LLC | Fraser Blog

Five Stories That Matter in Michigan This Week – July 11, 2025

Collateral Consequences: How Criminal Convictions Can Jeopardize Your Professional License

When people think about the consequences of a criminal conviction, they typically focus on the immediate penalties: fines, probation, jail time. But licensed professionals—doctors, nurses, lawyers, teachers, real estate agents, and others—the consequences can extend far beyond the courtroom. A criminal case doesn’t just threaten your freedom. If you’re a licensed professional, it can threaten your livelihood.

Why it Matters: Licensed professionals have more at stake than the average person facing criminal charges, but with early legal counsel from an attorney who understands both criminal law and licensing law and a proactive plan, you can minimize the damage and, in many cases, preserve your ability to work. Don’t make the mistake of waiting until your criminal case is over to start thinking about your license. By then, it may be too late. Read more from your Fraser Trebilcock attorney.

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Supreme Court Restricts Scope of Nationwide Injunctions

In Trump v. CASA, Inc., the U.S. Supreme Court, on June 27, 2025, ruled 6–3 that federal courts cannot issue nationwide injunctions that block executive branch policies for individuals who are not parties to a lawsuit. Writing for the majority, Justice Amy Coney Barrett concluded that the Judiciary Act of 1789 authorizes injunctions only to the extent needed to provide “complete relief” to the plaintiffs before the court.

Why it Matters: This decision significantly limits the reach of federal court rulings and will impact how constitutional and administrative challenges are litigated—especially those seeking to block executive actions.

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Coverage Position vs. Reservation of Rights Letters: What They Are and Why Timeliness Matters

When a claim comes in and there are coverage issues, insurers have two key tools to protect their position: the Coverage Position Letter (CPL) and the Reservation of Rights (RoR) letter. These letters serve related but distinct purposes, and sending them promptly can help prevent miscommunication, disputes, and legal exposure.

Why it Matters: Timely, specific communication helps preserve legal defenses, avoid unintended estoppel, and demonstrate good faith. Whether used separately or together, these letters allow insurers to stay proactive, protect their position, and encourage a more informed dialogue with insureds. If you have questions about CPL or RoRs, or need assistance with drafting one, our insurance team can help. Learn more.

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Fraser Trebilcock Attorneys Facilitate $14 Million Sale for Local Family Business, Continue to Guide Clients Through Historic Wealth Transfer

Fraser Trebilcock attorneys Mark E. Kellogg and Robert D. Burgee recently facilitated the $14 million sale of a local family-owned business, ensuring its legacy of top-notch service will carry on well into the future.

Why it Matters: This successful transaction is a prime example of the expert legal counsel our attorneys provide as the largest wealth transfer in history continues to unfold. Our team represents a diverse range of clients—from purchasers and sellers to lenders and directors—in all facets of business transactions, including stock and asset acquisitions, corporate restructuring, mergers, and reorganizations. In June alone, Fraser attorneys closed business transactions totaling nearly $20 million, with deal values ranging from $200,000 to $14 million, highlighting our team’s dexterity in delivering lasting results for our clients. Learn more.

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Michigan Warns of Fraudulent Annual Statement Fee Scam Targeting Corporations and LLCs

Michigan’s Department of Licensing and Regulatory Affairs is warning businesses about a scam from “New Business Filing LLC,” a non-governmental entity sending official-looking solicitations demanding annual statement fees from Michigan corporations and limited liability companies. The fraudulent mailings imply that entities must complete an annual statement regardless of whether they have already filed their required documents with the state. LARA Director Marlon I. Brown emphasized that these deceptive mailings are not from the state agency, even though they appear official, and advised businesses to disregard them and only respond to correspondence directly from LARA.

Why it Matters: This scam specifically targets Michigan business entities and could result in unnecessary payments to fraudulent operators while creating confusion about legitimate state filing requirements. If you require assistance regarding your business’ corporate formation and filing issues, please contact a Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Five Stories That Matter in Michigan This Week – May 23, 2025

Thaddeus E. Morgan Recognized as a ‘Michigan Go To Lawyer’ for Construction Law in 2025 by Michigan Lawyers Weekly

Fraser Trebilcock Shareholder Thaddeus E. Morgan has been recognized by Michigan Lawyers Weekly as a ‘Michigan Go To Lawyer” in 2025 for Construction Law. “I am honored to have been recognized by Michigan Lawyers Weekly as a ‘Michigan Go To Lawyer’ for Construction Law,” said Mr. Morgan.

