Forming in Nevada and doing business in Michigan
I am Mitchell Bisson, a Grand Rapids business formation lawyer. I have litigated for over 15 years. Owners sometimes form a company in Nevada and then run it from Michigan. This page covers one thing: what Michigan law requires of a company formed in another state that does business here. This page does not describe Nevada law. The questions and answers near the end of the page come from my Michigan legal library.
The short answer. A limited liability company must obtain a certificate of authority from the state before transacting business in Michigan, and a corporation formed elsewhere may not transact business here until it has one. MCL 450.5002; MCL 450.2011. Either one must keep a registered office and a resident agent in Michigan and file its annual statement or report. MCL 450.4207(1), (3); MCL 450.1241(1); MCL 450.1911(1). Michigan leaves a foreign LLC’s organization and internal affairs to the law of the state where it was organized, but it does not keep Michigan courts or Michigan taxes away from a company that does business here. MCL 450.5001; MCL 450.5008(2). Nothing here predicts how a particular matter will turn out.
The state of formation changes where the company is organized. It does not change where the company does business. A certificate of authority puts the company on the same footing as a Michigan company, not a better one, and the company registers here in addition to its home-state formation.
I act for either side. Some clients are owners who formed a company elsewhere and need it brought into line in Michigan. Others are people who have a claim against such a company, or who are dealing with one, and need to know whether it is registered, who can be served and where a suit can be filed.
What Michigan requires of a company formed in another state
The Michigan LLC Act and the Business Corporation Act each have a chapter on foreign companies. They run in parallel, and the table shows where they differ.
| Point | Foreign LLC | Foreign corporation | Authority |
|---|---|---|---|
| Certificate of authority | Must obtain one from the state before transacting business in Michigan | May not transact business in Michigan until it has procured one | MCL 450.5002; MCL 450.2011 |
| What the application states | Name, jurisdiction and date of organization, the Michigan registered office and resident agent, a statement that the state is the agent for service if no agent is in place, the name and address of a member, manager or other person to receive copies of process, and the address of its office in its home state | Name and jurisdiction of incorporation, date of incorporation and duration, the address of its main office, the Michigan registered office and resident agent, and the character of the business it will transact in Michigan with a statement that it is authorized to do that business in its home jurisdiction | MCL 450.5002(a)-(e); MCL 450.2015(a)-(e) |
| Home state good standing | The statute’s list of application contents does not include a certificate | Certificate from the official in the home state who has custody of corporate records, dated not earlier than 30 days before the application is filed | MCL 450.2016(1) |
| Filing fee | $50 | $10, plus any franchise fees prescribed by law. Fees are not refundable | MCL 450.5101(1)(n), (3); MCL 450.2060(1)(b), (2); MCL 450.2016(2) |
| Rights once authorized | May transact any business a domestic LLC may lawfully transact, with no greater rights or privileges than a domestic LLC | Same rights and privileges as a domestic corporation, and the same duties, restrictions, penalties and liabilities as a similar domestic corporation | MCL 450.5003(2), (3); MCL 450.2002(1) |
| Organization and internal affairs | Governed by the law of the state where the LLC is organized | The Act does not authorize Michigan to regulate the organization or internal affairs of an authorized foreign corporation | MCL 450.5001; MCL 450.2002(2) |
| Registered office and resident agent | Must have and continuously maintain both in Michigan | Same duty as a domestic corporation | MCL 450.4207(1); MCL 450.1241(1) |
| Annual filing | Annual statement due not later than February 15. A foreign LLC authorized after September 30 need not file the next February 15 | Annual report due no later than May 15 | MCL 450.4207(3); MCL 450.5005(3); MCL 450.1911(1) |
The annual statement fee for an LLC and the annual report fee for a corporation are each $25 through September 30, 2027 and $15 if paid after that date. MCL 450.5101(1)(g); MCL 450.2060(1)(u). A foreign LLC’s name also has to meet the name requirements of the LLC Act before a certificate issues. MCL 450.5004; MCL 450.4204(3). If a statement in the application was false when made, or the facts later change, the LLC must promptly file a correcting certificate, though a change of agent or office is made through the regular statement. MCL 450.5005(1). I confirm the current form and fee with the state before anything is filed.
