Michigan Treasury Online - Defined Terms

A

Assumed Name - Business name.

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C

C Corporation - A corporation (sometimes referred to as a C corporation) is an independent legal entity owned by shareholders. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts the business incurs.

CAC - Customer Assistance Center for Michigan Business One Stop.

CIT - Corporate Income Tax. CIT replaced the Michigan Business Tax (MBT) effective January 1, 2012.

COL - Corporate Officer Liability.

Concessionaire - A person who sells at only one or two events in Michigan per year.

Corporation - A corporation is a legal entity having its own rights, privileges and liabilities, apart from those of the persons forming or owning the corporation. It is the most complex form of business organization and is comprised of three groups of people – shareholders, directors, and officers. The corporation can own assets, borrow money, and perform business functions without directly involving the owner(s) of the corporation. The corporation is subject to more government regulation than proprietorships or partnerships. Corporate earnings are subject to “double taxation” when they are passed through as stockholder dividends. However, corporations have the advantage of limited liability.

To determine which type of corporation is appropriate for your business, please consult a CPA, tax attorney, or other expert on business liability and business tax. Depending on the corporate purposes, there are other types of corporations that incorporate under special acts. One Stop cannot provide legal advice.

For more information from the Department of Licensing and Regulatory Affairs Corporations, Securities & Commercial Licensing Bureau, Corporations Division, or their contact information, click on Corporation.

D

DBA - Doing Business As (business name).

Domestic Corporation - A corporation is a legal entity having its own rights, privileges and liabilities, apart from those of the persons forming or owning the corporation. It is the most complex form of business organization and is comprised of three groups of people – shareholders, directors, and officers. The corporation can own assets, borrow money, and perform business functions without directly involving the owner(s) of the corporation. The corporation is subject to more government regulation than proprietorships or partnerships. Corporate earnings are subject to “double taxation” when they are passed through as stockholder dividends. However, corporations have the advantage of limited liability.

For more information from the Department of Licensing and Regulatory Affairs Corporations, Securities & Commercial Licensing Bureau, Corporations Division, or their contact information, click on Corporation.

Domestic Ecclesiastical Corporation - Section 178 of the General Corporation Act (PA 327 of 1931) defines an ecclesiastical corporation as one whose purpose is the teaching and spreading of religious beliefs and principles.

For more information from the Department of Licensing and Regulatory Affairs Bureau of Commercial Services, Corporation Division, or their contact information, click on Corporation.

Domestic Non Profit Corporation - Nonprofit corporations are those formed in which members may not receive any profits of the corporation. A nonprofit corporation is formed under the Michigan Nonprofit Corporation Act. Some purposes for which nonprofit corporations are commonly formed are those involving religious, educational, and charitable activities.

For more information from the Department of Licensing and Regulatory Affairs Bureau of Commercial Services, Corporation Division, or their contact information, click on Corporation.

Domestic Professional Service Corporation - A professional service corporation, as the name implies, is a corporation made up exclusively of licensed professionals. Licensed professionals are those people who have been legally authorized to provide such a professional service. The professional service corporation may be formed by one or more licensed persons to render professional services. The annual Information Update filed by a professional service corporation must list the shareholders and attest that all are licensed or authorized to provide the professional service. Professional service corporations are formed to give professionals the benefits of a corporation, while not altering the law involving liability of the individual licensed person.

For more information from the Department of Licensing and Regulatory Affairs Bureau of Commercial Services, Corporation Division, or their contact information, click on Corporation.  

Domestic Profit Corporation - Domestic profit corporations are formed for the purpose of generating profit for shareholders. A corporation is generally composed of three classes of persons: shareholders, directors, and officers. The shareholders own the corporation, elect the directors, and have the right to vote on major events of the corporation. Directors are responsible for managing the corporation’s affairs. Officers are persons chosen by the board of directors to run the day-to-day operations of the corporation.

For more information from the Department of Licensing and Regulatory Affairs Bureau of Commercial Services, Corporation Division, or their contact information, click on Corporation.

DTMB - Michigan Department of Technology, Management & Budget.

E

eCredential - The electronic copy of your license, which can be printed and displayed at your business. Not all licenses and permits provide an eCredential.

EIN - Employer Identification Number (see FEIN information below).

eRegistration - A registration for a business completed online through Michigan Business One Stop (MBOS).

F

FEIN - Federal Employer Identification Number.

FICA - Federal Insurance Contributions Act.

Flow-Through Entity - a general partnership, a limited partnership, a limited liability partnership, a subchapter S corporation, or a limited liability company that is not taxed as a corporation for federal income tax purposes. Flow-through entities have members, partners, or shareholders that are C Corporations, nonresident individuals, or other flow through entities.

Foreign Limited Liability Company - A foreign limited liability company (LLC) is one that is formed under the laws of another jurisdiction. Foreign limited liability companies that are "transacting business" in Michigan must first obtain a Certificate of Authority from this agency. The term "transacting business" is a technical term. The Michigan Limited Liability Company Act sets out particular activities, which in and of themselves do not constitute transacting business. In determining whether it is necessary to obtain a Certificate of Authority, the limited liability company should look at its proposed activities in this state, the statute, and applicable court decisions.

FUTA - Federal Unemployment Tax Act.

G

General Partnership - General Partnerships assume that profits, liability and management duties are divided equally among partners. If you opt for an unequal distribution, the percentages assigned to each partner must be documented in the partnership agreement.

H

HICA - Health Insurance Claims Assessment (administered by Michigan Department of Treasury).

I

Independent Contractor - A self-employed person. People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.

IRS - Internal Revenue Service (Federal government).

