Are you looking to launch a Minnesota limited liability company (LLC)? You are not alone. The state saw nearly 60,000 LLCs established in 2021. Although the process of setting up an LLC is similar across the United States, there are crucial differences from state to state. Business owners and members forming a new entity in Minnesota should be mindful of local requirements and laws. With that in mind, we put together a comprehensive guide on how to start an LLC in Minnesota. Here’s what you need to know.
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Before Setting Up an LLC in Minnesota
Prior to moving forward with establishing your LLC, there are a few things to know and crucial steps to take.
Make Sure Your LLC Name Is Available
Perhaps the first thing to decide is what your LLC gets called. Before settling on a name, you need to ensure that it’s available to use in Minnesota. If you’re registering an out-of-state LLC and your official LLC name isn’t available in Minnesota, you may need to use a fictitious name instead.
You can determine availability through a business name search at the Secretary of State’s (SOS) website. If you settle on an available name but aren’t ready to form your LLC yet, you can file a Name Reservation form to reserve your chosen name for a year. The fee is $35 by mail and $55 for expedited or online filings. Name reservations can be extended for additional 12-month periods if necessary.
Have a Registered Agent
All Minnesota LLCs are required by law to have a registered office. The registered office is a street address (not a P.O. Box) in Minnesota where legal documents and notices can be received on behalf of your company. You can also designate a specific person (the “registered agent”) to whom documents can be sent.
There are various businesses qualified to provide registered office and agent services in Minnesota. The cost can vary between $50 and $300 annually, but you should try to opt for a service that is not only affordable but is also guaranteed to provide the services you need.
Filing Your Minnesota LLC Documents
To establish an LLC in Minnesota, submit Articles of Organization to the office of the Secretary of State. The document must include information such as the complete mailing addresses of each organizer. You can complete the process online, send in your documents by mail or submit your paperwork in person.
Minnesota charges $155 for applications completed online or in person, as the process will be expedited. Otherwise, you will pay $135 to file by mail.
Alternatively, foreign entities wanting to do business within the state complete a Certificate of Authority to Transact Business in Minnesota form. The filing fee is $185 when sent by mail, or $205 when submitting in person or online.
Send your completed forms to 332 Minnesota Street, Suite N201, Saint Paul, Minnesota 55101. Remember to make checks and money orders payable to the MN Secretary of State.
What To Do After Establishing Your LLC
After you successfully file your LLC paperwork, there are still a few more steps to take care of. Below are a few additional tasks to take in maintaining your LLC over the long term.
Correct Any Errors
If you successfully filed your Minnesota LLC documents only to later learn there are mistakes, do not panic. The state offers an Amendment to Articles of Organization form, which lets you update any incorrect information. The filing fee is $35 by mail and $55 when submitted online or in person.
File Your Minnesota Annual Renewal
All Minnesota LLCs must file an annual renewal, also known as an annual report. The reports must be sent by December 31st each year to the Secretary of State’s Business Services office. This process is vital for keeping your LLC in good standing. Though annual renewals are a statewide requirement for businesses, there are no associated filing fees at present.
Pay Your Taxes
As with annual renewals, timely tax payments also help to maintain good standing. An LLC’s federal tax filing status usually determines its filing status for Minnesota state taxes. LLCs are usually taxed like partnerships or sole proprietorships, with income and expenses reported on the owners’ personal tax returns. But LLCs can also be taxed as S corporations (S-corps) or C corporations (C-corps). LLCs taxed as C corporations must pay a flat 9.8% corporate franchise tax. Set up a consultation with a small business accountant to get a better understanding of your options and obligations.
Create an LLC Operating Agreement
LLC operating agreements are not required, but it is a great idea to create one, as their existence will minimize any potential future disputes with business partners. An operating agreement specifies such things as your company’s management structure, the roles and voting rights of the owners, and the way you’ll split profits. A lawyer or online legal service provider can prepare an operating agreement for you. If you decide to write your own agreement, it’s a good idea to familiarize yourself with Minnesota’s LLC laws, which underwent some significant changes in 2018.
Employer Identification Number (EIN)
Most businesses must have an EIN, sometimes called a Federal Tax Identification Number (FTIN) or Federal Employer Identification Number (FEIN). However, if your business is a single-member LLC without employees, you are not required to get an EIN. Instead, you can use your Social Security number.
Still, an EIN might be an ideal alternative to using your Social Security number to keep it safe and private. EINs are free and obtainable through the official IRS website.
LLC State Guides
Frequently Asked Questions
What Is an LLC?
A limited liability company balances the relative ease and flexibility of a partnership or sole proprietorship structure with the increased risk protection of a corporate structure. Like corporate shareholders, LLC owners (known as “members”) enjoy limited liability, meaning personal liability to the company includes only what members have invested and does not extend beyond it to cover corporate losses or debts.
By default, members of an LLC pay taxes as a share of personal income just as owners of a sole proprietorship or general partnership would—this is often referred to as a “pass-through” tax structure. An LLC can elect to be taxed as a C corporation C-corp or S corporation (S-corp) if it meets certain requirements. Many small business owners choose LLCs for their simplicity and flexibility.
How much does it cost to start an LLC in Minnesota?
In Minnesota, the filing fee for domestic LLCs is $135 by mail and $155 when filed online or in person. Foreign LLCs registering in Minnesota must pay $185 when submitting by mail or $205 for in-person or online form submission.
Do LLCs in Minnesota have to pay taxes?
LLCs are typically pass-through entities, meaning members will report business profits and losses on their personal tax forms. Business profits are taxed at the owners’ personal tax rates. However, if an LLC elects to be taxed as a C corporation, it must pay federal corporate income tax and a flat 9.8% Minnesota corporate franchise tax.
Can I act as my own registered agent in Minnesota?
Yes, you can act as a registered agent, provided you are at least 18 years of age and have a physical street address within Minnesota that can serve as the registered office.
How long does it take to set up an LLC in Minnesota?
Once you complete your LLC paperwork and submit the accompanying filing fee, it can take a couple of weeks by mail for your LLC submission to get approved. In-person or online requests are automatically expedited; they are typically approved within a couple of days.
What are the different types of LLCs to set up?
When determining how to start an LLC, there are several types of LLCs to choose from. Knowing the LLC structures available is essential for selecting a business model that most closely aligns with the nature of your company and how you intend for it to operate. These LLC structures include:
- Single-member LLC: This LLC is owned and operated by a single person. While similar to a sole proprietorship, this LLC provides additional tax benefits and liability shielding.
- Multimember LLC: Standard LLCs with more than one member, often divided into manager-managed or member-managed entities.
- L3C: These entities, also known as “low-profit liability companies,” act as a bridge between nonprofit LLCs and for-profit LLCs where the business cause remains the primary focus rather than earnings.
- Series LLC: Series LLCs are tiered business structures where the topmost LLC owns a series of lower-tiered LLCs through limitless segregation. Each LLC in the series operates mostly independently of one another; their assets are also primarily separated.
- PLLC: A specialized LLC, this business formation type is only available to certain licensed professionals.
- Restricted LLC: Restricted LLCs are not taxed during the first 10 years of formation. Likewise, they cannot make distributions to members. It must be stated in the articles of organization that the LLC will be restricted.
