Michigan LLC Taxes: 4.25% Flat Income Tax, Sales Tax and No Franchise Tax

Most new Michigan LLC owners ask the same question first: how much will the state take from the business? For a standard LLC, the answer is simpler than in many states. The LLC pays no Michigan franchise tax and no Michigan income tax at the entity level. Its profit passes through to the owners, who report their share on their Michigan individual income tax return at the flat 4.25% rate for the 2026 tax year. Sales tax at 6% applies to taxable sales, and a few elections and local rules can change the picture.

This guide covers the Michigan LLC taxes that matter for most new businesses, the recurring filings that go with them, and the points you should confirm with the agency before you rely on them. This is informational content, not legal or tax advice. Your facts decide the answer. Before you choose a tax classification or make a major decision, talk with a qualified CPA or attorney who works with Michigan businesses.

Michigan LLC Tax Rates at a Glance

Tax or charge	Rate or amount	Who pays	Notes
Individual income tax	4.25% flat (2026 tax year)	Each member, on their share of profit	A standard LLC is pass-through
Entity income tax	None for a standard LLC	Not applicable	The LLC itself pays no Michigan income tax by default
Corporate Income Tax	6%	The LLC	Applies only if the LLC is taxed as a C corporation
Franchise or gross receipts tax	None for ordinary businesses	Not applicable	The Michigan Business Tax ended for most taxpayers January 1, 2012
Sales tax	6% statewide, no local add-on	Collected from customers, remitted to Treasury	Requires a free Treasury sales tax license
Annual Statement	$25 per year ($75 for professional LLCs)	The LLC	Due February 15 each year
City income tax	Set locally	Depends on the city	Applies only in the 24 cities that levy it

No Franchise Tax for Ordinary Michigan Businesses

If you searched for a Michigan franchise tax, the answer for an ordinary LLC is that there is none. The Michigan Department of Treasury does not list a franchise tax among its business taxes, and the older Michigan Business Tax ended for most taxpayers on January 1, 2012. Ordinary businesses also do not pay a gross receipts tax, so your LLC does not owe Michigan a percentage of revenue simply for existing.

The one recurring state charge most standard LLCs pay is the $25 Annual Statement filed with LARA, covered below. It is a filing fee, not a tax on profit or revenue.

How the 4.25% Income Tax Works for LLC Owners

A standard Michigan LLC is a pass-through entity. The LLC does not pay Michigan income tax on its profit. Instead, each member reports their share of the profit on their Michigan individual income tax return, taxed at the flat 4.25% rate for the 2026 tax year. A flat rate has no brackets: the same percentage applies to every dollar of your share.

Here is the math, using the rate alone. Suppose a single-member LLC has $80,000 of Michigan taxable income for 2026. At 4.25%, the owner's Michigan tax on that share is $3,400. If two equal members each receive $40,000, each owes $1,700. Your Michigan taxable income can differ from your net profit because of state adjustments, so treat these figures as illustrations, not a prediction of your bill.

Nothing in a pass-through structure sets money aside for this tax, so plan for it throughout the year. Owners who wait until filing season often find the bill larger than expected. This guide states only the 2026 rate. Confirm the rate for later years with Treasury before you build a multi-year forecast.

When the LLC Pays the 6% Corporate Income Tax

An LLC can elect federal C corporation treatment. If it does, the LLC is subject to Michigan's 6% Corporate Income Tax on its income instead of passing that income through to the owners. The election is a federal tax choice, so the Michigan result follows it. The election changes who pays and when, and it can affect more than tax, such as how owners take money out of the business. Have a CPA model both paths before you choose.

Treasury also describes a small business alternative credit that offers an alternate rate of 1.8% of adjusted business income. Whether your LLC qualifies, and how the alternate calculation works in your case, are questions to confirm with Treasury or a CPA. Do not assume the 1.8% figure applies to your business.

The Optional Flow-Through Entity Tax

Michigan also offers an elective Flow-Through Entity Tax for LLCs taxed as partnerships or S corporations. It is a choice, not an automatic charge, and it changes how the business's income is taxed at the entity level. The rate, the election's timing and its effect on each owner's individual return are details to confirm with Treasury before you decide. Ask a CPA to run the numbers with and without the election, because the benefit depends on your owners' situations.

Sales Tax: 6% Statewide and a Free Treasury License

Michigan's state sales tax rate is 6%, with no local sales tax added on top. You charge one rate across the state, which simplifies the math but does not change which sales are taxable. Confirm with Treasury which of your products or services fall under sales tax before you set prices.

