Michigan real estate businesses face distinct entity compliance challenges: a strict February 15 annual statement deadline with no grace period, automatic loss of good standing after two consecutive years of missed filings, property tax uncapping when transferring assets to LLCs, and no Series LLC formation option forcing separate entities for each property. Managing a real estate portfolio in Michigan means juggling these compliance obligations across multiple property LLCs. Each LLC holding a rental property, each corporation managing commercial assets, and each partnership structure faces distinct compliance obligations with Michigan LARA (Licensing and Regulatory Affairs)—requirements completely separate from real estate broker licensing.
When a property LLC falls out of compliance with Michigan LARA, the consequences extend beyond administrative penalties. Title companies verify entity status before closing, and lenders require certificates of good standing for refinancing—meaning loss of good standing can halt transactions mid-process. After two consecutive years of failing to file required annual statements, an LLC loses good standing by operation of law under MCL 450.2922 and faces administrative dissolution. This guide covers the entity-level compliance requirements that real estate businesses must manage in Michigan, from registered agent obligations to annual statement filings and property transfer tax considerations.
Michigan requires LLCs, corporations, and other business entities to maintain specific compliance obligations with LARA, and these requirements vary based on your entity type and business activities. Professional LLCs face enhanced annual disclosure requirements under MCL 450.4909 that don't apply to standard LLCs, while entities engaged in real estate brokerage must obtain separate licensing under MCL 339.2508. Understanding these requirements for your specific structure prevents administrative issues that can disrupt your real estate operations.
Michigan LLCs operate under the Michigan Limited Liability Company Act (MCL 450.4101-450.5200), which sets the rules for how you form, manage, and maintain your LLC in the state.
Formation Requirements: LLCs must file Articles of Organization with Michigan LARA under MCL 450.4203, designating a registered office with a physical street address in Michigan and appointing a resident agent.
Annual Statement Requirements: Michigan requires all domestic LLCs to file an Annual Statement by February 15 each year with a $25 filing fee, according to Michigan LARA's official guidance. Foreign LLCs authorized to conduct business in the state must file their annual statements by February 15 each year (the same deadline as domestic LLCs), also with a $25 filing fee.
First-year exception: LLCs formed after September 30 are not required to file an annual statement on the February 15 immediately succeeding their formation. For example, an LLC formed on November 15, 2025 would not file by February 15, 2026, and would first file by February 15, 2027.
Late penalties: A flat $50 penalty applies immediately when an LLC's annual statement is filed after the February 15 deadline. The total cost for late filing becomes $75 ($25 base fee plus $50 penalty).
Loss of good standing: If an LLC fails to file its annual statement for two consecutive years, the entity loses good standing by operation of law under MCL 450.2922. This occurs automatically without additional state action, with formal administrative dissolution taking effect 60 days after the two-year delinquency period expires.
Most real estate investors prefer LLCs over corporations due to pass-through tax treatment and simpler operational requirements. Corporations may be appropriate for specific tax planning strategies, preparing for eventual public offering, or certain commercial structures with multiple classes of equity.
Michigan-specific limitation: Michigan does not authorize Series LLC formation. While MCL 566.41 defines "protected series" for fraudulent transfer analysis purposes, the Michigan Limited Liability Company Act contains no provisions allowing Series LLC creation. This forces Michigan real estate investors to form separate LLCs for each property requiring liability segregation, multiplying filing fees and administrative overhead.
Real estate entities formed outside Michigan must register as foreign entities when conducting business in the state, but passive ownership of Michigan property alone does not trigger this requirement. Under Michigan law, a Delaware LLC that acquires Michigan property as a passive investment and holds title without active management, systematic rent collection, or other business operations falls within a statutory safe harbor and does not require registration. However, registration becomes necessary when a foreign LLC actively manages Michigan properties, systematically collects rental income, conducts repeated property sales, or engages in other regular business operations in the state.
Michigan's "doing business" determination focuses on activity beyond passive ownership. Under MCL 450.5008(1)(i), "owning, without more, real or personal property" does not constitute transacting business in Michigan. This safe harbor allows foreign LLCs to hold title to Michigan real property as passive investments without triggering registration requirements.
However, active property management, including systematic rent collection, regular maintenance coordination, and ongoing operational control, typically exceeds the passive ownership exemption and requires foreign LLC registration through Form CSCL/CD-760.
Michigan LLC formation requires filing Articles of Organization with LARA, designating a registered office with a physical Michigan street address, appointing a resident agent, and filing annual statements by February 15 for a $25 fee.
Critical Property Transfer Consideration: Transferring existing real estate to an LLC triggers property tax uncapping, resetting taxable value to state equalized value according to Michigan's Transfer of Ownership Guidelines. Combined state and county transfer taxes of $8.60 per $1,000 of property value apply.
Michigan requires all domestic LLCs to file an Annual Statement by February 15 each year with a $25 filing fee, according to Michigan LARA's official guidance.
First-year exception: LLCs formed after September 30 are not required to file an annual statement on the February 15 immediately succeeding their formation.
Late penalties: A flat $50 penalty applies immediately when an LLC's annual statement is filed after the February 15 deadline. The total cost for late filing becomes $75 ($25 base fee plus $50 penalty).
Loss of good standing: If an LLC fails to file its annual statement for two consecutive years, the entity loses good standing by operation of law under MCL 450.2922. This occurs automatically without additional state action, with formal administrative dissolution taking effect 60 days after the two-year delinquency period expires.
