Setting Up the Business: Structure, Tax ID, Name and Free Help

The licences that decide what can be sold are on The Michigan Rules. This page is the other half of the paperwork: what kind of business to be, the free federal tax number, registering a name, the taxes a one-person stall owes, the records that keep it inside the cottage food cap, and the free advice Michigan offers to anyone starting out. It ends with the steps in the order they are best done. Start Here places this paperwork at stage 1.

My first business was a coffee and ice cream shop in Beaufort, South Carolina, around 1990; the coffee stall in Michigan is still a plan, and the figures here are Michigan’s and the IRS’s own, as published in October 2026. I am not an accountant or a lawyer; the free counsellors at the end of the page are the right people to check a specific plan with.

The short version

Step	What	Cost (October 2026)
Structure	Start as a sole proprietor (nothing to file), or form an LLC with the state	Sole proprietor $0; LLC $50 to form, $25 a year
Tax ID	An EIN from the IRS, online, in minutes	Free. Any site charging for one is not the IRS.
Name	A sole proprietor trading under any name but their own files an assumed name (DBA) with the county clerk; an LLC files it with the state	County: $16 in Ingham (statutory minimum $6); LLC: $25. Both last five years.
Sales tax licence	Michigan Treasury, online	Free (details)
Income tax	Profit goes on Schedule C; self-employment tax of 15.3% on top of income tax; quarterly estimates once the tax owed passes $1,000 (federal) or $500 (Michigan)	—
Records	A separate bank account and a simple ledger from the first sale; cottage-food sales tracked against the $50,000 cap	Free to a few dollars a month
Zoning	Ask the township whether the home business is a permitted home occupation	Usually free to ask
Free help	Michigan SBDC, SCORE, MSU Product Center, chambers of commerce	Free or nearly so

Sole proprietor or LLC

A sole proprietorship is what a person is by default the moment they sell something on their own account. Nothing is filed with the state. The owner and the business are the same legal person: the business’s debts are the owner’s debts, and its profit is reported on the owner’s own tax return.

A limited liability company (LLC) is a separate legal entity formed by filing articles of organization with the Michigan Department of Licensing and Regulatory Affairs (LARA). Michigan’s statute, MCL 450.4501, states the point of it: “Unless otherwise provided by law or in an operating agreement, a person that is a member or manager, or both, of a limited liability company is not liable for the acts, debts, or obligations of the limited liability company.”

	Sole proprietor	Single-member LLC
To start	Nothing to file (a DBA if using a trade name)	Articles of organization, $50 (MCL 450.5101)
Each year	Nothing with the state	Annual statement, $25, due 15 February; $50 penalty if late
Federal tax	Schedule C on the owner’s return	The same, by default: a one-member LLC is taxed like a sole proprietor unless it elects otherwise
Business debts	The owner’s	The LLC’s, unless the owner signed for them personally
A customer’s claim	Against the owner	Against the LLC, but see below
Bank account	Recommended	Needed, and must be kept separate

The annual-statement rules carry two details worth knowing. An LLC formed after 30 September does not file the statement on the next 15 February. And the statute lowers the fee to $15 for statements filed after 30 September 2027. An LLC that stops filing is eventually put out of good standing and “may lose the rights to your business name and assumed names.”

What an LLC does not protect

The popular idea that forming an LLC makes the owner untouchable is wrong in three common ways:

• Personal guarantees. A bank loan, an equipment lease or a landlord’s lease for a new, small business will usually ask the owner to sign personally. That signature puts the owner’s own assets back on the line, LLC or not.
• The owner’s own negligence. If the owner personally scalds a customer, or roasts a bag that makes someone ill, the injured person can usually pursue the person who did it as well as the company. An LLC shields an owner from the company’s debts, not from their own acts. That is what liability insurance is for.
• Mixing money. An LLC whose owner pays groceries from the business account and deposits market cash in their own is inviting a court to treat the two as one. A separate account, used only for the business, is the cheap protection.

