigan LLC.
• Same liabilities. All the out-of-state LLC’s liabilities from before conversion stay with the Michigan LLC. The conversion to Michigan does not change any of the LLC’s obligations or affect a member’s or manager’s personal liability for LLC debts from before the conversion.
• Contracts are still valid. An LLC conversion does not affect existing contracts, which remain valid and enforceable. The out-of-state LLC’s contractual rights and obligations become the Michigan LLC’s rights and obligations. There is no need to sign new agreements.
• Intact contracts. The out-of-state LLC’s contracts are still valid and enforceable. The Michigan LLC stands in the pre-conversion company’s shoes with the same contract rights and obligations as the out-of-state LLC before conversion.
• No business interruption. Day-to-day business can continue during an LLC conversion with no interruption to ordinary operations. If the LLC will do business in the original state after the conversion, it can register in that state as a foreign LLC. If not, the company does not need to register as a foreign LLC. Employment relationships are also unaffected, so the LLC need not release and re-hire employees.
• Legal proceedings. Legal and administrative proceedings involving the out-of-state LLC move forward as though conversion had not occurred. If the conversion results in a name change, the company substitutes its new name as a Michigan LLC for its prior name.
• Consistent ownership interests. When the conversion takes effect, ownership interests in the out-of-state LLC are converted into membership interests in the Michigan LLC or into cash, property, or company obligations under the terms described in the plan of conversion.
• No need to dissolve. Dissolving an LLC is a burdensome process that sometimes results in substantial legal fees. The Michigan LLC conversion process avoids dissolution of the company since it remains the same company throughout. Winding up and asset distributions are likewise unnecessary. No dissolution is necessary, so the company does not have to wind up affairs, distribute assets, or pay off liabilities except to the limited extent that the plan of conversion provides differently.

Michigan LLC Laws That Apply After the Move

The Michigan Limited Liability Company Act (Mich. Comp. Laws sections 450.4101 through 450.5200) imposes ongoing requirements on all domestic LLCs, including those formed through conversion from another state. An LLC that converts to Michigan becomes subject to these obligations immediately upon effectiveness of the conversion.

Michigan Annual Report and Compliance Requirements

Michigan requires domestic LLCs to file an Annual Statement with the Michigan Secretary of State every year by February 15. The filing fee is $25.00. This is a relatively low annual reporting requirement compared to other states, making Michigan an attractive jurisdiction for LLCs.

Michigan LLC Operating Agreement Requirements

Michigan refers to an LLC’s internal governance document as an “Operating Agreement” under Mich. Comp. Laws section 450.4102(2)(r). The Operating Agreement governs the LLC’s internal affairs, including the rights and obligations of members and managers, profit distributions, and management structure. The Operating Agreement is not filed with the state; it is maintained by the LLC as a private document.

Michigan Registered Agent Requirements

Michigan law requires every Michigan LLC to have a registered office and resident agent on file with the Michigan Secretary of State. The registered agent must be an individual Michigan resident or a business entity with legal authority to do business in Michigan. The registered office must be the registered agent’s residence or business office. An LLC’s registered office and resident agent are publicly available information to allow for service of process on the business.

Alternatives to Michigan LLC Conversion

When conversion is not available because the other state’s law does not authorize it, a merger-based reorganization achieves the same result. The reorganization involves forming a new Michigan LLC and merging the out-of-state LLC into it, with the Michigan LLC as the surviving entity.

The surviving LLC succeeds to all property, contracts, and obligations of the original LLC by operation of law. Understanding the full domestication and conversion process across all states is covered in detail in our guide to LLC domestication and conversion by state.

Post-Move Compliance for Michigan LLCs

After an LLC converts to Michigan, the business must comply with Michigan’s ongoing reporting and governance requirements. The converted LLC must file annual statements every year by February 15, maintain an operating agreement governing its internal affairs, maintain a registered office and resident agent in Michigan, and comply with all other requirements of the Michigan Limited Liability Company Act. These compliance obligations ensure that the LLC maintains its good standing and liability protection under Michigan law.

Understanding the full conversion process, including document preparation and coordination between both states, is covered in detail in our guide to LLC conversion.

Understanding the full conversion process, including document preparation and coordination between both states, is covered in detail in our guide to LLC conversion.