Why it Matters: Mr. Morgan is President of Fraser Trebilcock and has over 30 years of litigation experience in both state and federal courts in a wide variety of areas, including, commercial and business disputes, employment and shareholder litigation, construction, health care, real estate, insurance, and intellectual property. He is a former assistant prosecutor and assistant attorney general. Read more.

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Fraser Trebilcock Attorneys Secure Victory for Firm Client

The litigation team of Thaddeus E. Morgan and Andrew G. Martin obtained dismissal of a case for the firm’s client.

Why it Matters: The litigation team obtained dismissal of a case alleging assumption of a contract as part of a business acquisition rejecting plaintiff’s claim of the “mere continuation” doctrine. Learn more.

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NLRB Establishes Standard for Workplace Rules

The National Labor Relations Board (NLRB) has issued a ruling in Stericycle Inc., adopting a new legal standard for evaluating the lawfulness of employer work rules. Under the previous standard, an employer was not required to narrowly tailor its rules to promote its legitimate and substantial business interests without unnecessarily burdening employee rights.

Why it Matters: Workplaces may need to review existing policies to their employee handbooks to ensure compliance, and tailor their workplace rules to service legitimate business interests. Read more from your Fraser Trebilcock attorney.

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Organizing Your Business: A Step-by-Step Guide for Michigan LLCs

Starting a business involves critical choices that shape your success and safeguard your financial future. In Michigan, forming an LLC offers entrepreneurs a powerful way to protect personal assets, simplify taxation, and maintain management flexibility.

Why it Matters: Forming and maintaining an LLC in Michigan provides valuable liability protection and flexibility for your business. By maintaining proper governance, your LLC can serve as a solid foundation for your business ventures. Read more from your Fraser Trebilcock attorney.

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Navigating Bad Faith Claims: What Defense Attorneys Need to Know

Under the Michigan Uniform Trade Practices Act, an insurer is liable for penalty interest if it fails to timely pay a claim. “The purpose of the penalty is to penalize insurers for dilatory practices in settling meritorious claims, not to compensate a plaintiff for delay in recovering benefits to which he or she is ultimately determined to be entitled.”

Why it Matters: While it is important for insurers to train their claims professionals in background knowledge regarding bad faith law, including the factors above, there is no need to lead with fear. The biggest takeaway is that the opposite of “bad faith” is “good faith.” Therefore, claims professionals should be encouraged to utilize their best judgment with the information at the given time. Read more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Five Stories That Matter in Michigan This Week – May 16, 2025

Federal Government Sues to Block Michigan’s Climate Lawsuits Against Fossil Fuel Companies

The federal government has filed a preemptive lawsuit against Michigan to prevent the state from pursuing litigation against fossil fuel companies for climate change damages. Michigan had announced plans to join approximately similar lawsuits already pending in courts nationwide but was sued by the federal government before it could file.

Why it Matters: This unusual procedural move specifically references President Trump’s recent executive order on American energy production that criticizes climate-focused state actions.

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Governor Whitmer Signs Two Bills Into Law Revolving Around Financial Transparency for Public Officers and Candidates

Michigan Governor Gretchen Whitmer signed Senate Bills 99 and 100 into law this week, which focused on increasing transparency within the Michigan legislature, requiring public officers and candidates to report and specify any unearned income and/or securities they receive.

Why it Matters: Senate Bill 99 amends the Public Officers Financial Disclosure Act, including specifying that reporting requirements for unearned income and securities would have to include the origin and address of the sources and securities, and require the public officer to include the name of the lobbyist or lobbyist agent that made the gift payment. Senate Bill 100 amends the Candidate for Office Financial Disclosure Act, including specifying the reporting requirements for unearned income and securities would have to include the origin and address of the sources and securities.