So when is an LLC worth $50 and $25 a year? For a one-person stall selling bags and cups, with a liability policy in place, the protection it adds is modest. It earns its keep when the business signs contracts in its own name (a lease, wholesale accounts, a commissary agreement), takes on employees or a partner, or holds equipment worth protecting. Many people start as a sole proprietor and form the LLC when the shop or the roaster lease comes in sight. A lawyer can say where the line falls for a particular plan.

The EIN

An EIN (Employer Identification Number) is the federal tax number for a business, the business’s equivalent of a Social Security number. The IRS is blunt about the price: “You never have to pay a fee for an EIN,” and “Beware of websites that charge for an EIN.” The online application issues the number immediately when approved.

A sole proprietor with no employees is not strictly required to have one; the IRS lists hiring employees, operating as a partnership or corporation, and paying excise taxes among the reasons. It is still worth getting, because it is free and it keeps the owner’s Social Security number off forms that suppliers, wholesale buyers and markets ask for. An LLC with employees must have one; banks usually ask for one to open a business account.

The business name

Selling under any name other than the owner’s own legal name (“Maple Street Coffee” rather than “Jane Smith”) needs a registered assumed name, commonly called a DBA (“doing business as”).

Business	Where to file	Fee	Lasts
Sole proprietor or partnership	The county clerk of each county where business is done (MCL 445.1)	The statute sets $6.00; counties add certified copies. Ingham County: $16 new, $14 renewal, with two certified copies	Five years (Ingham)
LLC	LARA, Certificate of Assumed Name (form 541)	$25 (MCL 450.5101)	Until 31 December of the fifth full year, renewable (MCL 450.4206)

Ingham’s clerk is explicit that “a DBA or Co-Partnership is not an LLC or corporation”; filing a DBA protects nothing and creates no company. Filing in person needs photo ID for every owner; filing by mail needs notarised signatures.

A registered name is not a trademark. A DBA tells the county who is behind a name; it does not stop anyone in the next county, or the next state, from using it. Checking a name before printing bags, and whether to register it as a trademark, is on Branding, Naming and Trademarks.

Sales tax

A sales tax licence is free, is registered online through Michigan Treasury Online, and several markets ask for a copy. Bags of coffee are exempt; anything in a cup is taxed at 6%. The details, including the concessionaire’s return for someone selling at only one or two events a year, are on The Michigan Rules and not repeated here. Bags posted to buyers within Michigan are taxed the same way as bags handed over (Selling Online and by Mail).

Income tax

For a sole proprietor or one-member LLC, the business does not pay income tax itself. Its profit lands on the owner’s return.

Tax	What	Source
Schedule C	Profit or loss from the business: sales minus the cost of goods (green coffee, bags, cups) and expenses	Form 1040
Self-employment tax	15.3% (12.4% Social Security + 2.9% Medicare) on net self-employment earnings, owed once they reach $400; half of it is deductible	IRS, Schedule SE
Federal income tax	At the owner’s ordinary rates
Michigan income tax	A flat 4.25% (MCL 206.51); the statute can trim it for a year when state revenue outpaces inflation	MI-1040
Federal estimated tax	Quarterly payments if the year’s tax owed will be $1,000 or more	Form 1040-ES
Michigan estimated tax	Quarterly if the year’s tax owed will exceed withholding by more than $500; due 15 April, 15 June, 15 September and 15 January	MCL 206.301

Self-employment tax is the surprise for most first-year vendors. A stall that clears $8,000 of profit owes roughly $1,100 in self-employment tax before any income tax at all. Setting aside a quarter to a third of each market day’s profit in a separate savings account covers both.

