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Michigan Corporate Income Tax and Business Entity Conversions

The new Michigan Corporate Income Tax (CIT), which replaced the previous Michigan Business Tax (which replaced the Michigan Single Business Tax) was applauded by the business community in Michigan as drastically simplifying the corporate tax system.  The CIT taxes C corporations at a rate of 6%, while federal pass-through entities (LLCs, S corporations, etc.) are not required to pay a business-level income tax.

While it may seem advantageous to avoid the 6% CIT by simply converting all C corporations to S Corporations or LLCs, there are many tax and non-tax considerations to think through before completing a business entity conversion.  To help C corporation owners and professional advisors decide whether or not to convert, the State of Michigan (in conjunction with the State Bar of Michigan) has created a comprehensive guide available at the State’s website:

Issues to Consider Before Electing to Convert From a C Corporation to a Limited Liability Company or Before Electing S Corporation Status

If you own a C Corporation and would like additional information about whether or not a business entity conversion makes sense for your company, please contact Jeffery A. Jacobson at 231.722.5405 or jaj@parmenterlaw.com