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Organizing Your Business: A Step-by-Step Guide for Michigan LLCs

Why it Matters: Forming and maintaining an LLC in Michigan provides valuable liability protection and flexibility for your business. By maintaining proper governance, your LLC can serve as a solid foundation for your business ventures. Read more from your Fraser Trebilcock attorney.

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Navigating Bad Faith Claims: What Defense Attorneys Need to Know

Why it Matters: While it is important for insurers to train their claims professionals in background knowledge regarding bad faith law, including the factors above, there is no need to lead with fear. The biggest takeaway is that the opposite of “bad faith” is “good faith.” Therefore, claims professionals should be encouraged to utilize their best judgment with the information at the given time. Read more from your Fraser Trebilcock attorney.

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NLRB Establishes Standard for Workplace Rules

Related Practice Groups and Professionals

Insurance | Dakota Larson
Business & Tax | Andrew Martin
Labor, Employment & Civil Rights | David Houston

Organizing Your Business: A Step-by-Step Guide for Michigan LLCs

1. Liability Protection: An LLC creates a separation between business and personal assets, protecting members’ personal property from business liabilities. This means creditors generally cannot seize your personal assets to satisfy business debts.
2. Tax Flexibility: By default, LLCs – considered “pass through” entities – don’t pay federal taxes directly. Instead, LLC members pay taxes for the LLC on their personal tax returns.
3. Management Flexibility: LLCs can be either member-managed (all owners participate in operations) or manager-managed (designated managers handle day-to-day operations).

This guide breaks down the steps needed to organize and manage an LLC effectively, helping you establish a solid foundation for long-term business growth and security.

What Distinguishes an LLC from Other Structures?

When choosing a business structure in Michigan, many entrepreneurs opt for LLCs due to their unique blend of protection and flexibility. Unlike sole proprietorships that offer no separation between personal and business assets, an LLC creates a legal shield that protects your personal property from business liabilities while maintaining the same pass-through taxation benefits. Compared to corporations, LLCs free you from many formalities like mandatory board meetings and minutes, while avoiding the double taxation issue that impacts traditional corporations.

Michigan recognizes both single-member and multi-member LLCs, treating them virtually identically for formation purposes. Whether you’re a solo entrepreneur seeking control and simplicity or a team dividing ownership and responsibilities among multiple members, the LLC structure adapts to your needs. Single-member LLCs enjoy sole decision-making authority and straightforward sole proprietorship-like taxation, while multi-member LLCs distribute ownership, split profits according to agreed terms, and are taxed like partnerships by default.

The management structure you choose further tailors your LLC to your specific business needs. In the default member-managed structure, all owners actively participate in day-to-day operations and can legally bind the company in contracts and agreements. For businesses preferring separation between ownership and management, the manager-managed option allows designated individuals (whether members or not) to handle operations. This flexibility makes LLCs particularly attractive for entrepreneurs who want protection without excessive corporate formality.

Although Michigan doesn’t legally require an operating agreement, working with your attorney to create one strengthens your liability protection and clarifies how your business will function – from ownership percentages and capital contributions to profit distribution and decision-making protocols. This internal document becomes especially crucial for multi-member LLCs to prevent misunderstandings and establish clear procedures for everything from routine operations to member changes and potential dissolution.

Step-by-Step Process for Creating a Michigan LLC

Step 1: Choose a Name for Your LLC

Michigan requires that your business name be “distinguishable” from other businesses in the state. Your Michigan LLC name must include “limited liability company,” “limited company,” “LC,” or “LLC.” You cannot use words like “corporation” that suggest another type of entity.

To check name availability, you can search the Michigan business name database through the Department of Licensing and Regulatory Affairs (LARA) website.

Step 2: Designate a Registered Agent

A registered agent is the person or business you appoint to receive and forward important legal and tax documents. Michigan requires your registered agent to have a physical address (no P.O. boxes) in Michigan and be available during normal business hours.

Step 3: File Articles of Organization

The document required to form an LLC in Michigan is called the Articles of Organization. You can file online, by mail, or in person with the Michigan Department of Licensing and Regulatory Affairs. The filing fee is $50 (as of April 2025).