Deductions worth knowing:

• Cost of goods sold. Green coffee, bags, labels, valves, cups, lids, milk, honey used in drinks. Keep the receipts.
• Mileage. The IRS business rate for 2026 is 72.5 cents a mile from 1 January to 30 June and 76 cents from 1 July to 31 December (IRS; 70 cents in 2025). Driving to markets, to buy green coffee or to the bank counts; a log with date, purpose and miles is what makes it stick.
• Market fees, licences, insurance, the sales tax licence’s paperwork costs, card-reader fees.
• Equipment. The roaster, grinders, canopy and power station, deducted under the depreciation rules or, for many small items, in the year bought. An accountant settles which.
• The home office. The simplified method allows $5 a square foot, up to 300 square feet ($1,500), but only for space “exclusively used on a regular basis” for the business. A family kitchen where the roasting happens does not qualify on that test.
• The storage exception. IRS Publication 587 lets a seller deduct space used to store inventory without meeting the exclusive-use test, if all five conditions hold: the business sells products at wholesale or retail; the inventory is kept at home for the business; the home is “the only fixed location” of the business; the space is used regularly; and it is “a separately identifiable space suitable for storage.” Shelving in a dry basement holding the green coffee and finished bags is the case it was written for. (Michigan’s cottage food rules require that storage to be inside the house, not the garage: The Michigan Rules.)

Records, and the cottage food cap

Michigan’s cottage food exemption stops at $50,000 of gross sales a year ($75,000 for products priced at $250 or more), and MDARD may adjust that figure each October from 2026 (The Michigan Rules). MSU Extension reads the cap as applying separately to cottage foods, honey and maple syrup. Nobody files a report against the cap; the operator is simply expected to stay under it and to be able to show it.

A stall that sells cottage-food bags, honey and licensed cups from one table therefore wants its sales split by kind from the first day:

Column	Why
Date and market	The mileage log and the market fee
Bagged coffee and cookies (cottage food)	The $50,000 cap; sales-tax exempt
Honey	A separate cap, by MSU’s reading; exempt
Cups (licensed)	Not cottage food; taxable at 6%
Gear and T-shirts	Taxable
Sales tax collected	Owed to Treasury
Cash / card	Matching the card processor’s deposit

Bookkeeping, simplest first:

1. A spreadsheet, one row per market day with the columns above, plus a second sheet of expenses. Free, and enough for the first season.
2. The card processor’s reports. Square, Clover and the like categorise card sales by item if the items are set up that way (Taking Cards). Cash still has to be entered by hand.
3. Bookkeeping software such as Wave or QuickBooks, linked to the business bank account, once the receipts pile up or a second person is involved.
4. A bookkeeper or accountant at tax time, once there is a roaster to depreciate or an LLC with employees.

Keep receipts (a photo in a dated folder is fine) for as long as the IRS can ask about the return, and for equipment until it has been fully written off and sold.

A separate bank account

Open a business checking account before the first sale, with the EIN, and run every business dollar through it: market cash deposited, the card processor paying into it, supplies paid from it. It makes the Schedule C a matter of reading statements, it is the evidence an LLC needs that the company is separate from its owner, and it shows the cottage-food total at a glance. Many credit unions and community banks offer a free or low-fee small-business account; ask about monthly minimums and cash-deposit fees, since a market business deposits cash every week.

Zoning and the township

Michigan’s cottage food exemption does not override local ordinances (The Michigan Rules). Most townships and cities allow a home occupation (a small business run from a home) under conditions set in the zoning ordinance: no or few employees who live elsewhere, no exterior signs or a small one, no customer traffic, no outside storage, and limits on noise, smell and deliveries. A coffee roaster raises the smell question, and selling from the house raises the traffic question. Smoke, Air Permits and the Neighbours covers the smoke.

Questions for the township or city zoning office:

1. Is a home business that roasts and packs coffee for sale at markets a permitted home occupation in my zoning district? Does it need a permit?
2. Are there limits on smoke or odour from the roasting?
3. May customers collect orders at the house? May I put up a sign?
4. May a helper who does not live here work here?
5. Is a separate permit needed to park a food trailer at the house?

What to ask before signing a lease on a shop is on Opening a Coffee Shop.

