Michigan Economy Overview

Currency

US Dollar (USD)

Working hours

40 hours/week

Public/bank holidays

12 public holidays

Capital

Lansing

Languages

English

Population

Approx. 10.03 million

Minimum hourly salary

$10.33 (As of 2024, State Minimum Wage Law)

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Employers who misclassify workers as independent contractors may face legal penalties, unpaid wages, and tax liabilities.

Fun fact

Detroit, Michigan, is known as “Motor City” due to its role in revolutionizing the automobile industry with companies like Ford, GM, and Chrysler.

Michigan is known for its lakeshores, rich history, and low cost of living. Interestingly, in addition to its attractions and affordability, Michigan’s economy has gained momentum in the last year and continues to increase its foreign direct investment (FDI) in the automotive and manufacturing sectors.

In recent years, Michigan has become a business-friendly state, providing a gateway for international businesses. The state’s workforce is considered well-educated, technically skilled, and diverse, assisting companies from all over the world with expansion.

Along with its strategic position and driven labor force, Michigan aims to increase investment opportunities for businesses through its investor incentives and programs. For example, the Michigan Business Development Program (MBDP) issues grants to small businesses for growth through job creation.

If you are thinking of doing business in Michigan, you’ll need to follow the Business Corporation Act in addition to the Michigan Employment and Labor Law when hiring employees. To protect your business from penalties for non-compliance with these regulations, discover how an Employer of Record (EOR) and the services provided by a recruitment agency can facilitate business expansion in Michigan.

Overview of Michigan's Economy

In 2024, Michigan was ranked as the 7th major transporter of goods, with exports valued at $61.6 billion. Michigan’s largest economic contributors are the manufacturing and automotive sectors. In 2019, Fiat Chrysler Automobiles (FCA) enlarged five of its plants in Michigan, and 2024 saw increases in revenue in automobile and light vehicle manufacturing of $113.3 billion.

Sector
Contribution to Michigan’s Economy
Gross State Product (GSP) Growth
Michigan’s GSP reached $565.5 billion in 2024, with projected growth of 2% in 2025 and 2.1% in 2026.
Manufacturing & Automotive Sector
Fiat Chrysler Automobiles (FCA) expanded five plants in Michigan, and the state’s automobile and light vehicle manufacturing generated $113.3 billion in 2024.
Exports & Trade
Michigan ranked as the 7th major transporter of goods in 2024, with exports valued at $61.6 billion.
Real Estate & Leasing
Real estate and leasing sectors played a key role in Michigan’s economic development, contributing to steady state growth.
Technical Services & Innovation
Michigan’s economy has seen significant development in technical services, supporting advancements in engineering and business consulting.

Michigan’s 2024 Gross State Product (GSP) stood at $565.5 billion, and despite slow growth over the last five years, the state has seen significant development in vehicle manufacturing, real estate, technical services, and leasing. Michigan’s economy is expected to continue to grow moderately with an increase of approximately 2% in 2025 and 2.1% in 2026.

Taxes

Employer Tax: 7% - 14%

Social Security (FICA)

6.2% 

Medical Insurance (FICA)

1.45% 

Federal Unemployment Tax (FUTA)

6.00% (first $7,000)

State Unemployment Insurance (SUI)

~0.06% – 10.3%

Employee Tax: 7.65%

Social Security (FICA)

6.2% 

Medical Insurance (FICA)

1.45% 

Income Tax

Flat 4.25% (applies to all taxable wages)

Overview of Michigan's Business Regulation

Michigan’s business laws are governed federally and by the state. Federal law oversees worker rights, tax laws, and securities, whereas state law covers anti-discrimination measures along with employee and employer rights.

Understanding these statutes is imperative for compliance, but if you are incorporating a business, Michigan law requires obtaining applicable licenses and permits along with registering for tax. The following overview provides a look at pressing business regulations in Michigan:

Company Registration

In Michigan, LLCs and corporations must register with the state by filing the requested documents with the Michigan Department of Licensing and Regulatory Affairs (LARA). Licenses are industry-dependent; for instance, if you are in the retail industry, you will need a sales tax license that can be obtained from the Michigan Department of Treasury. All new companies must register for tax by obtaining an Employer Identification Number (EIN) and filing personal and financial records.

Investment Laws

Michigan offers investor protection laws and regulations for pursuing international investment in the state. For example, the “prudent investor rule” requires that a fiduciary invest in so-called trust assets to avoid high-risk assets that could significantly decrease in value in a short period. 

For economic development, the Michigan Early Stage Venture Investment Act encourages investment in specific early-stage businesses. The Michigan Compiled Laws (MCL) regulate investments in public corporations by requiring the presentation of an investment policy. This policy must describe the company objectives and tradeable financial instruments. 

Michigan offers various investor laws that are broken down in more detail in Michigan’s Investor Guide.

Tax Policies

The corporate income tax rate in Michigan is 6%; however, small businesses are entitled to an alternative credit involving a tax rate of 1.8% on the business’s adjusted income. 

