Minnesota is a solid destination for planting a business flag. Small businesses account for a large part of the state’s income, meaning there’s great community support.
With this existing network to fall upon for support, there’s also a fantastic quality of life, where you’ll be surrounded by the most beautiful nature and scenery.
Forming a limited liability company (LLC) in Minnesota also comes with some financial perks. The state has its angel investor financing group that can help obtain funding beyond the SBA government loans. Plus, MN offers a tax credit of 25% for both in and out-of-state investors.
Find the above appealing? If yes, here are all the steps you need to complete to form an LLC in Minnesota.
Table of contents
- Step 1: Choose a business name for your Minnesota LLC
- Step 2: Designate a registered agent
- Step 3: File the Minnesota LLC articles of organization
- Step 4: Obtain an Employer Identification Number (EIN) from the IRS
- Step 5: Register with the Minnesota Department of Revenue
- Step 6: Prepare an LLC operating agreement
- Step 7: Open a Minnesota business bank account
- Taxes, costs, and fees in Minnesota for LLC
- Business permits and licenses in Minnesota
- Pros and cons of forming an LLC in Minnesota
- Formation FAQs for an LLC in Minnesota
Step 1: Choose a business name for your Minnesota LLC
Minnesota is pretty lenient with LLC naming requirements.
You can only use numbers or letters with no special characters (meaning 0-9, A-Z only). If you’re using “&” you’d have to replace it with “and” in your LLC’s name. Your company name must also be distinguishable from other businesses.
If you decide on a name, you should always check if it’s available. Use the business search tool from the Minnesota Secretary of State for that.
If there’s another registered business using a name you want, you’d have to tweak your option until it becomes sufficiently distinguishable. Or opt for another name altogether.
Reserving your name
Maybe you aren’t ready to pull the trigger and get your LLC up and running, but you found a great name that matches your brand to the dot.
In that case, you can get a name reservation for up to 12 months from Minnesota SOS. You have three filing options:
- Online or in-person for $55 (this includes expedited service fee)
- By mail for $35 — the processing then takes longer
If you haven’t filed your LLC formation documents before the reservation expires, you can re-apply for another 12-month reservation.
You might want to consider using an assumed name, also called a doing business as (DBA) name.
For example, if your LLC’s legal name is “Bob Enterprises LLC” is a bit generic, you may want to operate as “Bob’s Burgers” instead. With this name, customers will know exactly what you sell.
Having an assumed name also makes sense if you have several business branches under different names. For example, a “Northwest Spa Salon” and “East End Spa Salon” need to associate both with your registered business entity.
To obtain a DBA, you’ll need to fill in a respective form and pay state filing fees — $30 for mailed-in submissions and $50 for online applications.
After the filing is done, you must also publish your “Certificate of Assumed Name” in at least 2 legal newspapers in the Minnesota county where the business is registered.
DBAs must be renewed annually, but you won’t pay any fees as long as your company remains in good standing.
However, if you forgot to file the renewal on time, you can reinstate an expired assumed name by filing the current year’s renewal and paying a fee — $45 for online or in-person filings and $25 for mailed-in documents.
Step 2: Designate a registered agent
Your Minnesota LLC must have a registered agent.
A registered agent is a person or professional service provider that you appoint to receive legal documents on behalf of your company. Receiving a court summons, service of process of legal documents, or any business correspondence with the state is what a registered agent does.
For that reason, an appointee must have a physical address in Minnesota (P.O. boxes are not accepted) and be available during standard business hours.
You can act as a registered agent yourself.
While this may save you some money upfront, being your own registered agent means your address becomes public information. You’d also have to be available every day during business hours at the registered street address. It can be inconvenient if you travel or don’t have a permanent business establishment.
The alternative is hiring a professional registered agent service. Doing so allows you to maintain some privacy, plus avoid any stress associated with missed or lost correspondence.
The costs are reasonable, with most providers charging $50-$200 a year. It’s a small price to pay to remove the headache of more paperwork.
Step 3: File the Minnesota LLC articles of organization
Filing the articles of organization officially creates your Minnesota LLC.
On the state filing form, you’ll have to provide the following information:
- LLC members (owners) details
- Registered agent information
- Primary type(s) of business activity
- Number of employees (if any)
- Contact information
The cost of filing articles of organization in Minnesota is $155 for online/in-person filings or $135 for mail submissions.
Electronic and in-person submissions are processed first, usually in 3 to 5 business days. Mailed-in documents typically take longer to get reviewed.
Registering a foreign LLC in Minnesota
If you already have a business structure established in another state and want to expand your operations to MN, you must register as a foreign LLC.
The process is similar to the above. Fill in the state form called the Certificate of Authority to Transact Business in MN (LLC) and list your business details.
The state fees for foreign LLC registration are:
- $205 for in-person and online filings
- $185 if submitted by mail
Note: if your registered company name is not available in Minnesota, you’ll have to register under an alternate name.
Step 4: Obtain an Employer Identification Number (EIN) from the IRS
An Employer Identification Number (EIN) is required for federal tax purposes.
