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Starting a Limited Liability Company (LLC) in Minnesota can be a straightforward and advantageous process for entrepreneurs looking to establish their business in the North Star State. Minnesota’s LLC formation provides the benefits of limited liability protection and flexibility in management, making it an appealing option for small businesses and startups.
This introductory guide will outline the key steps involved in initiating the LLC formation process in Minnesota, from choosing a unique business name to filing the necessary paperwork with the Secretary of State, ensuring a smooth and legally compliant start to your business venture in this economically vibrant state.
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How to Start an LLC in Minnesota: 7 Simple Steps
Initiating a Minnesota LLC requires submitting the Articles of Organization to the Minnesota Secretary of State, with an online filing fee of $155. The application can be completed through online submission, mail, or in person.
Step 1: Choose a Name for Your Minnesota LLC
Selecting a business name is the initial and crucial step in establishing a Minnesota LLC. Opting for a name that adheres to Minnesota’s naming criteria and is easily discoverable by potential clientele is essential.
Adhere to Naming Guidelines:
- Ensure your name includes the term “limited liability company” or one of its abbreviations (LLC or L.L.C.).
- Avoid incorporating words that might cause confusion between your LLC and a government agency (such as FBI, Treasury, State Department, etc.).
- Note that certain restricted words (e.g., Bank, Attorney, University) may necessitate additional documentation and the inclusion of a licensed individual, such as a doctor or lawyer, in your LLC.
- Verify that your chosen name is distinct from any other existing Minnesota limited liability company, corporation, partnership, limited liability partnership, or limited partnership.
Check Name Availability in Minnesota:
Verify whether your desired name is already in use by conducting a Business Filings Search on the Minnesota Secretary of State’s website.
Confirm URL Availability:
Even if you don’t currently plan to establish a business website, it’s advisable to check the online availability of your chosen business name as a web domain. Securing the URL now can prevent others from acquiring it in the future.
Once you’ve ensured your chosen name’s availability, you can engage a professional service to handle the LLC formation process on your behalf.
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Step 2: Select an LLC Registered Agent in Minnesota
It’s mandatory to designate a registered agent in Minnesota for your LLC.
What is a registered agent? A registered agent is a person or business entity entrusted with the responsibility of receiving crucial tax forms, legal documents, notices of lawsuits, and official government communications on behalf of your business. Consider your registered agent as the primary point of contact between your business and the state.
Who is eligible to be a registered agent? A registered agent must either be a Minnesota resident or a corporation authorized to conduct business in Minnesota, such as a registered agent service. You can choose an individual within your company, which may include yourself.
Can I act as my own registered agent? Yes, you have the option to serve as your own registered agent. However, many business owners find it more convenient to enlist the services of a registered agent company to receive, scan, and electronically transmit documents. This ensures you won’t be stressed about being away from the office or receiving legal filings in the presence of customers.
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Step 3: Submit Articles of Organization
Establishing an LLC in Minnesota involves the submission of Articles of Organization to the Minnesota Secretary of State. You can file these articles online or through the mail, with respective fees of $155 for online filing and $135 for mail filing.
Ensure that your Minnesota LLC’s Articles of Organization contain the following information:
- LLC name, address, phone number, and email address
- Registered agent’s name, address, and signature
- LLC organizer’s name, address, and signature
For Foreign LLCs Conducting Business in Minnesota
If you’re an LLC formed outside of Minnesota seeking to operate within the state, you must register with the Minnesota Secretary of State. Follow these steps:
- Access Minnesota LLC naming guidelines and verify name availability using the Search Business Filings app.
- Designate a Minnesota registered agent.
- File a Certificate of Authority to Transact Business in MN with the Minnesota Secretary of State. This certificate can be submitted online or by mail, with filing fees of $205 for in-person and online filings and $185 for mail filings.
Mailing Address for Filing:
Business Services
Retirement Systems of Minnesota Building
60 Empire Drive, Suite 100
St Paul, MN 55103
Minnesota Secretary of State
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Step 4: Create an Operating Agreement
While not legally required to form an LLC in Minnesota, it’s highly advisable to draft a thorough operating agreement for all newly established limited liability companies.
What is an operating agreement? It’s a legal document that delineates the ownership and operational processes of an LLC.
The operating agreement should:
- Outline the business structure of the LLC
- Define the individual responsibilities and obligations of LLC members
- Specify the operational procedures for running the LLC
Without an operating agreement that clearly defines the roles and responsibilities of its members, an LLC may encounter substantial legal and operational challenges.
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Step 5: Obtain a Minnesota LLC Employer Identification Number (EIN)
Acquiring an Employer Identification Number (EIN) from the IRS is an essential step in the process. This identification number, akin to a Social Security number for individuals, serves to identify your business entity uniquely and facilitates efficient tracking of your business’s tax reporting.
Why is an EIN necessary? An EIN is indispensable for various aspects of business operations:
- Opening a Business Bank Account: Financial institutions often require an EIN to establish a business bank account for your company.
- Federal and State Tax Compliance: The EIN is crucial for complying with federal and state tax regulations.
- Employee Hiring: If you plan to hire employees for your company, having an EIN is a prerequisite.
Where can you obtain an EIN? Business owners can obtain an EIN from the IRS at no cost after the company’s formation. This process can be conveniently completed either online or through mail.
Additional Information for International Applicants: Unlike a Social Security number, international applicants don’t need an SSN to obtain an EIN.
Correspondence Address:
Internal Revenue Service
Attention: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
Cost: No charge
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Step 6: Fulfill Your Minnesota LLC’s Additional Legal Obligations
Upon the registration of your LLC, it becomes imperative for its members to address ongoing legal responsibilities throughout the company’s existence.
Annual Renewals
Every active LLC in Minnesota must submit an annual renewal to the Secretary of State. This renewal is due by the close of the calendar year, specifically on December 31. Filing for the annual renewal can be done at no cost through online submission or by mail.
Business Licenses and Permits
Depending on the nature and location of the business, a Minnesota LLC may need to acquire one or more state or local business licenses or permits. Comprehensive information about Minnesota state business licenses can be found on the Minnesota E Licensing portal.
For details on local licensing regulations, it’s advisable to contact a clerk or representative of the local government in the city or county where your LLC is headquartered.
Registration With the Minnesota Department of Revenue
Certain Minnesota LLCs, such as those involved in retail sales tax collection or those with employees, must register with the state’s Department of Revenue. This registration can be conveniently completed online through the e-Services application provided by the Minnesota DOR.
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Step 7: Minnesota LLC Tax Filing Requirements
To maintain the good standing of your business, it’s crucial to stay informed about your tax obligations as a Minnesota LLC.
Depending on your business activities, you may need to register for one or more types of taxes:
Minnesota Sales Tax
If you sell physical products, you must obtain a seller’s permit through the Minnesota Department of Revenue website. The state’s general sales tax rate is 6.875%, with additional local rates ranging from 0.5% to 3%.
Minnesota Employer Taxes
If you have employees in Minnesota, you must register for Unemployment Insurance Tax via the Minnesota Department of Employment and Economic Development website. Additionally, signing up for Employee Withholding Tax through the Minnesota Department of Revenue website is required.
Partnership Tax
Multi-member LLCs in Minnesota with property, annual payroll, and annual sales exceeding $1.08 million are subject to Partnership Tax. Those below this threshold are exempt from the minimum fee but must file Minnesota Form M3, which can be submitted online or by mail.
Income Tax
State:
Minnesota has four individual income tax brackets, ranging from 5.35% to 9.85%. Your LLC’s taxable income determines the applicable bracket, rounded to the nearest $10. State tax returns are due by April 18 each year.
Federal:
Federal income tax reporting for multi-member LLCs uses Form 1065, while single-member LLCs use Form 1040 Schedule C.
What Is the Minnesota Nonresident Withholding Tax?
If any of your LLC’s partners are non-residents of Minnesota and receive at least $1,000 in distributive income, the partnership must withhold 9.85% of the non-resident’s income.
What Is the Minnesota Partnership Tax?
This tax applies to multi-member LLCs formed in Minnesota and varies based on the LLC’s income.
Hiring Employees in Minnesota
To comply with the law when hiring employees for your Minnesota LLC, follow these steps:
- Verify that new employees can work in the US
- Report employees as “new hires” to the state
- Provide workers’ compensation insurance
- Withhold employee taxes
- Display workplace compliance posters in visible areas
Employee Payment Frequency in Minnesota:
In Minnesota, most employees are typically paid on a monthly basis. However, those in “transitory employment” or working for public service corporations must be paid within 15-day intervals.
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How to Start an LLC in Minnesota – Buyer’s Guide
What Is an LLC?
An LLC blends the simplicity and flexibility of partnership or sole proprietorship structures with enhanced protection against risks associated with a corporate framework. Similar to corporate shareholders, the members of an LLC, often referred to as “members,” enjoy the advantage of limited liability. This means personal liability is confined to the members’ invested capital, shielding them from being held responsible for corporate losses or debts.
By default, LLC members are subject to taxes based on personal income, following a taxation structure similar to that of sole proprietorships or general partnerships—commonly known as a “pass-through” tax arrangement.
An LLC also has the option to choose between C corporation (C-corp) or S corporation (S-corp) taxation, contingent upon meeting specific criteria. Many small business proprietors opt for LLCs due to their simplicity and adaptability.
Is It Possible to Establish a Non-profit LLC?
Certainly, you can create a non-profit LLC in Minnesota using the same process as you would for a standard LLC. However, if you intend to register as a 501(c)(3) with the IRS, the Minnesota Secretary of State cautions against utilizing the non-profit LLC form with the IRS, as it lacks the necessary language. The state form is adequate for establishing your non-profit LLC in Minnesota exclusively.
What if I Forget to File My Annual Report?
It’s common to overlook deadlines from time to time. In the event of a missed annual renewal filing, you can still file it later, but a reinstatement fee will be incurred. If you choose to mail your form, the reinstatement fee is $25, while filing online or in person incurs a $45 fee.
What Other Obligations Do I Have After Registering My LLC?
To ensure compliance, it’s essential to research the specific tax filing obligations for your Minnesota LLC. Minnesota imposes tax requirements on LLCs earning above a certain threshold, meaning your LLC may be liable for taxes on its revenue. Members of the LLC will also be responsible for personal income tax on the income they receive from the LLC.
If you employ individuals, you may need to secure workers’ compensation insurance and adhere to state and federal employment tax obligations. Engaging the services of an experienced accountant can be a valuable investment to stay on top of these obligations and avoid falling behind.
What Is a Foreign LLC?
A foreign LLC is a business established in a state other than Minnesota that intends to conduct operations within the state. To operate in Minnesota, a foreign LLC must submit a certificate of authority to the Minnesota Secretary of State. Like domestic LLCs, foreign LLCs must verify the availability of their business name and submit an annual renewal to the state annually.
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Ways to Create a Minnesota LLC
Our guide not only outlines the steps to initiate an LLC but also aids in determining the level of assistance you require throughout the process.
DIY Approach
If your LLC in Minnesota is anticipated to have a restricted number of members or employees, with no intentions of expanding to multiple states, you can manage the registration process independently.
Minnesota LLC Online Formation
For a hassle-free approach, consider utilizing LLC formation services that can handle the paperwork on your behalf when setting up your Minnesota LLC. Some services even offer guarantees for accepting your legal documents or providing refunds. Many of these services present customizable package options, enabling you to select and pay for only the specific services you require. Certain providers may also offer free LLC creation, with additional paid services available.
When considering online formation services for your Minnesota LLC, explore ZenBusiness, Swyft Filings, and IncFile options. Compare the offerings of these recommended services to make an informed decision.
Zenbusiness is a digital LLC formation service that focuses on facilitating the formation of LLCs, catering to entrepreneurs and small business proprietors by providing a comprehensive set of tools to kickstart and expand their enterprises. They present cost-effective and inclusive packages for LLC formation, encompassing features like aid with registered agents and the filing of annual reports.
Going beyond the initial formation phase, ZenBusiness extends ongoing support and valuable resources to assist businesses in adhering to compliance standards and striving for success.
Swyft Filings is a specialized service for forming LLCs known for its efficiency and simplicity in the LLC creation process. They offer a comprehensive suite of services related to LLCs, covering everything from incorporation to compliance and assistance with registered agents. Swyft Filings also offers personalized guidance, helping businesses navigate the intricacies of LLC formation and ensuring compliance with state and federal regulations.
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Incfile presents a valuable resource library that proves highly beneficial for novice business owners navigating the process of selecting the most appropriate business structure. Following this, Incfile offers assistance with crucial documentation and filing procedures, simplifying concepts such as a registered agent, articles of organization, and EIN. The company has established a robust reputation and consistently garners positive online reviews.
How to Start an LLC in Minnesota – FAQs
What Is the Cost of Initiating an LLC in Minnesota?
In Minnesota, the filing fee for domestic LLCs is $135 via mail and $155 for online or in-person filings. For foreign LLCs registering in Minnesota, the fees are $185 for mail submissions and $205 for in-person or online submissions.
Are There Tax Obligations for LLCs in Minnesota?
LLCs in Minnesota are generally pass-through entities, meaning that members report business profits and losses on their individual tax returns. Business profits are taxed at the personal tax rates of the owners. However, if an LLC opts for C corporation taxation, it becomes subject to federal corporate income tax and a flat 9.8% Minnesota corporate franchise tax.
What Is the Minnesota Annual Renewal?
LLCs in Minnesota are mandated to fulfill the Annual Renewal, which involves submitting an annual renewal to the Secretary of State’s office. This renewal necessitates providing updated information about your LLC, including its current address and management particulars. The fee for the renewal filing is contingent upon your LLC’s annual revenue.
Neglecting to complete the annual renewal and remit the corresponding fee may lead to your LLC losing its good standing with the state.
Read More: Cost to start an LLC
What Is the Timeframe for Establishing an LLC in Minnesota?
Upon completing your LLC documentation and payment of the filing fee, the approval process for LLC submissions by mail typically takes a few weeks. On the other hand, in-person or online submissions are automatically expedited and usually approved within a couple of days.
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About the author
Dr. Gabriel O'Neill, Esq., a distinguished legal scholar with a business law degree and a Doctor of Juridical Science, is a leading expert in business registration and diverse business departments. Renowned for his academic excellence and practical insights, Dr. O'Neill guides businesses through legal complexities, offering invaluable expertise in compliance, corporate governance, and registration processes.
As an accomplished author, his forthcoming book is anticipated to be a comprehensive guide for navigating the dynamic intersection of law and business, providing clarity and practical wisdom for entrepreneurs and legal professionals alike. With a commitment to legal excellence, Dr. Gabriel O'Neill, Esq., is a trusted authority dedicated to empowering businesses within the ever-evolving legal landscape.