Michigan does not impose an annual franchise tax or privilege tax on LLCs. Unlike states such as Delaware or California that charge annual franchise taxes regardless of activity, Michigan LLCs pay no entity-level tax solely for maintaining their existence.
By default, Michigan LLCs are treated as pass-through entities with no entity-level tax obligation under Michigan law. However, LLCs may elect into the Flow-Through Entity Tax at 4.25% of Michigan-allocated business income, or if the LLC elects corporate tax treatment at the federal level, it becomes subject to Michigan's Corporate Income Tax at 6%.
Most real estate holding LLCs structured as pass-through entities pay no entity-level Michigan tax, though members report their distributive share of income on personal Michigan tax returns. This contrasts sharply with Delaware LLCs, which pay a minimum $300 annual franchise tax regardless of activity level.
Foreign LLCs authorized to conduct business in Michigan face the same annual compliance obligations as domestic Michigan LLCs, including annual statements by February 15 each year with a $25 filing fee.
Foreign LLCs that fail to file for two consecutive years lose good standing status and face administrative dissolution. They must also maintain good standing in their home jurisdiction.
Michigan has implemented several significant compliance changes affecting real estate entities:
MiBusiness Registry Portal (Effective June 23, 2025): Michigan discontinued paper annual reports and launched the MiBusiness Registry Portal. All LLCs and business entities must now submit filings electronically through the portal at www.michigan.gov/fileonline. Annual statements must be filed by February 15 each year through the portal.
Michigan Marketable Record Title Act (MRTA) Deadline (September 29, 2025): Under the extended grace period for recording Notices of Claim under MRTA, September 29, 2025 represents the final deadline to record Notices of Claim to preserve property interests that would otherwise be extinguished. This affects LLCs and other entities holding real estate with long ownership histories. Failure to record by this deadline may result in permanent loss of property interests, including easements, restrictive covenants, mineral rights, and other encumbrances.
Earned Sick Time Act (Effective February 21, 2025): Real estate LLCs with 50 or more employees must comply with Michigan's Earned Sick Time Act, requiring accrual of 1 hour of sick time per 30 hours worked.
These changes create additional compliance touchpoints for Michigan real estate entities beyond traditional annual statement filings.
Every Michigan LLC must maintain a resident agent with a physical street address in the state. Under MCL 450.4207, the resident agent receives service of process, tax notices, and official state correspondence on behalf of the entity.
Do I need a separate registered agent for each property LLC in Michigan? Each LLC requires its own registered agent designation under MCL 450.4207, but you can use the same registered agent service across all entities. According to Michigan LARA's Registered Agent Guidance, professional registered agent services simplify this by providing a single point of contact for all your Michigan entities while meeting the statutory requirement for each LLC to have a designated agent.
What happens if my property LLC loses good standing in Michigan? An LLC that loses good standing cannot maintain lawsuits in Michigan courts and faces administrative dissolution under MCL 450.2922. This can delay property transactions and expose members to liability. Reinstatement requires filing a Certificate of Restoration of Good Standing ($50), submitting all delinquent annual statements ($25 per year), and paying accumulated late penalties ($50 per delinquent year). Michigan allows reinstatement at any time after dissolution with no maximum time limit.
Does my Delaware LLC need to register in Michigan if it only owns one rental property? Under MCL 450.5008(1)(i), "owning, without more, real or personal property" does not constitute transacting business in Michigan. If your Delaware LLC passively owns Michigan real estate under a triple-net lease or similar arrangement with minimal involvement, foreign registration may not be required. However, active property management, systematic rent collection from multiple tenants, or regular leasing operations typically exceed this exemption and trigger foreign registration requirements. Consult Michigan counsel for specific fact patterns.
What triggers administrative dissolution in Michigan? Administrative dissolution occurs automatically after an LLC fails to file annual statements or pay associated fees for two consecutive years under MCL 450.2922. LARA sends written notice at least 90 days before the two-year delinquency period ends. Sixty days after the two-year delinquency period is complete, the LLC is administratively dissolved.
Does Michigan impose franchise tax on property holding LLCs? Michigan does not impose a franchise tax or privilege tax on LLCs. By default, LLCs are treated as pass-through entities with no entity-level tax under Michigan law, the same as any other LLC structure. Michigan law provides no special tax exemptions or treatments exclusively for real estate holding LLCs. LLCs may elect into the Flow-Through Entity Tax at 4.25% of Michigan-allocated business income, or if the LLC elects corporate tax treatment, it becomes subject to Michigan's Corporate Income Tax at 6%. Most real estate holding LLCs structured as pass-through entities pay no entity-level Michigan tax, though members report their share of income on personal returns. However, transferring real estate into an LLC triggers property tax reassessment and combined state and county transfer taxes of $8.60 per $1,000 of property value.
Managing compliance deadlines, registered agent requirements, and annual filings across dozens of Michigan property LLCs creates ongoing administrative burden that diverts time from portfolio growth. Failing to file annual statements for two consecutive years triggers automatic loss of good standing, potentially halting transactions and exposing your business to liability.
For real estate investors with multi-state portfolios, Discern tracks different filing deadlines, fee structures, and registered agent requirements across all jurisdictions where your entities operate. The platform monitors entity status in real-time and alerts you to compliance gaps before they escalate into administrative dissolution or loss of good standing.
Ready to simplify your real estate entity compliance? Book a demo with Discern today and see how we can reduce your administrative burden while ensuring your Michigan entities stay in good standing.
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