What counts as doing business in Michigan
Both statutes list activities that, alone, do not count as transacting business: maintaining, defending or settling a proceeding, holding meetings on internal affairs, maintaining bank accounts, selling through independent contractors, soliciting orders that require acceptance outside Michigan, creating debt and security interests, collecting debts, owning property without more, an isolated transaction completed within 30 days that is not part of repeated transactions, and interstate commerce. MCL 450.5008(1); MCL 450.2012(1).
Two limits matter. The lists are not exclusive, and each section says it does not decide which contacts subject a company to service of process, taxation or regulation under other Michigan law. MCL 450.5008(2); MCL 450.2012(2). So a company can be outside the registration statute and still be inside the reach of a Michigan court or the Michigan tax collector. I treat registration, jurisdiction and tax as three separate questions.
Whether a Michigan court can hear a claim against the company is a third question, and the long-arm statutes answer it, not the registration statutes. For claims arising from business done in the state, MCL 600.715(1) gives Michigan courts limited personal jurisdiction over a corporation. A corporation that carries on a continuous and systematic part of its general business in Michigan is subject to general jurisdiction. MCL 600.711(3). The Court of Appeals reads the transaction-of-business language generously. In Oberlies v Searchmont Resort, Inc, 246 Mich App 424 (2001), a nonresident’s advertising aimed at Michigan residents, which led directly to a business relationship with them, counted as transacting business here. Constitutional limits still apply: the company must have purposefully availed itself of Michigan, the claim must arise from its Michigan activity, and jurisdiction must be reasonable. That case ended in the resort’s favor, because the plaintiff’s injury in Ontario was too remote from the Michigan advertising. The statutes speak of corporations and say nothing of LLCs, so an LLC defendant can argue about how they apply.
Registered office, resident agent and service of process
A foreign LLC authorized in Michigan must have and continuously maintain a registered office and a resident agent here, and the agent is the person on whom process against the company may be served. MCL 450.4207(1), (2). The LLC’s application names the agent and says that the state is the company’s agent for service of process if no agent has been appointed, the agent’s authority has been revoked, the agent has resigned, or the agent cannot be found or served through reasonable diligence. MCL 450.5002(c), (d). If the company has no agent, or the agent cannot be found or served with reasonable diligence, service may be made by delivering or mailing by registered mail a summons and complaint to the state’s administrator. MCL 450.4207(4).
A foreign LLC that transacts business in Michigan without a certificate of authority appoints the administrator as its agent for service of process with respect to a cause of action arising out of that business. MCL 450.5007(4). An unregistered company therefore does not escape service. It simply has no agent of its own choosing, and the papers go to the state and then to whatever address the state has on file.
Service and jurisdiction are different questions. The court rule says its service provisions are not intended to limit or expand the jurisdiction given to Michigan courts, which is governed by the United States Constitution and the constitution and laws of Michigan. MCR 2.105(K)(1). I look at both.
Internal affairs and disputes among the owners
As to what law governs the owners’ relationship, Michigan defers. A foreign LLC’s organization and internal affairs follow the law of the state where it was organized, subject to the Michigan constitution. MCL 450.5001. The Business Corporation Act likewise gives Michigan no authority to regulate the internal affairs of an authorized foreign corporation. MCL 450.2002(2). That choice-of-law question is separate from whether a Michigan court may hear the dispute.
A dispute among the owners of an out-of-state company can be heard in Michigan. In Daystar Seller Financing LLC v Hundley, 326 Mich App 31 (2018), the trial court had dismissed claims involving foreign entities for lack of subject-matter jurisdiction, reasoning from the internal-affairs doctrine, and the Court of Appeals reversed. It treated the doctrine as a choice-of-law principle that can lead a court to decline jurisdiction in its discretion, not as a limit on the court’s power, and it observed that claims for money damages over past conduct do not ask the court to run the foreign entity.
Parties can also decide the forum in writing. If they agreed in writing that an action may be brought in Michigan and the agreement is the only basis for jurisdiction, a Michigan court must entertain the action if it has power to do so, Michigan is a reasonably convenient place for trial, the agreement was not obtained by misrepresentation, duress, abuse of economic power or other unconscionable means, and the defendant is served as the court rules provide. If they agreed to bring an action only in another state and file in Michigan, the court must dismiss or stay the action unless one of the listed exceptions applies. MCL 600.745(2), (3).
Michigan taxes, as far as I can verify them
This section covers only the Michigan income tax provisions I have read. It is not a tax opinion, and sales, payroll, property and federal tax are separate subjects.