Your Articles of Organization must include:

- LLC name
- Purpose of the LLC
- Registered agent information
- Whether the LLC will be member-managed or manager-managed (if manager-managed)
- Name and signature of the organizer

Step 4: Create an Operating Agreement

Again, while Michigan doesn’t legally require an operating agreement, it’s strongly recommended to create one to establish how you’ll run your LLC. This is especially important for single-member LLCs to help prove the LLC is being operated as a separate legal entity in court, and for multi-member LLCs to define rights and obligations among business owners.

Step 5: Obtain an EIN (Employer Identification Number)

An EIN is also called a Federal Tax ID Number or Federal Employer Identification Number. If your LLC has more than one member, it must obtain an EIN from the IRS, even if it has no employees. Single-member LLCs may use the owner’s Social Security Number instead, but an EIN is recommended for privacy.

Step 6: Open a Business Bank Account

Keep your personal and business finances separate by opening a dedicated business bank account. This helps maintain the liability protection of your LLC by showing it’s truly a separate entity.

Managing Your Michigan LLC

All LLCs doing business in Michigan must file an annual statement with LARA by February 15th each year. The filing fee is $25 (as of April 2025). If you form your LLC after September 30, you don’t need to file a statement the following February.

Here are a few best practices for managing your LLC, mitigating risks, and remaining compliant on an ongoing basis:

1. Maintain Separation: Keep business and personal finances strictly separate with dedicated accounts and records.
2. Document Decisions: Record major business decisions, especially for multi-member LLCs.
3. Update Your Operating Agreement: Review and update your operating agreement as your business evolves.
4. Keep Good Records: Maintain detailed financial records, meeting minutes, and membership changes.
5. Stay Compliant: File annual statements on time and keep your registered agent information current.
6. Consider Professional Help: Consult with an attorney periodically to ensure ongoing compliance.

Conclusion

Forming and maintaining an LLC in Michigan provides valuable liability protection and flexibility for your business. By following the steps outlined in this guide and maintaining proper governance, your LLC can serve as a solid foundation for your business ventures.

Remember that while this guide provides a comprehensive overview, consulting with a Michigan business attorney for your specific situation is always recommended, especially for complex ownership structures or specialized industries.

This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions. When it matters in Michigan, we are the trusted legal advisors for businesses and individuals.

Andrew G. Martin is an experienced registered patent attorney with history working in the automotive, electrical, and agricultural industries. He regularly advises startups and small businesses on the patent and trademark prosecution process, assisting clients from start to finish. You can reach him at 517.377.0834 or at amartin@fraserlawfirm.com.

Five Stories That Matter in Michigan This Week – January 5, 2024

Reminder: Michigan LLCs Must File Annual Report by February 15

With the new year upon us, we want to remind you that limited liability companies formed with the Michigan Department of Licensing and Regulatory Affairs must file their annual report (called an Annual Statement) by February 15.

Why it Matters: LLCs that fail to file are subject to fines. More importantly, failure to file an annual report after two consecutive years results in an LLC falling out of good standing with the state of Michigan, which may lead to the dissolution of the entity. Contact a Fraser Trebilcock lawyer if you require help with corporate filing and reporting requirements.

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Michigan Minimum Wage Increased After New Year

Now that we’re into calendar year 2024, Michigan’s minimum wage has increased per the Improved Workforce Opportunity Wage Act of 2018 which establishes the annual schedule of increases. The minimum hourly wage increased to $10.33 per hour; the 85% rate for minors aged 16 and 17 increased to $8.78 per hour; the tipped employee rate of hourly pay increased to $3.93 per hour; and the training wage of $4.25 per hour for newly hired employees ages 16 to 19 for their first 90 days of employment remains unchanged.

Why it Matters: It’s important to be aware of new laws, and changes to existing laws, that have taken effect as of January 1, 2024. Contact us with any questions.

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Fraser Trebilcock Announces Department Chairs for 2024

Fraser Trebilcock announces new Department Chairs for 2024: Sean P. Gallagher, Administrative Law; Robert D. Burgee and Paul V. McCord, Business & Tax; Robert D. Burgee, Employee Benefits: Welfare/Health; David J. Houston, Labor, Employment, and Civil Rights; Michael P. Donnelly, Litigation; Jared A. Roberts, Real Estate; and Marlaine C. Teahan and Mark E. Kellogg, Trusts and Estates.

