How to Start a Cleaning Business in Michigan

The state of Michigan is in midwestern part of United States. Because this state has the longest shoreline in the whole world, it is named after the Lake Michigan from the Ojibwe Indian term “mishigama” which means large lake or large water. It is bounded by Lake Saint Clair and the four among the five Great Lakes. Having 64,980 inland lakes, Michigan is third in having registered recreational boats in 2005. It is also a favorite tourist destination having $17.5 billion income per year which creates 193,000 tourism jobs. The capital city os this state is Lansing.

Michigan is the 8th most populated state in 2000. In July 1, 2008, the estimated population of the state was already 10,003,422. There was 0.7 percent increase since 2000 or a head count of 64,930. Most of the population resides in Detroit, Warren, Sterling Height, Lansing, and Flings.

The gross state product of Michigan in 2004 was at $372 billion with per capita income of $31,178 in 2003 which ranked twentieth in all states. Automotive is the main component of its output and the other major industries are cereal products, aerospace, information technology, iron, copper, furniture, and military equipment. Michigan became the US center of automotive industry since Henry Ford put up his automotive plant in Highland Park.

Starting and Operating Your Business in Michigan

Having your business in Michigan will ensure success because according to Fortune Small Business, it is included in Top 10 States for Small Business. Starting your business in this state is favorable because:

Free One-On-One Business Counseling – This is available for free to all qualified companies in Michigan. You can check the details in the website of Michigan Small Business and Technology Development Center (MI-SBTDC). There is also available guide in starting a small business in Michigan in this address http://www.gvsu.edu/forms/misbtdc/2007%20Guide%20to%20Starting.pdf.

Virtual Incubator – The state has AME or Accelerating Michigan Entrepreneurs. This is a virtual incubator in partnership between the Michigan Economic Development Corporation (MEDC) and the Michigan Small Business Technology Development Center (SBTDC) which provides the web-based services to businesses across the state.

Check the Details in Putting up a Business - You can get important information of starting a business in the brochure of Small Business Resources in http://ref.themedc.org/cm/attach/09096FEB-DAB1-47E8-998C-C5F48144048B/smallbusiness.pdf. This gives you idea about the business development services provided by MEDC to small businesses in Michigan.

Overcome your Business Obstacles – If you have problems with regulations and complexities of the government agencies in Michigan, you can get help from the office of Michigan Small Business Ombudsman.

Legal Structure and Registration of Business Name

In starting your business, it is important to determine first the business structure you want. This is because you will register your business to different agencies depending on its type. Different structure also requires unique financial report and it demands different taxes and exemptions. Therefore, you can seek assistance from a lawyer, accountant or business consultant on the type of your business structure. The state has the Small Business Technology Development Center to help you regarding this matter.

You choose the business structure which caters your present and future needs but do not use a complex one because you can change it later anyway. Consider your business size in deciding your legal structure. You can consider incorporating your business if: you have sufficient assets to cover the incorporating expenses; you have the capacity to follow additional government regulations and do the required related reports; and the stockholders need limited liability provisions.

Discussed below are the pros and cons of different types of business structures including as to where the application of these must be filed:

Sole or Single Proprietorship

Sole or Single Proprietorship is a type of business where there is only one owner who operates his business. Therefore, there is no distinction between the business and the owner’s personal assets. He would enjoy 100 percent the profits but suffer on the liabilities and debts of the business. There is no legal regulation in this type of business. He can name the business after his name but if he will use an assumed name or simply called "doing business as" (DBA), he can inquire to the office of local county clerk.

   Advantages
  • There is a an ease in establishing
  • The profit are all enjoyed by the owner
  • Owner has the full control in decision making
  • There is very low or minimal start-up costs
  • It enjoys some tax exemptions
  • Easy to stop the operation of the business
   Disadvantages
  • Owner have unlimited liability
  • There is a limited source of capital
  • The sole owner might not have enough experience to manage the business
  • There is limited continuity of the business because a death or illness of an owner will cause the closure of the business

Partnership

When there are two or more individuals who joined their forces to operate a business, it is called as partnership. There is little regulation in this type and there is a formal partnership agreement to address future conflicts between partners. In general partnership, the partners are liable with the debts of the business. It must also get a name certificate in the office of county clerk.

