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You are close. The book income is used for the period within which the business has existed upto the last five years. So your dividing factor for the first year is .504 (assuming the authority grant date is July 1). Note - the date stamped on the "articles of incorporation" (yes, I know it is an LLC) is the driving date. Whatever is written in the membership agreement is immaterial. If you do not have the document from the State Department granting authority to operate, you need to request it from your client. It is a big deal to have the correct date. I have seen the capital stock tax sway hundreds of dollars by the date being off just a couple of days. Now, going back to our example. Your second year dividing factor will be 1.504, the third 2.504, the fourh 3.504, the fifth 4.504, and the sixth 5.0. Notice all of those .504's in there? That is why they want you to file now. Trust me, if your client is profitable in, say, the fourth year, they would much rather have a divisor of 4 than 3.504 - but it ain't happening because that start date pesters you for five years.

As a preparer in TX, I don't do very many state returns. I'm not too worried about his regular MI return, although I haven't read the instructions yet - that's on the list for this afternoon. But state or fed, I've never done any business entities other than sole proprietors. And, my clients know that. This guy has been filing his own taxes until this one (2007, BTW!). So he's been on his own for knowing the requirements previously. I sent him an e-mail last night letting him know the general state requirements y'all listed above. I also passed on the Secretary of State website suggestion.