Why it Matters: A new year brings a renewed commitment to leadership within our firm. When it matters in Michigan, we are the trusted advisor for businesses and individuals requiring planning and consulting services, or facing legal and regulatory challenges, and our capabilities extend to wherever clients require counsel. Read more.

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Reminder: Prevailing Wage Act Being Reinstated in Michigan in 2024

It’s important for businesses to be aware of laws that will take effect in 2024. One is the reinstatement of Michigan’s Prevailing Wage Act (the “Act”), which will require contractors and subcontractors in Michigan to pay the prevailing wage and benefit rates to employees working on most state funded construction projects.

Why it Matters: A prevailing wage law was in effect in Michigan from 1965 until 2018 when the law was repealed. On March 24, 2023, Governor Whitmer signed the Act into law. It will take effect in March of 2024.

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How do you Defend an Amazon Neutral Patent Evaluation?

Amazon’s Neutral Patent Infringement Program (NPE) is Amazon’s version of a quasi-judicial court to resolve patent infringement disputes between sellers. It is akin to an arbitration or mediation overseen by an experienced and vetted patent practitioner. NPE is not a court of law, so any of the rulings are not prejudicial on any platform or marketplace other than Amazon.com. However, it aims to provide a more cost-effective method to resolve patent disputes between sellers.

Why it Matters: The program is initiated once a patent holder submits a complaint to Amazon through Amazon’s seller portal. The accused product is immediately removed from its Amazon listing and the accused infringer is notified. The accused infringer then may negotiate a settlement directly with the rights holder or agree to participate in the NPE program. Learn more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Business & Tax | Robert Burgee
Labor, Employment & Civil Rights | David Houston
Intellectual Property | Andrew Martin

Five Stories that Matter in Michigan This Week – October 7, 2022

Michigan Legislature Allocates $846 Million for Economic Development Projects

Michigan legislators recently approved $846.1 million to support economic developments projects in the state. The funding will be administered through the state’s Strategic Outreach and Attraction Reserve (SOAR) fund.

Why it Matters: As the economy slows, these funds will inject a needed boost for business and entrepreneurship in Michigan. In 2021, $1 billion in SOAR funds were distributed to aid corporations planning major projects.

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Lawsuit Emerges as City of Detroit’s Adult-Use Marijuana Ordinance is Challenged Again

A new lawsuit challenging the City of Detroit’s adult-use marijuana ordinance was filed recently in the U.S. District Court for the Eastern District of Michigan alleging that the revised ordinance the Detroit City Council passed still has the same issues as the original ordinance that led to multiple lawsuits.

Why it Matters: In August, a judge threw out two lawsuits that claimed the revised ordinance gave an unfair advantage to certain residents and that the new law would signal the end for existing medical marijuana facilities already in the area. Fraser Trebilcock cannabis attorneys will continue to monitor the situation for updates.

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New Legislation Will Allow Preprocessing of Absentee Ballots

A package of bills recently passed by the Michigan legislature with bipartisan support would allow local clerks two days to preprocess absentee ballots prior to election day. Additionally, enhanced security measures will go into effect, such as routinely removing deceased voters from the Qualified Voter File, and requiring a chain of custody logs for ballots placed in drop boxes. The recent changes are effective now, leading up to the November election.

Why it Matters: The legislation before us would remove the sunset to allow clerks to again use this tool to efficiently and securely process absentee ballots,” said Senate Elections Chair Committee Chair Ruth Johnson.

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New Scholarship Program Aimed at Helping Michigan’s Middle Class

The new Michigan Achievement Scholarship program will help Michigan families reduce the costs of attending various post-high school education programs. Public university students who are selected will receive up to $5,500 a year for five years, independent university students will be able to get up to $4,000 a year for five years, private trade school students $2,000 a year for two years and community college students $2,750 a year for up to three years.

Why it Matters: The Michigan Achievement Scholarship program is projected to double the number of the recipients who receive financial aid through the state’s various programs. And the new program seeks to reduce or eliminate the need for student loans for families across the state.