   Advantages
  • It easy to establish and operate the business
  • There are more expertise available to manage successfully the business
  • There will be more available capital because there are more partners who will contribute
  • The partners have the control in decision-making
  • There are tax exemptions for partnership
   Disadvantages
  • One partner has unlimited liability
  • The partnership will be terminated incase of death, withdrawal, or incapacity of one of the partners
  • With less number of partners, it is difficult to gather capital
  • Because of different partners, there is division of authority
  • It is also difficult to find the most suitable partners

Limited Partnership

Just like in general partnership, the limited partnership has at least two owners. The partners could be general or limited. The general partner enjoys the portion of the profit as stated in the agreement and has unlimited liability. He also manages the business unlike the limited partner who has no power to do so but he has limited liability. A Certificate of Limited Partnership is required by the Department of Labor and Economic Growth, in the Corporation Division of the Bureau of Commercial Services. They also provide the important information and they give assistance to the businesses. Their website is www.michigan.gov/corporations where the needed application forms, statutes, and related publications are available. Their contact number is 517-241-6470.

   Advantages
  • This business structure is more easy to establish rather than in corporation
  • It requires lesser start-up costs
  • The business is not liable incase of malpractice or negligence of associates
  • There are tax exemptions enjoyed by this business structure
   Disadvantages
  • The partners are personally liable for all the contractual debts and obligations

"C" Corporation

A Corporation is considered as legal entity with its own rights, liabilities, and privileges which is separate from those who formed and owned the business. The corporation composes three groups of persons: directors, officers, and stockholders. It does not involve the owners in earning assets, borrowing money, and even performing business functions. It is however subjected to more regulations of the government. The earnings of a corporation are subjected to double taxation if these are qualified as stockholder dividends making it called as "C" Corporation. This type of corporation enjoys the benefits of limited liability. Whether a regular corporation or a "c" corporation, it is required to form its "Articles of Incorporation" and must be submitted to the Department of Labor & Economic Growth, Bureau of Commercial Services, Corporation Division. Assistance and marginal information are provided in this office.

   Advantages
  • There is limited liability of the owner
  • It is more easy to raise capital because it can operate as a separate entity
  • The ownership of stocks is transferable
  • The operation of the business still continues even the owner becomes incapacitated
  • There is more expertise available to manage the business
   Disadvantages
  • This is regulated closely
  • It requires an extensive record keeping
  • It is expensive to establish this type of business
  • It requires double taxation, one for the business itself and the other one for the individual owners

Subchapter "S" Corporation

A Subchapter "S" Corporation is a special section in the IRS Code which allows the corporation to be taxed like a partnership or a single proprietorship but not in corporate rate. A business must meet first certain requirements in order to qualify as this. The pertinent information and the details in applying for this are all available in www.irs.gov. Their contact number is 800-829-4933. Articles of Incorporation are also filed in the Department of Labor & Economic Growth, Bureau of Commercial Services, Corporation Division.

   Advantages
  • Double taxation is avoided
  • The incurred losses of the business can be offset from the personal income of owners
   Disadvantages
  • There are some restrictions
  • It is required to operate on a calendar year for the reporting purposes

Professional Service Corporation or PC

A Professional Service Corporation or PC is composed of licensed professionals who are authorized legally to extend professional services. It is formed to legally allow the professionals to enjoy the advantages of a corporation, without altering the law on liability of an individual licensed person. An annual information update must be filed consisting of the list of stockholders and attested by an authorized or licensed professional.

   Advantages
  • The owners are protected from the negligence or malpractice of the associates
   Disadvantages
  • The ownership is restricted only to licensed practitioners with a specific occupation
  • There is more expensive start-up costs and more paperwork are required than in single proprietorship or partnership

Limited Liability Company or LLC

The Limited Liability Company or LLC can be considered as single proprietorship or partnership because of the tax and limited liability reasons. It is mostly preferred by newly existing businesses. The owners are called as member and it is comparable with the stockholders or limited partners. It must have an operating agreement with the member of a limited liability company, having one member or between members (if they have more members), regarding the affairs and conduct of the business. If the members fail to do this, they are not allowed to enjoy the benefits of having LLC. An Articles of Organization is required to be submitted to the Department of Labor and Economic Growth, Bureau of Commercial Services, Corporation Division.