For the owner, the starting point is residence. Someone domiciled in Michigan is a resident, and so is anyone who lives here 183 days or more in the tax year. MCL 206.18(1)(a). A resident’s taxable income from every source is allocated to Michigan, apart from income the allocation rules attribute to another state. MCL 206.110(1). Neither section asks where the owner’s LLC was formed. Whether the LLC’s profit flows into the owner’s income depends on its federal tax classification, which I leave to the owner’s tax adviser.
The company’s own exposure is separate. Michigan’s corporate income tax reaches a taxpayer with business activity in the state, or with an interest in a flow-through entity that has it, at 6.0% of the apportioned tax base. MCL 206.623(1). Substantial nexus exists in three ways: physical presence in Michigan for more than one day in the tax year, active solicitation of sales here with $350,000 or more of Michigan-sourced gross receipts, or an ownership or beneficial interest in a flow-through entity that has substantial nexus. MCL 206.621(1).
What happens when a company does not register
Skipping registration costs a company in three ways, and the first is access to court. A foreign LLC that has been transacting business here without a certificate cannot maintain a Michigan lawsuit until it obtains one. The bar extends to successors in interest and assignees, except a receiver, a trustee in bankruptcy or another representative of creditors, and an assignee for value who did not know a certificate was required. MCL 450.5007(1). A foreign corporation is in the same position. MCL 450.2051(1).
The disability can be cured. If the company gets its certificate before the court enters an order of dismissal, the suit goes forward, and a dismissal that does occur is without prejudice to refiling once the company is authorized. MCL 450.5007(2); MCL 450.2051(1). Contracts and other acts of the company stay valid, and the company can still defend a case brought against it. MCL 450.5007(3); MCL 450.2051(2). A company that only collects debts may not need a certificate at all, since securing or collecting debts and enforcing security interests are on the list of activities that alone are not transacting business. MCL 450.5008(1)(h); MCL 450.2012(1)(h).
The second cost is money owed to the state. An unregistered foreign LLC owes the fees it would have paid had it registered, plus the Act’s penalties. MCL 450.5007(5). The civil penalty runs $100 to $1,000 for each calendar month of unregistered business, looking back no more than 5 years, with a $10,000 ceiling, and each manager, member or authorized person who authorized, directed or took part in the Michigan business faces a civil penalty of up to $10,000. MCL 450.5007(6). A foreign corporation’s monthly penalty is also $100 to $1,000, looking back no more than 5 years, capped at $10,000. MCL 450.2055.
The third is an injunction. On a finding that the LLC or any of its members, managers or authorized persons transacted business in violation of the Act, the court must enjoin further business until the civil penalties, interest and court costs have been paid and the company has obtained a certificate of authority. MCL 450.5007(7).
Withdrawing from Michigan and keeping good standing
Leaving Michigan has its own paperwork. A foreign LLC applies for a certificate of withdrawal, and the application does several jobs at once. It identifies the company and its home jurisdiction, states that the company is no longer transacting business here, surrenders its authority, cancels the resident agent’s authority to accept service, and consents to service on the administrator for any claim that arose in Michigan while the company was authorized. The administrator also needs a mailing address for process and the facts needed to assess unpaid fees. MCL 450.5006(1). A foreign corporation’s certificate of withdrawal ends its authority to transact business here and ends its agent’s authority to take service. MCL 450.2031; MCL 450.2032. Either filing costs $10. MCL 450.5101(1)(q); MCL 450.2060(1)(h).
For a foreign LLC, withdrawal does not wipe out Michigan claims. The consent to service on the administrator covers claims arising in Michigan during the time the company was authorized. MCL 450.5006(1)(d).
| Company | What happens if annual filings stop | How it is fixed | Authority |
|---|---|---|---|
| Foreign LLC | After two consecutive years of missed annual statements the state sends notice. If the LLC does not file all missing statements and fees within 60 days after the notice is sent, it is not in good standing. It cannot get a certificate of good standing and the state accepts no filing from it other than a certificate of restoration. It remains in existence and may continue to transact business in Michigan | Certificate of restoration of good standing with the missing statements and fees, plus a $50 filing fee | MCL 450.4207a(2)-(4); MCL 450.5101(1)(h) |
| Foreign corporation | If it neglects its annual report or fee for one year, its certificate of authority is subject to revocation, which requires at least 90 days’ notice and a failure to cure. A certificate of revocation has the same force and effect as a certificate of withdrawal | Cure the default within the 90-day notice period | MCL 450.1922(2); MCL 450.2041; MCL 450.2042(1), (4) |
How I handle a Michigan matter for a company formed elsewhere
- Find out what the company actually does in Michigan. I ask where the people, property, customers and money are, because the registration statutes, the long-arm statute and the tax nexus rules each ask a different question.