The Michigan Business Tax Act (MBT) enforces a business income tax of 4.95% and a gross receipts tax rate of 0.8%. Different tax rates apply to insurance and financial companies. Business tax in Michigan applies to the income of taxpayers conducting business activities in the state as per federal law. It does not only apply to corporations. 

To encourage foreign investment and local business development, Michigan offers tax credits, abatements, and deductions based on the company’s objectives, industry, and location.

What Are the Benefits of Doing Business in Michigan?

Investing in Michigan offers companies several advantages, including the following:

  • Business Incentive Programs: The following business incentive programs are offered in Michigan:
    • Michigan Business Development Program (MBDP): This program offers financial aid to businesses creating employment and investment in Michigan.
    • Commercial Rehabilitation Act: Tax incentives are provided to businesses to improve commercial property and create ongoing employment.
    • Jobs Ready Michigan: Companies receive grants for expansion projects that produce jobs and investment in the state.
    • Capital Access Program: This program allows companies to finance debts through private lenders.
    • Incentive Programs: Michigan offers various investment incentive programs, from tax credits to grants.
  • International gateway for businesses: Michigan is considered a gateway for international businesses because of its high level of FDI and strength in the automotive and manufacturing sectors. The state’s FDI totaled $13.1 billion between 2018 and 2022 in key industries such as automotive, metals, and electrical components. Michigan is strategically located in the Great Lakes area, making it easier to access North American and Canadian markets.
  • Low cost of living: Michigan’s cost of living is approximately 4% below the national average. Flat tax rates and low property and sales tax contribute to local affordability, making it easier for global businesses to rent or purchase commercial property.

What Are the Downsides of Doing Business in Michigan?

Despite the advantages, companies need to also consider the following downsides of doing business in Michigan:

  • Stringent regulatory structure: Michigan’s structured business regulations and licensing requirements can delay expansion and make hiring a workforce more difficult. While local government is looking at reforms to ease strict requirements, companies can rely on an EOR or an international recruitment agency to facilitate hiring while remaining compliant.
  • Harsh weather conditions: Michigan is known for its extreme winter conditions and weather events that often affect small business operations, including tourism. However, it is considered stable in terms of climate change.

Business Expansion into Michigan

Expanding your business in Michigan means incorporating a subsidiary or branch or hiring third-party services to help you hire the best talent in the state. 

Michigan Employer of Record (EOR)

An EOR in Michigan is suitable for foreign businesses that want to hire a workforce without a legal entity in the state. EORs provide payroll and benefits administration but also handle employment contracts and onboarding. They manage workplace conflict and handle the termination of employment contracts. A Michigan EOR can place job candidates and serve as the legal employer of your labor force.

Recruitment Agency

A Michigan recruitment agency, such as Remote People, can make hiring a competent workforce efficient by connecting employers to local top talent. Recruiters are experienced in sourcing vetted job candidates, conducting interviews, and screening applicants for job placement.

Michigan Professional Employer Organization (PEO)

A Michigan PEO is considered a co-employer because they help client companies with business activities from processing payroll and benefits to HR functions. A Michigan PEO will help you maintain compliance and assist with workers’ compensation. A PEO outsources its services to companies with an entity, such as an LLC or corporation, in Michigan.

Subsidiary Incorporation

To incorporate in Michigan, the following steps must be followed: 

  • Select a unique business name. 
  • Assign a registered agent. 
  • File Articles of Incorporation with LARA in person, by mail, or online. 
  • Get an EIN from the IRS. 
  • A U.S. corporation must file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN).
  • Open a corporate bank account and create the company bylaws.

Branch Registration

A branch office in Michigan must be registered with the Department of Insurance and Financial Services (DIFS). Based on the Michigan Insurance Code, a business must register as a Designated Responsible Licensed Producer (DRLP) to receive a license.

Business Opportunities in Michigan

Michigan has become an attractive investment destination for businesses because of its incentives, low taxes, and high level of FDI. The state offers various investor protection regulations and business laws that encourage economic progress through job creation and financial stimulus.

Business Opportunity
Reason
Foreign Direct Investment (FDI) & Incentives
Michigan attracts businesses with competitive tax policies, financial incentives, and strong FDI regulations that encourage economic growth.
Business-Friendly Regulations
The state has investor protection laws and business-friendly policies that support startups and large enterprises in expanding operations.
Workforce Expansion & Compliance
Businesses hiring in Michigan must comply with state labor laws, tax registrations, and licensing requirements to ensure smooth operations.
Recruitment & Talent Acquisition
Professional recruitment services and workforce placement solutions help companies find skilled employees while maintaining compliance.
Economic Growth & Job Creation
Michigan’s financial stimulus programs and investment policies drive job creation, supporting business expansion across multiple industries.

When you expand in Michigan and hire employees, you’ll need to adhere to Michigan’s labor laws and business regulations. From tax registration to obtaining the necessary business licenses, compliance with these laws will protect your company and the rights of your employees.

Are you about to start doing business in Michigan? Remote People can help. Contact us today to assess your business needs and learn how we can assist you in achieving your objectives.