   Advantages
  • There is limited liability of the owners
  • It enjoys some tax exemptions
  • It requires lesser start-up costs as compared with a corporation
  • There is greater flexibility with regards to management as compared with the corporation
  • It is less formal compared to the corporation
  • There is no restriction on the quantity or type of members
   Disadvantages
  • The transfer of ownership is more difficult rather than in corporation
  • The filing procedures are different in every state
  • This is the latest form of business structure so some practitioners or persons might not be aware or familiar with the proper organization and the operating issues of limited liability

Nonprofit Corporation or NPC

The Nonprofit Corporation or NPC is a corporate entity wherein there is a limitation on payment or distribution of the business’ assets, profit, or income except if it is in accordance to the corporation’s purposes. This is the same with receiving of profit of the members. A nonprofit corporation is organized under Michigan Corporation Act and there are several special acts which permits the formation of wide-ranged variety of this. The common for this are those involved in charitable, religious, and educational activities. Again, an Article of Incorporation must be submitted to Department of Labor & Economic Growth, Bureau of Commercial Services, Corporation Division. There are NPC which are qualified to tax exemptions of the federal government. This information is available at the IRS office. Their contact number is 877-829-5500 and their website is www.irs.gov.

There is also Michigan sales tax exemption offered by the state and the information can be obtained in Michigan Department of Treasury with contact number of 517-636-4660. The exemption is good only for the use of the official use of the organization. Therefore, selling of products to the public is not tax exempted. The other information are available online in the website of Department of Treasury at www.michigan.gov/taxes.

If you want to know if you are exempted to the Single Business Tax, you can ask the office of the Department of Treasury, Single Business Tax Division in 517-636-4700.

A nonprofit organization, collecting charitable contributions, need to be registered with the Department of Attorney General's Charitable Trust Section. Its address is Post Office Box 30214, Lansing, Michigan 48909 or in www.michigan.gov/ag and their phone number is 517-373-1152. The said office will give you free of charge the "Initial Charitable Trust/Charitable Solicitation Questionnaire".

Getting a Business Name

After deciding the structure of your business, you need to have a business name. Even if you filed a business name in your local county or in the Corporation Division of Bureau of Commercial Services, it does not mean that you have the right to that name. Therefore, you have to choose carefully your business name to avoid repetition. Monitor carefully if somebody will use your business name. In choosing a business name, you can refer to www.michigan.gov/corporations. This is an online publication of the Department of Labor & Economic Growth. You can also contact them in 517-241-6470 regarding this.

Your legal structure will determine where you will file your business name. For the sole proprietorships and co-partnerships, they can file in the county where the business is or in any business office of the county. There must be no repetition of business name to avoid deception and confusion. While the limited partnerships, corporations, and limited liability companies have to file to the Bureau. But again, the name must be guarded from any repetition.

Domain Name

In choosing a domain name, the following must be considered:

Obvious Blog vs Creative Domain Names – You have to decide first whether your domain name be obvious to the internet users or you will create your own. The advantage of obvious name is that people can easily find your blog in their keyword searches and it is also easy to remember. While if you are going to use a creative name, it may become your brand icon in case you become successful. With this, it will be unique, to avoid repetition with competitors.

Check Your Chosen Domain Name if it is Still Available – This is especially needed if you chose an obvious domain name. You can check this online including the extension of name you want to use. There are several websites which provide this type of service. They would even give you suggestions in case the name you want is already taken.

Make a List of Keywords You Will Use for Your Obvious Domain Name – Have time to search the related popular keywords which will fit to you blog. This is because you can use these words in your blog to help more customers or readers find you. You can visit http://weblogs.about.com/od/searchengineoptimization/tp/Top10SEOTips.htm for the tips in optimizing search engine.

Use Your Own Words - If you will use creative domain name, be sure that it is unique to avoid repetition. The following are some useful tips:

Business Logo

Here are steps to create your free logo:

       Step 1 – You can use the web for your free logo generator. Choose the website which provides a wide array of font size, style, color and background for your business logo. You can have your free logo in just about two days.
       Step 2 - Type the message you want in your business logo.
       Step 3 – Choose your desired font style, size, and color.
       Step 4 - Generate your free logo through the online service you had chosen.
       Step 5 - Save your logo as a .jpg file.

With these steps, you will not need extra software to download your logo therefore there is no string attached because you do not need to deal with any logo designer.

Employer Identification Number or EIN

The Employer Identification Number is a nine digit number given to businesses. It is used to identify whether it is for state or federal tax purposes. Commercial banks do not allow businesses with assumed name to open an account to them without this number.

For the single proprietorship, with no hired employees, they are not required by the state to get EIN. This is because they are using their personal social security number in determining their taxes. But with this, it would cause problems like identity theft. This is because information on your social security number will be opened to the public.

EIN is required in partnership, s corporation, c corporation, limited liability company, and single proprietorship which has hired employees.