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Importance of Signing an Operating Agreement for Your LLC

It happens more often than individuals think and something small businesses should heed is the need to adopt an operating agreement at the start of your LLC. It may seem like an unnecessary step when you are starting out but waiting until the time is right or until you get big enough can often lead to forgetting about it completely.

Why it Matters: Failure to sign an operating agreement for your LLC may lead to issues for your small business that would otherwise be avoided. Learn more from a Fraser Trebilcock attorney on this topic.

Related Practice Groups and Professionals

Business & Tax | Klint Kesto
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Five Stories that Matter in Michigan This Week – September 23, 2022

CRA’s Fines Eight Cannabis Businesses Over Late Financial Reports

The Cannabis Regulatory Agency recently published their monthly disciplinary reports and eight cannabis businesses across the state have been fined for failing to submit annual financial reports by the required deadline.

Why it Matters: What comes with the territory of operating a business in a highly regulated arena, business owners both medical and recreational will need to be aware of deadlines for required financial reporting of their cannabis business operations.

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Majority of Legislators Could Run Again If Prop 1 Passes

A new analysis from the Citizens Research Council says that a majority of legislators, 89% of the 737 Michigan legislators, could run again for a seat if the Prop 1 (term limits and financial disclosures) ballot proposal passes.

Why it Matters: If this ballot proposal passes, the majority of past legislators have the option of running again for a legislative seat. Fraser Trebilcock election law attorneys will continue to follow and update news surrounding this ballot proposal.

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Importance of Signing an Operating Agreement for Your LLC

It happens more often than individuals think and something small businesses should heed is the need to adopt an operating agreement at the start of your LLC. It may seem like an unnecessary step when you’re starting out but waiting until the time is right or until you get big enough, can often lead to forgetting about it completely.

Why it Matters: Failure to sign an operating agreement for your LLC may lead to issues for your small business that would otherwise be avoided. Learn more from a Fraser Trebilcock attorney on this topic.

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Whitmer Names New Head of Cannabis Regulatory Agency

Brian Hanna, formerly an analyst in the Lansing Computer Crimes unit at the Michigan State Police, and deputy for the Kalamazoo County Sheriff’s Office, was tapped by Governor Whitmer to lead Michigan’s Cannabis Regulatory Agency (“CRA”). Immediately prior to his interim appointment, which took effect September 19, Hanna was the CRA’s manager of field operations, inspections and investigations.

Why it Matters: Hanna replaces former CRA executive director Andrew Brisbo, who will now lead the state’s Bureau of Construction Codes. In a statement, Hanna said “I look forward to reconnecting with stakeholders to ensure we have a clear and concise regulatory framework for oversight of this industry to promote continued growth in Michigan.”

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Will Electric Vehicle Incentives Under Inflation Reduction Act Actually Hurt Sales?

The Inflation Reduction Act includes billions in incentives for electric vehicle adoption, including $7,500 tax credits for EV purchases. However, many automotive manufacturers are not happy with the rules the bill imposes for vehicles to qualify for the credits.

Why it Matters: The opposition argue that the manufacturing, sourcing, and pricing rules, which require significant domestic sourcing of raw materials and manufacturing, are too aggressive and could result in most EV’s not qualifying for the federal incentives – therefore stifling sales for many manufacturers.

Related Practice Groups and Professionals

Energy, Utilities & Telecommunication | Michael Ashton

Business & Tax | Robert Burgee

Cannabis Law | Sean Gallagher

Election Law | Garett Koger

Importance of Signing an Operating Agreement for Your LLC

So, you and your little sister, Rachel, finally started that mitten-shaped decorative soap business you’ve always talked about – Nice! And your friend’s brother’s buddy helped you file for an LLC through the State of Michigan’s website and sent you the link to obtain an EIN from the IRS because the banks said you needed it to open a checking account. That’s it then, you’re all set and ready for the farmer’s market next weekend, right? Nope. You forgot to agree on the rules for running your business, the rules for how you and your sister will make the “big” decisions for your new company. We call these Operating Agreements and they are an important part of any small business – even if it’s just one person. There is nothing worse than having to stop the fun to argue about the rules in the middle of the game because no one can agree – no Rachel, landing on free parking does NOT mean you get all the money paid for the properties.