- Pull the state record. I check whether the company holds a certificate of authority, who the resident agent is, what office is on file and whether the annual filings are current.
- Deal with any lawsuit first. If a summons has been served, I get the papers, work out how service was made and calendar the response date.
- Register or correct the record. Depending on the facts, that means an application for a certificate of authority, a statement changing the agent or office, a correcting certificate, or the missing annual filings.
- Read the governing documents. The operating agreement or bylaws and any contract with a forum or choice-of-law clause can matter more than the formation state.
- Set up the calendar. I give you the filing dates for the company’s type and, if you want, I prepare the filings.
Ways these matters are resolved without a lawsuit
Most of these problems end with paperwork and a conversation rather than a court order.
Registering late. A company that has been transacting business without a certificate can obtain one, and a lawsuit it filed is not dismissed if the certificate is obtained before the order of dismissal. MCL 450.5007(2); MCL 450.2051(1). The fee and penalty exposure remains, and I tell owners what it is before they file.
Catching up annual filings. For an LLC, the missing statements and fees with a certificate of restoration. For a corporation, the cure within the notice period. MCL 450.4207a(4); MCL 450.2042(1).
Changing the agent or the address. A $5 statement changes the Michigan registered office or resident agent for either type of company. MCL 450.5101(1)(i); MCL 450.2060(1)(k).
What I need from you
Bring the formation documents from the home state and any certificate of authority issued in Michigan. Bring the operating agreement or bylaws, the most recent annual statement or report, and any notice from the state. Tell me where the company’s people, property and customers are, when it began doing business in Michigan, and who the registered agent is. If you have been served, bring the summons, complaint and proof of service.
Where your Kent County business matter will be heard
I represent business owners and companies in Grand Rapids, Kentwood, Grandville, Wyoming and across Kent County. Under MCL 600.8301(1), the district court has exclusive jurisdiction in civil actions when the amount in controversy does not exceed $25,000. Michigan law sets the Kent County district courts by municipality. The 61st District Court serves the city of Grand Rapids, the 59th serves the cities of Grandville and Walker, the 62A serves the city of Wyoming and the 62B serves the city of Kentwood. MCL 600.8128a; MCL 600.8130(1)-(3). The 63rd District Court serves the rest of Kent County, which includes the cities of Rockford, Lowell, Cedar Springs and East Grand Rapids and the surrounding townships. MCL 600.8130(4). Larger civil claims are filed in the Kent County Circuit Court, the 17th Judicial Circuit. MCL 600.518. A company formed in another state is sued in the same Kent County courts as any other defendant when a Michigan court has jurisdiction over it. A registration or filing problem is otherwise handled with the state through filings.
Why people hire me for a Michigan matter involving a company formed elsewhere
You work directly with me, the lawyer handling your matter. I tell you what Michigan requires, what is routine and what is a real risk. I do not promise outcomes.
My fee depends on the type of matter, how complicated it is and whether it is likely to involve a court. We talk about the fee at the consultation, before you decide whether to hire me.
Questions I hear from business owners about forming a company in Nevada and doing business in Michigan
Does my out-of-state LLC need to register in Michigan?
If it will transact business in Michigan, yes. A foreign LLC must obtain a certificate of authority from LARA before transacting business here. The statute lists activities that do not count by themselves, such as defending lawsuits, maintaining bank accounts, interstate commerce, and an isolated transaction completed within 30 days. The application fee in the statute is $50.
MCL 450.5002 requires the certificate of authority and lists what the application must contain, including a Michigan registered office and resident agent. MCL 450.5008 lists activities that alone are not transacting business, such as maintaining or defending a proceeding, holding internal meetings, maintaining bank accounts, selling through independent contractors, taking orders that need acceptance outside Michigan, owning property without more, and interstate commerce, but the list does not control service of process or taxation. Consequences of skipping the certificate when it is required are real: the company cannot maintain a lawsuit in Michigan courts until it obtains one, it owes the fees it would have paid, and it faces a civil penalty of $100 to $1,000 per month, capped at $10,000 (MCL 450.5007). Its contracts stay valid. The name must also satisfy Michigan’s naming rule (MCL 450.5004). Whether your activity crosses the line depends on the facts.