Always remember that you cannot share your EIN. If you are a new owner of the business, you are not allowed to use the EIN of the former owner. But you can use your existing EIN if you will just add, open, or purchase a similar operation. A new EIN is required if it is a new business line.

The EIN form, also called as the SS-4, can be secured in the IRS office or in their website at www.irs.gov. Their phone number is 800-829-4933. It takes time to process the IEN number therefore it is recommended that this should be done early.

Registration for State Taxes

It is complicated to fully understand the different tax obligations and the preparation of taxes. If these are not given proper attention or they are not filed properly, you will be charged with penalties and other payments. Therefore, it would be a good help if you ask assistance from an accountant to teach you your different tax obligations and to prepare income tax returns. The following are the different tax obligations you have to know:

EMPLOYER TAXES - Any employer with at least one hired employee must set aside from the wages to be paid to the employee for the state, federal, or local taxes. Part of the responsibilities of the employers are paying the Medicare and Social Security systems and by withholding the amount from the wages as part of the employees’ participation to the payment. The state also requires all employers to pay solely the unemployment insurance of their employees.

SELF-EMPLOYMENT TAXES – These are for those who are self employed. A self-employed person is someone who operates trade, profession or business for himself or as partner.

PERSONAL INCOME TAXES – These are for the partner or single proprietors. They pay taxes, with the federal and state governments, on the realized income from the business. You will have also to file extra schedule which identifies the income and expenses of your business. The partners, in partnership, have to file partnership return aside from their personal income tax return. The corporations are paying taxes based from their business income with the corporate tax rates. But the shareholders and employees pay income tax from dividend received from corporation.

Most of the businesses are required by the state to prepare the "Estimated Tax" payments every quarter for the income tax, self-employment tax, and federal income tax.

You may contact, the Michigan Department of Treasury in (800) 827-4000 and (800) 829-1040 for the IRS office, for further details of tax obligations and the needed forms.

STATE BUSINESS TAXES – You can register your taxes in Michigan through filling the Form 518 (Registration for Michigan Taxes. With this from, you can already register for the sales, use and withholding taxes, single business tax, and other local taxes. This form can be secured from the Michigan Department of Treasury. You can also access online the other information on taxes and the questions and answers portion regarding registering your business. Their contact numbers are (517) 636-4660 or (800) 367-6263.

SALES, USE AND WITHHOLDING TAXES – A "sales tax" license is needed for those who are engaged in retailing tangible personal properties coming from Michigan. This is 6 percent of the retail sales receipt.

A "use tax" is required if you sell or lease tangible personal property to a customer in Michigan and you are coming from outside the state and the rate is 6 percent also. If you hired at least one worker, you are required to set aside from his wage a portion for the federal income tax which is under Internal Revenue Code. You can file the sales, use, and withholding tax application from to the Department of Treasury of Michigan.

SINGLE BUSINESS TAX – This is modified value-added tax imposed by Michigan Department of Treasury. It aims to replace some business taxes, which includes personal property tax, corporate net income tax, franchise tax, and others.

This Single Business Tax is the only business tax of Michigan. About 70.4 percent of the businesses in the state are paying $1,000 or less in this tax and 59 percent does not pay. Any business earning less than $250,000 in its annual gross receipts does not have to pay SBT.

LOCAL TAXES – The local governments in the state impose property taxes. But in recent reforms, it had slashed the rate of the business property taxes of more or less 33 percent. The tax rates are different in every locality so you have to consult the local office of the treasurer in your area. They can also give you the details of other existing local taxes and on the requirements of registering and paying the said taxes.

Getting a Michigan Business License

There are business' types and occupations in Michigan that are required to secure license from the state. And these require unique individual regulations and also the requirements in education, legal and examination. Most often, licensing fees are required in every profession or occupation.

There are certifications, permits or licenses required by the state based on the specific business type and operation. You can access the information on these online. You may check your county clerk to know if local licenses are required in your area.

ENVIRONMENTAL CONSIDERATIONS – The legal environment is becoming more complex for the operation of small businesses. This is because of the increasing attention on protection to consumers and preservation of the environmental recently. These are then interpreted to regulations and laws imposed by the government making the business owners trapped with restrictions and a lot of paperwork. You will be required to secure more than one permit if your business activities are affecting our environment such as:

You can get the permit from the Department of Environmental Quality with contact number of (800) 662-9278. As a business owner, you must check your local county clerk for the information regarding licensing and permits. Find time to do this even it entails a lot of work and costs because you will suffer twice for noncompliance like paying penalties, fines, or even closure of your business.

