Michigan LLC structure and cost: the deed sale is taxed and the entity sale is not, but selling the entity resets your property taxes forever

Michigan taxes the sale of a building and does not tax the sale of the company that owns the building. So the obvious move, the one a transfer-tax advisor will wave through, is to sell the LLC instead of the deed and skip the transfer tax. That move works, for the transfer tax. It also triggers a second Michigan tax rule that the first advisor never looked at, and this one is permanent: transferring the entity uncaps the property’s taxable value and resets it to market for good. Two Michigan statutes look at the same transaction and reach opposite answers, and the gap between them is where Michigan deals get structured or get wrecked.

Take the pieces in order, because the interaction is the whole point.

The transfer tax that entity sales avoid

Michigan’s real estate transfer tax is a tax on the deed, not on the ownership behind it.

Michigan taxes a transfer of title at about 0.86%, and treats the sale of the entity that owns the property as no transfer at all.

The state real estate transfer tax is $3.75 per $500 of value, which is 0.75%, under MCL 207.525, and the county adds $0.55 per $500, another 0.11%, for a combined rate of roughly 0.86%, paid by the seller when the deed is recorded. It applies to transfers of title by individuals and by entities alike. The part that matters for structuring is what it does not reach. Michigan’s Treasury generally respects the legal form of ownership, so transferring the ownership interests in the entity that holds the real estate, even a disregarded single-member LLC, is not treated as a transfer of the real property and is not taxed. Sell the LLC and no transfer tax is due. This is the opposite of Pennsylvania, which taxes a 90% transfer of a real estate company as if it were a deed. In Michigan, moving the entity is the way around the transfer tax.

And that is exactly the trap.

The uncapping that entity sales trigger

Michigan caps how fast a property’s taxable value can rise, and the cap resets on a transfer of ownership. The catch is what counts as a transfer.

Transfer more than half of an entity that holds Michigan real estate and the property’s taxable value uncaps to market, permanently, with no deed recorded.

Under Proposal A, a Michigan property’s taxable value can rise no more than 5% or inflation a year, whichever is less, until there is a “transfer of ownership,” which uncaps it to the state equalized value, roughly half of true market value, often a large jump after years of a capped base. MCL 211.27a(6)(h) defines a conveyance of more than 50% of the ownership interest in a corporation, LLC, or partnership as a transfer of ownership of that entity’s real estate. So selling the LLC that owns the building escapes the transfer tax and uncaps the property tax. One statute treats the entity sale as nothing; the other treats it as everything. A CPA modeling the transfer tax and a broker papering an interest sale will both miss it, because the uncapping lives in the property tax act, not in either of their files, and it does not show up until the next assessment.

Two Michigan cases sharpen it. In Jeff Properties, LLC v. City of Warren (Michigan Court of Appeals, 2023), parents conveyed their interests in a property-holding LLC to their son, and the properties uncapped, even though a transfer between close relatives is normally exempt, because the exemption did not save an entity-interest transfer. And in 2025 the Michigan Supreme Court held that assessors may count multiple private conveyances of ownership interests cumulatively to cross the more-than-50% line, even where the original owners keep a majority the whole time. Confirm the current case cite before relying on the exact holding, but the direction is settled: Michigan is counting entity transfers toward uncapping more aggressively, not less.

The one-way door in Michigan is that putting property into an LLC you control usually does not uncap, but taking the LLC out to someone else does.

There is a planning path, and it is the mirror of the trap. MCL 211.27a(7)(m) exempts transfers between commonly controlled entities from uncapping, so contributing property into an LLC you already own generally does not reset the taxable value. The uncapping risk arrives later, when the entity itself changes hands. So the safe move, individual to wholly owned LLC, is free, and the dangerous move, selling or gifting that LLC, is the one that resets the base. For a family passing a real estate LLC to the next generation, that reset is the number to plan around, and it is a bigger long-run cost than the transfer tax anyone was trying to avoid.

Where the entity lives, and the series LLC Michigan does not have

An LLC is governed by the law of its formation state wherever it operates, the internal-affairs rule covered on the nexus and foreign qualification guide. Michigan closes one structuring option and opens an unusual one.

Michigan does not authorize a series LLC, so the multiple-property investor uses separate LLCs, one per asset.

Michigan’s LLC act has no series provision, so you cannot form a Michigan series LLC. Real estate owners who want isolation between properties use a separate LLC for each, which is the standard Michigan pattern and the reason separateness discipline matters for the veil analysis on the protection page. A series formed in a state that allows it can register into Michigan as a foreign entity, but whether a Michigan court would honor the liability walls between the series has not been tested, because Michigan has no series law of its own to lean on. The series LLC guide covers the form’s trade-offs.

Michigan does authorize an entity most states lack. Under MCL 450.4204, Michigan recognizes the low-profit limited liability company, the L3C, a for-profit LLC organized to pursue a charitable or educational purpose, designed to attract program-related investments from foundations. It is a niche vehicle, but it is a real Michigan option that many states never adopted.

On privacy, Michigan is moderate. The articles require an organizer and a resident agent with a Michigan street address, but members and managers do not have to be named in the articles, so formation offers some privacy. The annual statement collects member or manager information, and Michigan has no land-trust regime, so the anonymous LLC structures that create real privacy involve forming elsewhere and layering ownership rather than anything Michigan provides.

State tax on the LLC

Michigan’s entity-level tax picture is simple and mostly light.

Michigan levies no franchise tax on a pass-through LLC, so the recurring state cost of the entity is the $25 annual statement.

A pass-through Michigan LLC pays no entity-level state income tax and no franchise tax. Its income lands on the members and is taxed at Michigan’s flat 4.25% individual rate. An LLC that elects to be taxed as a C corporation pays the corporate income tax instead, a flat 6%. Michigan also offers an elective flow-through entity tax at 4.25%, a workaround that lets the LLC pay the members’ Michigan tax at the entity level and deduct it federally; the 2025 increase in the federal state-and-local deduction cap shrank that benefit for many owners, so it is worth running the numbers rather than assuming it helps. Owners in Detroit and a handful of other cities face a local income tax on top. The filing mechanics and the February 15 annual statement are on the filing page.

The bottom line

Michigan taxes a transfer of title at about 0.86%, 0.75% state plus 0.11% county, and does not tax the transfer of the entity that owns the property.

Transferring more than 50% of an entity that holds Michigan real estate uncaps the property’s taxable value to market under MCL 211.27a, a permanent cost the transfer-tax analysis misses entirely.

Selling the LLC to dodge the transfer tax is the exact move that triggers uncapping, so the two Michigan statutes reward opposite behavior on the same transaction.

Contributing property into an LLC you control usually does not uncap under the common-control exemption, but transferring that LLC out does, which is the number a family passing real estate must plan around.

Michigan has no series LLC, authorizes the low-profit L3C, offers moderate privacy, and levies no franchise tax, taxing pass-through income to members at a flat 4.25%.

What this page does not cover

This page is about where the entity lives and what it costs to hold and move. How creditors reach a member’s interest, the exclusive-remedy charging order, and the entireties shield are on the protection page. The default governance rules and the minority-member rights you cannot waive are on the governance page. The formation fee, the annual statement, forms, and deadlines are on the filing page.

Last verified August 2026.