Does an out-of-state company registered in Michigan need a Michigan registered agent?
Yes. A foreign LLC or corporation authorized to transact business in Michigan must have and continuously maintain a registered office and resident agent in Michigan, and its application for a certificate of authority must name them. An agent in the company’s home state does not meet the requirement.
The statutes apply the requirement to foreign entities that are authorized to do business in Michigan. A foreign LLC authorized here must continuously maintain a Michigan registered office and resident agent (MCL 450.4207(1)), and its application for a certificate of authority must state the Michigan registered office address and the name of its resident agent at that address (MCL 450.5002(c)). The application must also state that the Department of Licensing and Regulatory Affairs is appointed as the company’s agent for service of process if no agent has been appointed or the appointment has ended, or the agent has resigned or cannot be found or served (MCL 450.5002(d)). A foreign corporation is covered by MCL 450.1241(1), and its application must give the street address of its Michigan registered office, the name of its resident agent and a statement that the agent is an agent upon whom process against the corporation may be served (MCL 450.2015(d)).
The agent must be someone who qualifies under Michigan law: an individual Michigan resident whose business office or residence is the registered office, or an entity authorized in Michigan with a business office at the registered office (MCL 450.4207(1)(b); MCL 450.1241). Because the statutes call for a registered office and resident agent in this state, an agent in the state of formation does not satisfy them. The company also changes its Michigan agent or office by the same statement used by Michigan companies (MCL 450.4209; MCL 450.2021(1)), and it reports the agent in its annual filings (MCL 450.5005(3); MCL 450.1911(1)).
Not every out-of-state company needs a Michigan agent, because the requirement attaches to companies that are authorized to transact business here. Owning property without more, maintaining a bank account and other listed activities alone are not transacting business (MCL 450.5008(1); MCL 450.2012(1)), though those lists do not decide service of process, taxation or other regulation (MCL 450.5008(2); MCL 450.2012(2)). If a foreign corporation fails to maintain a resident agent, its certificate of authority is subject to revocation after at least 90 days’ notice (MCL 450.2041; MCL 450.2042), and a withdrawing foreign company revokes its agent’s authority to receive service (MCL 450.5006(1)(d); MCL 450.2032).
What happens if my registered agent resigns, moves or misses a lawsuit served on the company in Michigan?
A resident agent can resign by written notice, and the appointment ends 30 days after the notice is filed with the state or when a successor is appointed, whichever comes first. Papers served on the agent are served on the company, and the time to answer a lawsuit generally runs from service, 21 days in the usual case.
An LLC’s resident agent resigns by filing a written notice with the administrator and with a member or manager. The company must promptly appoint a successor, and the resigning agent’s appointment ends 30 days after the notice is filed or when a successor is appointed, whichever comes first (MCL 450.4208). A corporation’s agent resigns by notice to the president or a vice president and to the administrator, with the same 30-day outer limit, and when the resignation takes effect the resigned agent’s address is no longer the corporation’s registered office (MCL 450.1243; MCL 450.2243). The filing fee for a resignation notice is $5 for an LLC (MCL 450.5101(1)(i)). If an agent only moves within Michigan, the agent can file a statement changing the registered office address and mail a copy to the company (MCL 450.4209(2); MCL 450.1242(2)).
Service on the agent is service on the company (MCL 450.4207(2); MCL 450.1246(1)). A defendant generally must answer within 21 days after being served in Michigan in the manner MCR 2.108(A)(1) describes, and within 28 days when service is made outside Michigan or by a method that requires the summons and complaint to be sent by registered mail (MCR 2.108(A)(1), (2)). If the company does not plead or otherwise defend, the clerk enters its default, and after a default the company may not proceed with the action until the default is set aside (MCR 2.603(A)(1), (3)).
A default can be set aside only if good cause is shown and a verified statement of facts showing a meritorious defense is filed (MCR 2.603(D)(1)). A stricter timetable applies when personal service was made on the party: the motion must be filed before a default judgment is entered or within 21 days after it, with the narrow exceptions the court rules recognize (MCR 2.603(D)(2)). The court must condition an order setting aside a default on payment of the other side’s taxable costs and may add other conditions, including a reasonable attorney fee (MCR 2.603(D)(4)). A company that learns its agent resigned, left or sat on papers should confirm the state’s records and any pending case immediately.