Let’s look at a few scenarios of how the life of your business can go awry without a one.

Scenario 1: You and Rachel start the business together and agree to split the business 80/20 since you put in all of the startup funding, make all of the soaps, and spend every weekend selling them at farmers markets from Port Huron to Petoskey, and all she did was set up the website – seems like a fair split. After a few months, things are going well and you decide to hire Rachel’s boyfriend, Ray, to expand your sales capacity and sell the soaps at more shows. Unfortunately, you quickly realize that Ray isn’t up to the task and he’s losing more soap than he’s selling – no biggy, you can just fire Ray (even though Rachel says Ray isn’t going anywhere); after all you own 80% of the business. Not so fast; because you and Rachel never signed an operating agreement that says that decisions would be made on the basis of ownership shares, you have to make decisions according to the Michigan Limited Liability Company Act (the Act) which says that each owner (the Act calls them Members) of the company gets one vote. So what now…the status quo wins and Ray stays.

Scenario 2: Rachel started a new company a few months ago and asks you to join. She did the usual start-up procedures like file the Articles of Organization to start the LLC and opened a checking account, but it was just her, so she didn’t think she needed an operating agreement. You both agree that the business is worth about $20,000 dollars, so you pay her that $10,000 you were saving to buy a new car. A few years go by and you and Rachel are happily employed by the company, pulling great benefits and a decent salary, and because you and Rachel work so well together, you even get a few thousand dollars in distributions every year. Unfortunately, Rachel decides to run off with Raul and sells out to her pal Rusty. After a week or two, Rusty tells you he appreciates you, but your services are no longer needed and terminates your employment. “Wait, what!?! We’re 50/50!” you say. Not quite, sorry. There was no operating agreement, remember? And you bought your share from Rachel. Rusty has talked to a lawyer and figured out that you are merely an assignee of 50% of Rachel’s interest in the company, you were never admitted as a member. So long great benefits and decent salary; oh and by the way, Rusty has no idea what he’s doing so those distributions are gone, too.

These two scenarios illustrate the pitfalls of small businesses failing to adopt an operating agreement for their LLCs. It may seem like an unnecessary step when you’re starting out, but waiting until the time is right or until you get big enough, can often lead to forgetting about it completely. If you are starting a business, or have started a business and you’re unsure about whether it is properly structured, you should make sure that you consult with an attorney who can help you write the rule book for your business and ensure that everyone is playing the same game.

This is a brief summary and does not constitute legal advice. If you have any questions, please contact Robert D. Burgee or your Fraser Trebilcock attorney.

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.

Five Stories that Matter in Michigan This Week – August 5, 2022

August 2 Michigan Primary Election Results

The outcome of the August 2 Republican primary for Governor saw candidate Tudor Dixon prevail. In the November general election, she will face incumbent Governor Gretchen Whitmer who ran unopposed. In the newly drawn 3^rd congressional district, Republican John Gibbs defeated incumbent Peter Meijer.

Why it Matters: As November and the general election gets closer, stay tuned for more insights as Fraser Trebilcock’s election law team will be closely monitoring the action.

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MEDC to Make $237 Million Available to Help Michigan Small Businesses

The Michigan Economic Development Corporation announced that Michigan has been approved for up to $237 million in State Small Business Credit Initiative (SSBCI) funding from the U.S. Department of Treasury.

Why it Matters: Small businesses impacted by the COVID-19 pandemic can apply for funds through private lenders and the MEDC would back the loans through the SSBCI program. Learn more on the topic here.

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Ballot Initiative Aims to Increase Minimum Wage Targets 2024 Ballot

The Raise the Wage MI ballot initiative proposal aims to raise Michigan’s hourly minimum wage to $15 over the course of five years. The organizers behind the ballot initiative are reported to have secured more than 610,000 signatures and delivered them to Michigan officials last week.

Why it Matters: The issuance of a stay until February 19, 2023 follows the ruling by the Michigan Court of Claims stating that the state legislature’s adoption and alteration of a 2018 ballot initiative that would have raised minimum wage to $12 by 2022 was unconstitutional. This ruling has been appealed, but even if it gets overturned, Michigan may still see an increase to minimum wage if the Raise the Wage MI initiative is passed.