If you sell taxable items, you need a sales tax license from the Michigan Department of Treasury. The license is a free tax registration, not a business license. You can register online through Treasury's online business registration, and the license can arrive in as little as 7 business days. Register well before your first taxable sale, and do not plan a launch date around the fastest possible timeline.

Sales tax you collect from customers is money held for the state, not business revenue. Keep it in a separate account or ledger line from the first sale so it is never mistaken for profit.

City Income Tax: Only in 24 Cities

Michigan has about 275 to 280 cities, but only 24 of them impose a city income tax. If your LLC operates in one of those 24 cities, city income tax can apply on top of your state obligations. City rates and rules are set locally, so confirm the current rate and how it applies to your LLC with the city's tax office or clerk before you sign a lease or choose a business address.

Recurring Filings and Fees with LARA

The Michigan Department of Licensing and Regulatory Affairs (LARA), through its Corporations Division, receives and files the documents that form and maintain LLCs. LARA does not license businesses. The LLC filings that carry a cost are:

• Articles of Organization (Form CSCL/CD-700): $50 filing fee. The Articles must name a resident agent and a registered office. The resident agent must be a Michigan resident, a Michigan corporation or LLC, or a foreign entity authorized to transact business in Michigan. A P.O. box alone is not sufficient for the registered office. The name must contain the words Limited Liability Company or the abbreviation L.L.C. or L.C.
• Annual Statement (Form CSCL/CD-2700): $25, due February 15 each year, beginning the year after formation. An LLC formed or qualified after September 30 does not owe a statement on the February 15 immediately following. Professional LLCs pay $75 and incur a $50 late fee after February 15.
• Name reservation (Form CSCL/CD-540): $25, which holds the name for six months following the month of filing.
• Assumed name certificate (Form CSCL/CD-541): $25 for an LLC, effective through December 31 of the fifth full calendar year after filing.

Check name availability first on the MiBusiness Registry business search. File online through the MiBusiness Registry Portal, and use the LARA Corporations Division page for current forms.

Licensing Is Separate From Taxes

Michigan has no general statewide business license. Registering your LLC through the MiBusiness Registry is a filing that forms and maintains the entity. It is not a license to operate, and it does not satisfy any trade requirement. Licensing depends on what your business does. The LARA Bureau of Professional Licensing, the Bureau of Construction Codes, the Michigan Department of Agriculture and Rural Development (MDARD), the Michigan Liquor Control Commission (MLCC), the Cannabis Regulatory Agency, child care licensing (moved from LARA to MiLEAP in 2023) and other agencies each license different activities. Use LARA's State License Search to find out whether your business needs one.

Local rules add another layer. Counties and municipalities may require additional licenses or permits, and zoning, certificate of occupancy and health approvals can apply depending on your activity. Michigan has 83 counties, about 275 to 280 cities, about 255 to 258 villages and 1,240 townships, so the local office that matters depends on where you operate. If you run a sole proprietorship or general partnership instead of an LLC, your assumed name goes to the county clerk in each county where you do business, not to LARA.

A Tax Checklist for a New Michigan LLC

1. Decide the federal tax classification before you file anything that depends on it. Standard pass-through treatment means no entity-level Michigan income tax. A C corporation election brings in the 6% Corporate Income Tax.
2. File the Articles of Organization with LARA, name a resident agent with a physical Michigan address, and reserve a name first if you need time.
3. Register with Treasury for a sales tax license before your first taxable sale.
4. Calendar February 15 for the Annual Statement: $25 for a standard LLC or $75 for a professional LLC, starting the year after formation, with the timing exception for entities formed after September 30.
5. Confirm whether your business location is in one of the 24 cities with a city income tax.
6. Ask a CPA whether the Flow-Through Entity election fits your owners.
7. Set money aside for the 4.25% individual income tax on each member's share of profit.

Where to Confirm the Numbers

Treasury publishes Michigan tax information at michigan.gov/taxes. For formation and annual filings, use the LARA Corporations Division at michigan.gov/lara. The Michigan Small Business Development Center also works with new owners on planning questions. Tax rates, city rules and election details change, so check the source on the day you file.

Next Steps

A standard Michigan LLC has a simple tax structure: no franchise tax, no entity-level income tax, a 4.25% individual income tax on each owner's share, and 6% sales tax on taxable sales. The complications come from choices, such as a C corporation election, the Flow-Through Entity tax, or a location in a city with an income tax. Take those decisions to a CPA or attorney before you file. This article is informational only and is not legal or tax advice.