When is the annual statement due for a Michigan LLC, and what does it cost?
A Michigan LLC files an annual statement of its resident agent and registered office by February 15 each year. An LLC formed after September 30 does not file on the next February 15. The statute sets the fee at $25 through September 30, 2027, and $15 if paid after that date.
The statement lists the name of the resident agent and the address of the registered office (MCL 450.4207(3)). The deadline is February 15 of each year, with one exception: a company formed, or a foreign company authorized, after September 30 skips the February 15 that immediately follows. The fee schedule says the annual statement fee is $25 through September 30, 2027, and $15 if paid after September 30, 2027 (MCL 450.5101(1)(g)). A professional LLC has an extra annual report and fee, covered in a separate question. Missing the filing does not end the company right away, but it can cost you good standing, which affects certificates of good standing and the filings the state will accept. Put the date on a calendar and confirm the amount on LARA’s site before you file, because the fees are set by statute and can change.
What happens if my Michigan LLC misses its annual statements, and how do I fix it?
After two consecutive missed annual statements, LARA sends a notice. If the missing statements and fees are not filed within 60 days of that notice, the LLC is not in good standing. It still exists and may keep doing business. To fix it, file a certificate of restoration of good standing with the back statements and fees. The fee for that certificate is $50.
Under MCL 450.4207a, a company that is not in good standing cannot get a certificate of good standing, its name becomes available for use by another entity filing with the state, and the administrator will accept no document from it except the certificate of restoration. The statute says the company remains in existence and may continue to transact business. The certificate of restoration must state the name the company had when it lost good standing (or a compliant new name if that one is taken), its current resident agent and registered office, and that the back annual statements and fees accompany it. The fee statute lists $50 for the certificate (MCL 450.5101(1)(h)). Because the name can be taken in the meantime, waiting is risky. Lenders and counterparties can ask for a good standing certificate, so a lapse can slow a deal even if the company never stopped operating.
Who can serve me with a lawsuit in Michigan, and does the way I was served matter?
Any legally competent adult who is not a party can serve process. For an individual, the basic methods are delivering the summons and complaint to the defendant personally, or sending them by registered or certified mail, return receipt requested, with delivery restricted to the addressee (an agent authorized by written appointment or by law to receive process may also be served). A court can order another method if service cannot reasonably be made the usual way. Insufficient service is a defense that is waived if it is not raised in the first motion or the responsive pleading.
Process in civil actions may be served by any legally competent adult who is not a party or an officer of a corporate party (MCR 2.103(A)); a writ of restitution or other process that requires seizing property is served by an officer (MCR 2.103(B)). Under MCR 2.105(A), process on an individual is served by delivering the summons and a copy of the complaint to the defendant personally, or by sending them by registered or certified mail, return receipt requested, and delivery restricted to the addressee. The rule does not list leaving the papers with a household member or a co-worker as a method for an individual defendant; the substituted-service provisions in subrule (B) address other situations. Process may also be served on an agent authorized by written appointment or by law to receive it (MCR 2.105(I)(1)). Separate provisions cover other defendants: a minor is served through the person having care and control (MCR 2.105(B)(2)), and businesses are served through officers, resident agents or the other persons the rule lists (MCR 2.105(D) for corporations, MCR 2.105(H) for limited liability companies). If service cannot reasonably be made as the rule provides, the court may by order allow any other manner reasonably calculated to give the defendant actual notice and an opportunity to be heard, on a verified motion (MCR 2.105(J)). Proof of service is made by a signed acknowledgment, a certificate from certain officers or an attorney, or a verified statement of the facts of service, and failure to file proof does not affect the validity of the service (MCR 2.104(A) and (B)). Improper service does not necessarily end the case: an action is not to be dismissed for improper service unless the service failed to inform the defendant of the action within the time provided for service (MCR 2.105(K)(3)). The grounds of insufficient process and insufficient service under MCR 2.116(C)(2) and (3) must be raised in a party’s first motion or responsive pleading or they are waived (MCR 2.116(D)(1)).
How does a default and a default judgment actually happen in a Michigan civil case?
If a defendant has failed to plead or otherwise defend, the clerk enters the default. A defaulted party may not proceed with the action until the default is set aside. A default judgment is then entered either by the clerk, for a sum certain when the defendant failed to appear, or by the court on motion in other cases, and seven days’ notice of the request is required in certain situations.