Free help in Michigan

Who	What they offer	Cost
Michigan Small Business Development Center (SBDC)	One-to-one start-up consulting from regional consultants, training, market research; supported by the Michigan Economic Development Corporation (MEDC) and hosted statewide by Grand Valley State University	”No-Cost, Confidential Services”
SCORE	Volunteer business mentors, one-to-one, in person or online. Lansing has no chapter of its own; SCORE’s Ann Arbor Area chapter lists Ingham and Clinton counties in its area.	Free
MSU Product Center (Food, Ag and Bio)	Innovation Counselors for food and farm businesses: business planning, labels, nutrition facts, process authority, pH testing, regulations. Also the voluntary cottage-food registration (one-time fee of not more than $50) that keeps a home address off the label.	MSU’s own articles disagree: some call counselling free to Michigan residents; one describes unlimited counselling after a $100 application fee. Ask when registering.
MSU Extension	Food-safety classes and cottage-food guidance (Food-Safety Certification)	Class fees
Local chambers of commerce and downtown development authorities	Networking, sometimes small-business grants and façade programmes; useful once a shop location is in view	Membership dues for the chamber
MEDC (Michigan Economic Development Corporation)	State economic development; funds the SBDC; programmes mostly for larger or growing firms	—

For a coffee-and-honey business the MSU Product Center is the closest fit: it exists for Michigan food and agricultural products, and its counsellors deal with cottage food, labels and the step from cottage food to a licensed kitchen every day. The SBDC is the place for a business plan, a cash-flow forecast and, later, a loan application (Financing).

The checklist, in order

1. Talk to someone free first. Book an SBDC consultant or an MSU Product Center counsellor with the plan on one page. An hour of their time saves filing the wrong things.
2. Read The Michigan Rules and send the questions on it to MDARD and the county health department, in writing.
3. Ask the township the zoning questions above.
4. Choose a structure. Sole proprietor to start, or an LLC ($50 at LARA) if contracts, employees or a partner are coming.
5. Check the name against LARA’s business entity search, the county’s DBA list and a trademark search (Branding, Naming and Trademarks).
6. Register the name: county clerk (sole proprietor) or LARA (LLC).
7. Get an EIN from irs.gov. Free.
8. Open a business bank account with the EIN and the DBA or LLC papers.
9. Register for the sales tax licence through Michigan Treasury Online. Free.
10. Optional: register with the MSU Product Center to use a registration number on cottage-food labels instead of the home address.
11. Buy liability insurance and tell the homeowners insurer about the home roasting (Insurance).
12. Licences for cups: the county food service licence and, for a Transitory Food Unit or a shop, a certified food protection manager (Food-Safety Certification).
13. Set up the ledger with the columns above, and a savings account for tax.
14. Calendar the deadlines: estimated tax (15 April, 15 June, 15 September, 15 January), sales tax returns, the LLC annual statement (15 February), DBA renewal (five years), insurance renewal, and MDARD’s cottage-cap figure each October.
15. Apply to markets with the certificate of insurance, the sales tax licence and, where needed, the food licence in hand.

What is not known

• Whether a particular township treats home roasting as a permitted home occupation. Ordinances differ district by district, and nothing statewide settles it.
• The current cost of MSU Product Center counselling, given MSU’s own differing descriptions.
• Whether Treasury treats a blend of two roasted coffees as “prepared food”, which would make a blend taxable while a single origin is not. It is on the Treasury question list on The Michigan Rules.

Sources

• Michigan statutes: MCL 450.4501 (member liability), MCL 450.4206 (LLC assumed names), MCL 450.5101 (LLC fees), MCL 445.1 (assumed names with the county clerk), MCL 206.51 (income tax rate), MCL 206.301 (estimated tax).
• LARA: Annual Reports and Annual Statements; Limited Liability Company Forms.
• Ingham County Clerk, DBA and co-partnership filings.
• IRS: Get an EIN; Self-employment tax; Estimated taxes; Standard mileage rates; Simplified option for the home office deduction; Publication 587.
• Michigan Small Business Development Center.
• The Michigan Rules on this site, for the sales tax licence, the cottage food cap and the MSU Product Center registration.