Joint Venture - Joint Ventures act as general partnership, but for only a limited period of time or for a single project. Partners in a joint venture can be recognized as an ongoing partnership if they continue the venture, but they must file as such.

K

L

LARA - The Michigan Department of Licensing and Regulatory Affairs.

LLC - Limited Liability Company (LLC). A LLC is a business formed by an organizer who may, but need not be a member. It is a business entity separate from its members and liability is limited to the financial contribution made by the member. The members are the owners of the company. The management of the company is carried out by its members, unless the Articles of Organization provide for management by managers. Governance is set forth by the Articles of Organization or operating agreement. A limited liability company is formed by filing the Articles of Organization (form CSCL/CD-700) with the Bureau.

Limited Partnership - Limited Partnerships (also known as a partnership with limited liability) are more complex than general partnerships. Limited partnerships allow partners to have limited liability as well as limited input with management decisions. These limits depend on the extent of each partner’s investment percentage. Limited partnerships are attractive to investors of short-term projects.

M

MBT - Michigan Business Tax. Corporate Income Tax (CIT) replaced the Michigan Business Tax (MBT) effective January 1, 2012 (administered by the Michigan Department of Treasury).

MBOS - Michigan Business One Stop. An online resource to help individuals start and operate a business in Michigan, putting multiple government agencies at your fingertips. Whether you are starting a business or already operate one, the Michigan Business One Stop is your first stop for doing business in the State of Michigan.

ME - Michigan Establishment Number (issued by Michigan Department of Treasury).

MEDC - Michigan Economic Development Corporation.

MES - Michigan Employment Security.

MIOSHA - Michigan Occupational Safety and Health Act (administered by the Michigan Department of Licensing and Regulatory Affairs).

MISBTDC - Michigan Small Business and Technology Development Center.

MiSDU - Michigan State Disbursement Unit (administered by the Michigan Department of Human Services).

MTO - Michigan Treasury Online. A new self-service Web site which allows registered businesses the ability to access, view and make changes to information that Treasury has captured from your business application, specific to your account.

N

NAICS Code - The North American Industry Classification System code (replaced the old SIC code). Is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the United States business economy. In One Stop, the NAICS code is used to help determine which permits/licenses a business needs.

NMSN - National Medical Support Notice (administered by the Michigan Department of Human Services).

O

OCS - Office of Child Support (administered by the Michigan Department of Human Services).

OSHA - Occupational Safety and Health Act (administered by the U.S. Department of Labor).

P

Partnership - A partnership is a single business where two or more people share ownership.

Each partner contributes to all aspects of the business, including money, property, labor or skill. In return, each partner shares in the profits and losses of the business.

Because partnerships entail more than one person in the decision-making process, it’s important to discuss a wide variety of issues up front and develop a legal partnership agreement. This agreement should document how future business decisions will be made, including how the partners will divide profits, resolve disputes, change ownership (bring in new partners or buy out current partners) and how to dissolve the partnership. Although partnership agreements are not legally required, they are strongly recommended and it is considered extremely risky to operate without one.

PEO - Professional Employer Organization.

PSP - Payroll Service Provider.

Professional Service Limited Liability Company - A professional limited liability company, as the name implies, is a company made up of licensed persons who have been legally authorized to provide a professional service. Professional limited liability companies must consist of at least one member who is licensed in each professional service being offered. If there is more than one member, they must all be licensed to provide the services of the company.

Those professions which must form as a professional service limited liabilty company are dentists, osteopathic physicians, physicians, surgeons, doctors of divinity or other clergy and attorneys at law.

Profit Corporation - Profit corporations may be formed in Michigan under the Michigan Business Corporation Act for any lawful purpose. When articles drafted by the incorporators have been filed by the Bureau, the corporation’s existence begins.

Individuals acting as incorporators must be 18 years of age. However, they need not be United States citizens, residents of this state, shareholders, directors, officers or employees of the corporation.

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R

S

S Corporation - An S corporation (sometimes referred to as an S Corp) is a special type of corporation created through an IRS tax election. An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation.

An S corp is a corporation with the Subchapter S designation from the IRS. To be considered an S corp, you must first charter a business as a corporation in the state where it is headquartered. According to the IRS, S corporations are "considered by law to be a unique entity, separate and apart from those who own it." This limits the financial liability for which you (the owner, or "shareholder") are responsible. Nevertheless, liability protection is limited - S corps do not necessarily shield you from all litigation such as an employee’s tort actions as a result of a workplace incident.

What makes the S corp different from a traditional corporation (C corp) is that profits and losses can pass through to the your personal tax return. Consequently, the business is not taxed itself. Only the shareholders are taxed. There is an important caveat, however: any shareholder who works for the company must pay him or herself "reasonable compensation." Basically, the shareholder must be paid fair market value, or the IRS might reclassify any additional corporate earnings as "wages."

Seasonal Filer - Seasonal filers are required to file monthly returns for the months that the business is open (the business is not open continuously for the entire year).

Self-Employed - If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed.

Sole Proprietorship - Someone who owns an unincorporated business by him/herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.

A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your business’s debts, losses and liabilities.

Successor - Buyer or acquirer of a business.

Successor Liability - A purchaser of even a portion of a business (including stock of goods or even the transfer of a liquor license), may be held responsible for the preivous owner’s liabilities, regardless of any contractual language to the contrary.

SSA - Social Security Administration.

T

U

UCC - Uniform Commercial Code

UIA - Unemployment Insurance Agency (an agency within the Michigan Department of Licensing and Regulatory Affairs).

V

W

WCA - Workers’ Compensation Agency (an agency within the Michigan Department of Licensing and Regulatory Affairs).

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Y

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