A default is entered by the clerk if a party against whom affirmative relief is sought has failed to plead or otherwise defend and that fact is known to the clerk or verified in a request for default (MCR 2.603(A)(1)). Notice that the default has been entered is sent to all parties who have appeared and to the defaulted party, and if the defaulted party has not appeared the notice may be served personally, by ordinary first-class mail to the last known address or place of service, or as the court directs (MCR 2.603(A)(2)). After the default is entered the defaulted party may not proceed with the action until the default has been set aside (MCR 2.603(A)(3)). A default judgment is a separate step. The clerk may sign and enter it on a verified written request if the claim is for a sum certain or can be made certain by computation, the default was entered because the defendant failed to appear, the defendant is not a minor or incompetent person, and the amount requested is not greater than the amount in the complaint (MCR 2.603(B)(2)). In all other cases the party must file a motion asking the court to enter the default judgment, and the court may hold hearings to determine damages, with a jury right where the constitution requires one (MCR 2.603(B)(3)). The requesting party must give the defaulted party at least 7 days’ notice before entry if the party has appeared, if the request seeks relief different in kind or greater in amount than the pleadings state, or if the pleadings state no specific amount (MCR 2.603(B)(1)). The party who obtained the judgment must serve it, and it is mailed to the defendant’s last known address or the place of service (MCR 2.603(B)(4)). A clerk-entered default judgment for a sum certain can therefore issue without a hearing, and the time to challenge a default judgment is short once it is entered (see the 21-day rule in MCR 2.603(D)(2) for personally served defendants).
What do I have to show to get a default or default judgment set aside in Michigan?
The court must find good cause, and the defendant must file a verified statement of facts showing a meritorious defense. Good cause can be shown by a substantial procedural defect or irregularity or a reasonable excuse for the failure that caused the default. If the defendant was personally served, the motion must be filed before the default judgment is entered or within 21 days after it. The order setting aside the default must be conditioned on paying the other side’s taxable costs.
MCR 2.603(D)(1) provides that a motion to set aside a default or default judgment, except when grounded on lack of jurisdiction over the defendant, shall be granted only if good cause is shown and a statement of facts showing a meritorious defense, verified in the manner prescribed by MCR 1.109(D)(3), is filed. Case law treats the two requirements separately. The Michigan Supreme Court has explained that good cause and a meritorious defense are analytically different concepts and that a party must show both (Alken-Ziegler, Inc v Waterbury Headers Corp, 461 Mich 219, 229-233 (1999)). Good cause may be shown by a substantial procedural defect or irregularity, or by a reasonable excuse for the failure to comply with the requirements that created the default (Koy v Koy, 274 Mich App 653, 658 (2007)). Manifest injustice is not a third kind of good cause. It describes the result if a default were left in place after the party has satisfied both the good cause and meritorious defense requirements, and where the defense is strong a lesser showing of good cause will suffice, though good cause must still be shown (Alken-Ziegler, 461 Mich at 233; Barclay v Crown Building & Development, Inc, 241 Mich App 639, 653 (2000)). Michigan law generally disfavors setting aside defaults and default judgments that were properly entered (Alken-Ziegler, 461 Mich at 229). The timing rule is strict: if personal service was made on the party against whom the default was taken, the default and any default judgment may be set aside only if the motion is filed before entry of a default judgment or, if one has been entered, within 21 days after it, except as provided in MCR 2.612 (MCR 2.603(D)(2)). The court may also set aside a default and default judgment in accordance with MCR 2.612 (MCR 2.603(D)(3)). An order setting aside a default or default judgment must be conditioned on the defaulted party paying the taxable costs the other side incurred in reliance on it, and may impose other conditions, including a reasonable attorney fee (MCR 2.603(D)(4)).
Related Michigan pages
- Grand Rapids Business Formation Attorney
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I help owners of companies formed in another state meet what Michigan requires when the business operates here. Contact me 24/7 by phone or email. Your Rights, My Fight! Call for a free initial consultation.
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Law Offices of Mitchell S. Bisson, 2828 Kraft Ave SE, Suite 295, Grand Rapids, MI 49512, serving Kent County and West Michigan.
This page provides general information about Michigan law and is not legal advice. Reading it does not create an attorney-client relationship. Laws change and every case turns on its own facts. Consult a licensed attorney about your specific situation.