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New Law Allows Non-Profit Corporation to be a Member of Limited Liability Company

Senate Bill 926 was recently signed into law by Governor Whitmer, which changes the definition of a person in the limited liability company act, allowing nonprofit corporations to be members of limited liability companies (“LLC”).

Why it Matters: Michigan now joins other states that allow nonprofits to create LLCs that do not involve any financial gain or profit to perform certain functions while still maintaining their nonprofit status.

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Michigan Senate Judiciary Committee Approves Texting While Driving Bills

The Michigan Senate Judiciary Committee approved a package of bills expanding the scope of Michigan’s texting while driving laws, which would make requirements more stringent and penalties for violations more costly. The bills explicitly address social media use and live streaming.

Why it Matters: Distracted driving is dangerous. In 2020, according to the National Highway Traffic Safety Association, 3,142 people were killed in motor vehicle crashes involving distracted drivers. Distracted driving is also costly for drivers, as those who violate distracted driving laws tend to see their insurance rates shoot up.

Related Practice Groups and Professionals

Election Law | Garett Koger

Business & Tax | Robert D. Burgee

Business & Tax | Ed Castellani

Insurance Defense | Emily Vanderlaan

Five Stories that Matter in Michigan This Week – July 22, 2022

COVID, Force Majeure, and Frustration of Purpose

Courts have rejected COVID-related force majeure and frustration of purpose arguments on the reasoning that the pandemic and its effects were foreseeable. Now in its third year, disruptions related to the pandemic are no longer unforeseeable and businesses should take note.

Why it Matters: COVID-related frustration of purpose and force majeure are not cure-alls, and courts will not take these arguments at face value. However, with the right facts, frustration of purpose or force majeure arguments can be successful. Businesses should take positive steps to ensure that their interests are protected if/when COVID comes knocking again.

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Proposed Short-Term Rental Legislation Remains Stuck in Michigan House

Local communities will be limited in their ability to regulate short-term housing rentals if a bill passed by the Michigan House of Representatives, House Bill 4722 (“HB 4722”), becomes law. However, the bill remains on hold in the Michigan House, as powerful interest groups—local governments and Michigan realtors, in particular—remain at odds over the bill.

Why it Matters: The bill restricts local communities from adopting or enforcing zoning ordinance provisions that have the effect of prohibiting short-term rentals. On the one hand, local governments argue that the bill would undermine local control over zoning. On the other hand, realtors argue that the bill would dampen the real estate market. A lot is at stake, as Michigan homeownersreportedly made more than $250 million from Airbnb rentals alone in 2021.

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Decreased Costs Trending for Medical Marijuana Licenses

Last month the Cannabis Regulatory Agency (CRA) announced that medical marijuana facilities that need to renew their license or obtain a new license will pay less in fees for the upcoming fiscal year. Fees for each class and type of business have been reduced, a trend that started last year when the CRA reduced fees for this current fiscal year.

Why it Matters: As the number of medical licensees in the state continue to grow, associated costs of getting a new license or renewing are decreasing. If you have any questions or seeking to acquire a medical marijuana license, contact our cannabis attorneys.

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New Law Allows Non-Profit Corporation to be a Member of Limited Liability Company

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Paid Sick Leave and Minimum Wage Laws Up in Air

Following the ruling by the Michigan Court of Claims recently, the “adopt and amend” strategy taken on by Michigan’s legislature in 2018 to find a compromise for two ballot initiatives which would have increased the minimum wage and enacted a paid sick leave law, was deemed unconstitutional.

Why it Matters: It is anticipated that the Michigan legislature will appeal the decision and request a stay. If the decision is not reversed, then changes will go into effect immediately. The state’s minimum wage will increase to $12 an hour, tipped employees will receive an increase, and nearly every size and type of business will receive 72 hours per year of paid sick time leave.

Related Practice Groups and Professionals

Litigation | Matthew Meyerhuber

Real Estate | Jared Roberts

Cannabis | Klint Kesto

Business & Tax | Ed Castellani

Labor, Employment & Civil Rights | Aaron Davis