ZONING, BUILDING CODES, AND ORDINANCES - It is very important that you are sure enough that your facility is in accordance with local regulations and laws. You can contact the local authority for the zoning codes. Contact also a building inspector in your area to check the compliance on regulations that affects construction like your building, mechanical, electrical, plumbing codes, and the rules on construction, demolitions, occupancy, alterations, and the use of buildings. Even if you are a home-based business, there are also some local regulations and laws you have to check therefore it is recommended that you consult a lawyer to help you for this. If your business violates any of these, you will be charged or forced to stop your operation. There are products that cannot be manufactured in your home like poisons, fireworks, explosives, drugs, toys, and medical or sanitary products. There are also some strict rules in processing of food/drinks and manufacturing of clothes.

BARRIER FREE DESIGN – There is a special part in the building code of Barrier Free Design which was considered as public policy in the state since 1966. The Americans with Disabilities Act had mandated the federal requirements about barrier free design in 1992. The intention of the regulations is to make sure that the public facilities are accessible by all even the wheelchair users, elderly persons, and those who have temporary or permanent reduced coordination condition. There is no exception to the requirements of the state regarding Barrier Free Design unless the Board of this allows. They had established the guideline which describes the conditions of granting exemptions. A person must prove his reason, either in economic or technical, for the exemption. You can have the additional information for this in the Department of Consumer and Industry Services, Bureau of Construction Codes, Barrier Free Design Division in (517) 241-9300.

SERVICE MARKS AND TRADEMARKS - A service mark is a trademark and it is used in identifying and distinguishing the services sold or advertised by the person coming from the similar services. A trademark refers to the brand name of a product which is identified as the output of a particular manufacturer of distributor. A trademark could be a word, symbol, phrase, device, or the combination of these and it is used in identifying products.

Owners of marks that are registered in Michigan have at some point limited legal protection. Service marks and trademarks which are used and adopted in the state are registered in the Department of Consumer and Industry Services, Bureau of Commercial Services, Corporation Division. Their phone number is (517) 241-6400. Registration fee of $50 is required and this is good for ten years. The registered service mark and trademark can be used across United States.

Starting Your Cleaning Business in Michigan

Because of the increasing demand of the cleaning services, there are many who are deciding to put up a cleaning business. There is also an increasing incidence of working moms rather than staying at home and cleaning the house. They would just leave the chores in the house to the professionals so that they can spend more time with their family, spending holidays, or simply doing some relaxing activities. And this scenario becomes an opportunity to a cleaning business.

This business is attractive to business owners because it is easy to start and operate. This can be done at home either full time or part time using minimal investment. There are several resources in the internet where they offer step by step procedures of starting a cleaning business. The state of Michigan also made the rules and regulations easy access to potential entrepreneurs so that they can scrutinize first the details before entering to this kind of business.

The good thing also with this type of business is that it does not require a state license especially on those offering specific services like carpet cleaning or janitorial services. If products are sold to the public, the sales tax license is a must. You may request the form from the Michigan Department of Treasury in their contact number at (517) 636-4660. And for the information regarding environmental issues, you can contact the Department of Environmental Quality with their telephone number (800) 662-9278.

Conclusion

The state of Michigan has favorable business environment, actually it is included in the Top 10 States for Small Business by the Fortune Small Business. This state has excellent public policies; accessible and available expertise and resources on business development; minimal cost of operating a business; and very good tax structure of business which impose tax relief scheme and tax credit allowing reductions of taxes.

Another important thing to know is that the state has established the Michigan Small Business and Technology Development Center or MI-SBTC. It has 12 regional and 30 satellite offices. This has a written agreement with Small Business Administration of United States. There is one-on-one free business counseling and cheap trainings for those qualified businesses and entrepreneurs. The topics in their trainings like steps on starting a business, writing a business plan, and securing finances are helpful for the success of starting and operating a cleaning business. It has also virtual incubator which provide web-base services to small businesses across the state in their step by step journey to successfully operating their businesses.

Michigan is supportive to small businesses in the state because it recognizes the significance of these to the local economy.

The climate in the state also requires extensive cleaning of both houses and offices. It often experiences tornadoes, thunderstorms, and heavy lake-effect snow. There are also many potential market because it is the 8th most populated state and it is one of the favorite tourist destinations in United States.

Start a Cleaning Business




Learn How to Start a Cleaning Business In: