If you’re looking to form an LLC in the state of Minnesota, you’ve come to the right place! Read on for essential information about how to register your company with the Secretary of State.
Use our helpful links and resources, including a handy guide on company names, to get started.
What is an LLC?
An LLC (Limited Liability Company) is a hybrid form of business organization that offers many benefits of being part of a regular corporation.
In addition to the benefits listed below, LLCs are particularly beneficial because they generally do not pay federal income taxes and must file annual tax returns.
The Internal Revenue Service (IRS) indicates that all forms of business entities fall under a corporation, except for sole proprietorships when it identifies the following:
“In general … corporations are separate taxable entities from their owners … LLCs offer the limited liability features of a corporation and the tax efficiencies and simplicity of a partnership.”
How to Start an LLC in Minnesota
Forming an LLC in Minnesota is quite straightforward and does not require a lot of red tapes. All you need to do is file a Certificate of Formation with the Secretary of State’s office.
The next step is to obtain business permits and licenses from the state or local government using the Certificate of Formation as proof that it was filed. If you are incorporating as a professional service company, such as a medical practice, you will have to fill out different forms.
To start up your LLC in Minnesota, you have to do the following:
1. Name Your Minnesota LLC
The first step to forming an LLC in Minnesota is choosing a name for your company. According to the Secretary of State, all LLC names must contain at least three letters, no more than two numbers, and may not contain any special characters such as – or &.
You should also avoid using overall words that state or imply the desired outcome, such as “forever” or “insurance.”
- Name cannot contain the words “bank,” “insurance,” or other similar words
- No hyphens or special characters
- It may not be an overall word that implies a purpose of the business
- The name must have at least three letters and two numbers
2. Your LLC must establish a registered office.
An LLC’s registered office is where the company’s records will be filed. It must also be the location from which all notices and communications will be sent, such as letters, bills, and legal documents.
The LLC may also use its registered office for selling or licensing its business name to third parties.
3. Prepare and File Articles of Organization
The Articles of Organization set out the information needed to form a new LLC. To be eligible for registration, these documents must contain the following items:
- Applicant’s name, address, and signature;
- Date and place of formation;
- Type of entity to be formed as an LLC;
- Name and address of registered agent;
- The name and address of the registered office.
This document is signed by all persons who are investing money into the business.
4. Receive a Certificate From the State
After the Articles of Organization have been received, the company’s formation document is complete, and the LLC may now file for a Minnesota Certificate of Formation.
The Certificate of Formation is proof that your LLC was incorporated and is officially recognized by the state. This document must be filed with the Secretary of State within 90 days after the Articles of Organization have been filed.
5. Create an Operating Agreement
An LLC operating agreement is not required by law, but it is strongly recommended as your company’s guide for operating procedures.
The operating agreement should address the ongoing issues that a typical business would face, such as profit distribution, management of the company, and how to handle exiting members. As these matters are best dealt with in advance, it is much easier to make adjustments, while small changes are easier to make than larger ones.
6. Get an Employer Identification Number
To get an EIN (Employer Identification Number) from the IRS, Minnesota requires that you first fill out the SS-4 form. It is easy to complete and can be done online.
When you get your new EIN, make sure you follow up with a copy of this new employer identification number to the Secretary of State’s office within two months of receiving it.
Once you have finished getting all these legal documents started, your company is officially registered for business in Minnesota.
Once you have registered your LLC, there are two other documents that you will need to file:
I. The Annual Report:
This document is required every year and must be filed after March 1st of the following calendar year. The first annual report for an LLC is due on or before May 15th of the year following incorporation.
A late filing fee will be assessed if the Secretary of State’s office does not receive the report by May 27th.
II. The Statement of Information:
This document must be filed no later than 60 days after making any changes to the name of a member, an officer, or a registered agent.
The statement of information must also be filed within 45 days after an LLC transition from a member-managed business to a manager-managed business or vice versa. If a statement is not filed by the due date, a late filing fee will be assessed as well as any applicable penalties.
Pros and cons of LLC Minnesota:
There are benefits and disadvantages to operating under the LLC structure, so it is important that you consider both.
- The major benefit of using an LLC is the limited liability protection that it offers its investors. If a party is successful in bringing a lawsuit against the company, then only the business assets are liable, not personal wealth owned by shareholders.
- Since only financial losses can be recovered from creditors, this makes them less likely to sue your company. This also means that creditors cannot access personal information about investors.
- The taxes for an LLC are generally lower than those for a corporation or partnership. For this reason, business owners often choose to incorporate as an LLC.
- While non-disclosure agreements can be useful for keeping certain information from potential employees, they are unnecessary in an LLC. There is no limit on the number of owners that a company can have.
- There is little protection when your business is under threat of being taken over by a third party. In this situation, all partners must act according to the wishes of their individual owners, not of the company itself.
- The limited liability protection is proportionate to the amount of money invested into your business. If your business loses all its money, you will still be liable for all debts, including money that is owed to you personally.
- If your company goes bankrupt, it can have a negative impact on both investors and employees. If the company is not careful, it can go bankrupt and leave employees unpaid and creditors with unpaid debts.
In conclusion, choosing whether to incorporate your company as a corporation or a Minnesota limited liability company (LLC) depends on your individual needs. If you are a sole proprietor or small business owner, an S-corp is probably best for you.
If you are looking for more protection from liability and taxes, though, then an LLC might be your best choice.
How much does it cost to start a Minnesota LLC?
In Minnesota, people who are interested in starting an LLC will be required to fill out and submit the following documents:
- Registration Fee $100.00
- Articles of Organization $300.00
- Certificate of Formation $750.00
- Annual Report $150.00
- Transfer of a Minnesota Business Entity $250.00 plus state fees
In addition, there are other costs that may come up down the road depending on your decision-making and the way you run your business. These can include but are not limited to attorneys fees, accountant fees, insurance, and any other expenses related to special circumstances of your business.
How long does it take to start a Minnesota LLC?
Your business will not be officially registered until each of the above documents are properly submitted and reviewed by your state law of Minnesota Secretary of State.
Based on the time required for your corporation to get registered, it is highly unlikely that you could get a Minnesota LLC up and running within a week or two of you filing your articles of organization. In most cases, it can take anywhere from nine months to one year for an LLC to be registered in the state.
Separate Your Personal and Business Assets
Because an LLC offers limited liability protection for business owners, they may want to invest money into their business. However, it is best to keep your personal and business assets separate by either creating a separate bank account for the company or using personal savings accounts.
It is important to keep these accounts separate because you will be able to clearly distinguish your personal finances from your business finances. This separation can be useful in the case that you ever have a legal dispute with another party.
1. Opening a business checking account:
Opening a business checking account is easy. You fill out the necessary forms and submit them to your bank. Your business can then use this account for both business and personal expenses like payroll and purchases.
Keep in mind that you could also designate another bank account to be used exclusively for your business.
2. Getting a business credit card:
There are several different types of business credit cards. Some cards require that your business has no other credit cards and that it has a very limited credit history. Other businesses may have no restrictions on the type of card they can use, so long as their payment history is not very bad.
Another option is to get a business charge card that allows you to borrow money if needed and then pay it back just as you would with a personal charge card. This way, your business can keep its other accounts separate from personal ones.
3. Hiring a business accountant:
It is important to have an objective third-party account of your business in order to properly plan and track your inventory, finances, and other important things. Having an accountant that specializes in small businesses will be extremely beneficial.
The cost of an accountant will vary depending on the business and the size of your company. Make sure you are aware of these fees before hiring someone to do all these accounting responsibilities for you.
Get Business Insurance For Your Minnesota LLC
Business insurance protects you and your company from the unexpected. When you are running a business, there could be many risks associated with it. In addition to liability insurance, an LLC will want to make sure they have enough coverage for the business and its assets.
When starting up a new business without much experience, accident and liability insurance can be very helpful because an unexpected event can cost a lot of money. Without insurance, a serious accident could cause your business to fail.
There are many types of business insurance policies that you can obtain for your LLC. They include:
1. General liability insurance:
This is one of the most important types of insurance an LLC will want to purchase.
General liability insurance helps cover expenses your business incurs as a result of accidents or incidents that may occur. This coverage can help pay legal fees and property damage.
2. Commercial auto:
Commercial auto insurance provides a policy for your vehicles, including trucks, vans, and trailers that are used for business purposes.
3. Workmen’s compensation insurance:
Workmen’s compensation insurance is one of the most important types of insurance because it covers you if someone is injured during the course of your work.
This coverage is crucial because if an employee gets hurt in your business, you will have to cover their medical bills and lost wages.
4. Business interruption insurance:
Business interruption insurance protects your company from damage or destruction that happens due to circumstances beyond your control.
This type of coverage can help you recover from any financial losses that were incurred while your business was in a down cycle.
5. Professional liability insurance:
Professional liability insurance protects your business from lawsuits that result due to errors or accidents that occurred on the job site.
You should always have this kind of coverage since it helps avoid legal action against your company and can save you money if any lawsuits are filed.
6. Directors and officers liability insurance:
If you are the owner, president, or a member of your company’s board, you will want to acquire this type of policy.
Directors and officers liability insurance cover your expenses if someone is injured on the job or becomes ill due to a workplace injury.
7. Products liability insurance:
Products liability insurance covers losses that occur due to faulty products sold by your company. This coverage can help protect you from expensive litigation that may occur as a result of product defects or injuries.
8. Employer’s liability insurance:
This type of coverage protects you from any lawsuits that may be brought against your company because of the actions of employees. It can cover accidents and malicious behavior that occurred off the job while you were being compensated.
9. Property insurance:
The property covers replacement expenses for a lost, stolen, or damaged property due to some sort of event, such as a fire or storm. This type of coverage can protect your business’ assets from damage or loss due to an accident.
10. Professional liability insurance:
Professional liability insurance protects you from lawsuits that may be filed against your company if an employee is injured while on the job. This type of coverage can help avoid legal action against your company and can save you money if any lawsuits are filed.
Minnesota LLC Business Permits & Licenses
The following are the types of business permits and licenses that you may want to obtain once you have formed your LLC in Minnesota. All license applications will need to be submitted to the appropriate state agency.
- The first step toward becoming an LLC in Minnesota is filing Articles of Organization with the Secretary of State’s Office.
- A certificate of authority will be issued once your LLC is certified by the Secretary of State’s Office.
- Applying for a tax-identification number directly with the IRS. A new taxpayer identification number will be issued once your LLC is approved.
The various types of business permits and licenses that must be applied for through specific state agencies are:
- A license to conduct business
- A license to sell alcoholic beverages
- A liquor license
- A regional adult entertainment center liquor license
- A general business tax identification number
- A food and beverage establishment license
- Permits for gambling places and policy service centers
- An occupation tax identification number for a professional corporation (partnership)
- A permit to sell tobacco
All of the above permits and licenses must be applied for through the state agencies that coordinate them, but they are all required for an LLC business regardless of its type or industry.
For example, many businesses in Minnesota, such as restaurants, bars, and other shops, need to obtain a permit to sell tobacco in order to legally do business.
Minnesota LLC Tax Filing Requirements
All LLCs in Minnesota are required to file tax returns because they are considered their own legal entity. If a member’s income is used for personal purposes, then that amount can be deducted from the LLC’s total income.
Minnesota does not have a minimum annual LLC tax filing requirement according to tax laws.
Minnesota does not have any additional taxes in addition to the Federal taxes that your LLC must pay. However, nothing prevents you from paying an additional state tax for your business if you so choose.
Minnesota LLC Tax Responsibilities
As a Minnesota LLC owner, it is your responsibility to ensure your company’s tax responsibilities are met. Your business will be held responsible for the following taxes:
1. Federal income tax:
You will need to pay the Federal income taxes that occur regardless of whether or not you take those proceeds as compensation or distribute them to other members.
2. Minnesota Sales and Use Tax:
There is a Minnesota Sales and Use tax that is due on all retail sales of items, as well as services provided by your business. This is not a monthly payroll tax but is due at the end of each and every calendar quarter.
3. Minnesota Corporate Income Tax:
This type of tax only applies to corporations that are based in Minnesota. It is based on the company’s net income and is paid to the State of Minnesota along with the federal income taxes that apply.
4. Minnesota Corporate franchise tax:
This tax is paid by the first $5 million of a company’s annual gross receipts. The type of company that would be subject to this tax is a business that employs 500 or more people and who owns its own buildings, such as banks, professional service companies, or insurance companies.
5. Minnesota unemployment withholding:
Minnesota does not have any additional taxes that are unique to your LLC. However, you will still need to pay your state’s payroll taxes or payroll withholding if you hire employees.
Minnesota LLC Income Tax Exemptions
While no additional state taxes apply to your business, the LLC itself is still subject to certain income tax rules. The following are Minnesota’s income tax exemptions that apply to your company:
- You will not need to pay Minnesota income tax if you earn less than $250,000 in gross receipts from your company for the year or if you own less than 50% of a business that makes $100,000 or more.
- If your company has employees who earn $115,000 or less per year, you will not need to pay an income tax on any earnings.
- If you are operating a corporation as a single-member LLC in the state of Minnesota, then you will only need to pay income tax if your business makes $250,000 or more in gross receipts for the year or if it earns $100,000 or more and has at least one employee.
- If you are operating a corporation as a multi-member LLC in the state of Minnesota, then your company will not need to pay any income taxes if it makes less than $15 million in gross receipts or if it has at least one employee.
- If an LLC is considered a “disregarded entity” by the IRS, then your company will not be taxed on its profits as long as it does not have more than 100 members. In order to qualify for this classification, your company will need to have more than one member.
Do I need a registered agent?
The real answer for this depends on whether or not you have employees. If your LLC does not employ anyone, then there is no need to have a registered agent in Minnesota.
However, if you employ people, it would be highly recommended that you obtain a registered agent and/or office in another state. This will allow them to be held responsible if your business is ever sued.
How to Order LLC Formation Service?
There are very few options for ordering an LLC formation service. Many state-specific forms are published on the IRS site for you to fill out, but there is also no way to include any additional services such as a registered agent.
If you do not have the “official” forms from your state, you should contact your local county government office in the State of Minnesota. The form can be completed on their website or by calling them at their specific number.
Where do I fill out the LLC Articles of Organization?
You can complete and mail your Articles of Organization to the address below:
Minnesota Department of Administration, Division of Corporations, PO Box 64495, St. Paul, MN 55164-4495
What is the best way to find professional Leaseholds and Lenders?
The best way to contact a professional is by using the yellow pages or check business directories. There are many options, such as Attorney, Broker, Corporate Lawyer, Credit Counselors, and Escrow Accountants, which would be the most appropriate for your specific situation.
Ask friends, family members, or colleagues who they use and how satisfied they were with them. You can either visit their offices or call them to meet with them personally. Ask a lot of questions to help you determine if they are the right professional for you.
It depends on your budget, but generally, most professionals charge between $200-$600 for a single LLC formation and $500-$900 for an LLC annual report. Also, ask if there are any discounts, such as for new clients, or if there is any in-person consultation included, such as your first 30 minutes free.
So, by now, you should have a solid understanding of how to form an LLC in Minnesota. In order to form your LLC, you will need to follow the steps listed above and make sure that you apply for all state licenses and certificates as needed for your business.
Remember that if you fail to follow these rules and fail to obtain the necessary permits, then your company may not be allowed to conduct business in the state of Minnesota. If you have any questions or concerns about this process, then please feel free to ask us at any time.