We recently registered a company (LLC) in Nevada. But the physical
location of the company is in Michigan. Can we add employees to our
office in Michigan without qualifying to do business in MI? If the
answer is 'No' then there doesnt seem to be much reason to registering
in Nevada with an out of state address. Is this true?

The answer to both questions is "no."  People routinely form
corporations or LLC's in one state, e.g., Delaware or Nevada, to take
advantage of a favorable tax structure, but they have their physical
location elsewhere.  I used to work for a company that was a Minnesota
corporation, but our physical headquarters was in Atlanta.  On those
facts, you may still need to file as a foreign business entity doing
business in the state in which you have a physical presence.  Many
states call this a Certificate of Foreign Corporation or a Foreign
Corporation Filing, or, in the case of Michigan, a Certificate of
Authority.  See http://www.michigan.gov/cis/0,1607,7-154-10557_12901_12909-37548--,00.html
and the Business Corporation Act, Chapter 10 Sections 450.2012 and
450.2015 at http://www.cis.state.mi.us/bcsc/forms/corp/stat/284.pdf

The form is here:
http://www.cis.state.mi.us/bcsc/forms/corp/corp/560.pdf

I assume it would work for LLC's as well.  If you read 450.2012 and
determine that you are transacting business in the state, you should
file the form.