All multi-member LLCs reporting taxes as a partnership or corporation must obtain this number from the IRS. That’s because multi-member LLC members are taxed individually, and EIN allows the feds to track all your tax activity properly.
Single-member LLCs (without employees on payroll) don’t need an EIN and can use a social security number instead for tax reporting.
The best way to obtain your EIN is via an online application. The form will ask for owner information, type of business activity, and a mailing address for the business.
This part of the LLC formation process is free. Aside from tax and payroll purposes, your EIN allows you to open bank accounts and lines of credit for your LLC.
Step 5: Register with the Minnesota Department of Revenue
If your LLC makes sales of taxable goods or services in Minnesota, you must apply for a state tax ID. Your Minnesota tax ID is a 7-digit number you’ll use to report and pay your state business taxes.
The tax ID application process is simple and can be done online.
Step 6: Prepare an LLC operating agreement
Minnesota doesn’t require LLCs to have an operating agreement. But it’s important to have one if you operate a multi-member LLC.
An operating agreement specifies the ownership and management structure of the company and outlines the duties of members and managers. It also includes information on voting rights, how profits and losses are distributed, and the process for adding or removing members.
Essentially, it’s a statutory document you’ll refer to if there are any disputes with other members. Or if you need to make changes to your business structure.
Good operating agreements, drafted by legal professionals, may cover issues you haven’t considered or feel don’t apply to you right now.
Step 7: Open a Minnesota business bank account
Open a business bank account as soon as you complete all the registration procedures.
It’s critical to keep your business and personal finances separate. Unlike a sole proprietorship, LLCs are not allowed to mesh finances. In fact, doing so can lead to unfavorable legal consequences such as loss of personal liability and personal asset protection.
Consider a local bank versus a nationwide bank, as their monthly and operational fees tend to be lower.
For example, both Minnwest and Highland Bank offer small business bank accounts for $5/mo. For this price, you get access to all the essential banking features such as online banking, checking account, ACH transfers, etc.
Note: Business credit cards may come without any monthly costs, but pay attention to the annual ones.
If you’re a startup on a budget, you can start with a free minimal account at Park State Bank. They have limited transactional services but will get you up and running from the beginning.
Minnesota LLC taxes, costs, and fees
Annual report filings and renewals are free in Minnesota as long as there were no changes in your company or registered agent details. If you need to update some information, you’ll need to pay a $35 amendment fee.
Though there are no fees, Minnesota still requires businesses owners to file annual renewals each year. Failure to do so may result in statutory company dissolution, meaning your business’s existence will no longer be recognized in Minnesota.
If that happens, you’ll have to reinstate your business retroactively. Reestablishment is possible as long as your business name is still available. The fee for such annual reinstatement is $25 if you file online/in-person or $45 for mailed in filings.
When it comes to taxes, there are several things to consider.
Since an LLC is a pass-through business entity for federal tax purposes — your business doesn’t pay most taxes. Instead, the owners are taxed at their individual tax rates.
Still, some extra state taxes apply to your company. The State of Minnesota collects:
- Franchise tax from LLCs reporting as C-corporation. This corporate tax applies to the taxable income at a 9.8% flat rate. LLC members must report the taxes due on Form M4 and remit to the Minnesota Department of Revenue.
- Minimum corporate franchise tax from LLCs (reporting as partnership or S-corporation) with over $1,050,000 or more in-state property, payroll, sales, or receipts.
- State sales and use tax. Rates start at 6.875% and increase to over 8% once locality rates are added.
Minnesota business permits and licenses
The state doesn’t require a general business operating license like other states (e.g., Delaware).
It does, however, require you to obtain specific occupational business licenses depending on your line of business.
The best part is that you can learn about applicable business licenses online and file an application via Minnesota’s e-licensing portal.
For example, if you plan to operate a lodging business (a small bed and breakfast or a homestay), you’ll have to obtain a lodging license. The licensing fee starts at $165 per year and varies depending on the size of your establishment.
Pros and cons of forming an LLC in Minnesota
Operating in Minnesota, a small business-friendly state, is one of the best decisions you could make since there are quite a few advantages and just some minor cons.
Minnesota LLC Pros
- SMB-oriented business climate and state laws
- Plenty of resources and financial support are available
- One of the easiest and shortest application forms
- Free annual reports.
Minnesota LLC cons
- Minimal annual corporate income tax
- Sales tax ranks higher than the country average
But the above and the consistently cold weather should not deter you from setting up an LLC in this booming and diverse economy.
- Minnesota has an easy and fully online LLC formation process with fees starting at $135 for mailed-in submissions and $155 for online/in-person filings.
- LLCs need to file annual renewals (annual reports), but there are no state fees unless you miss the filing date.
- Minnesota has favorable taxation for small businesses, and most won’t be affected by the local minimal corporate franchise tax contributions.
Minnesota LLC FAQs
Below are some of the most frequently asked questions (FAQs) about forming an LLC in Minnesota.