Guide to Forming an LLC in Minnesota
Follow our free guide to form an LLC in Minnesota
- Pros and Cons of Forming an LLC in Minnesota
- Starting Your Minnesota LLC
- Maintaining Your Minnesota LLC
- Additional Minnesota Resources
Starting a new LLC venture in Minnesota can seem daunting. Our comprehensive guide is divided into two main phases to better help you understand the Minnesota LLC formation process.
Pros and Cons of Forming an LLC in Minnesota
Privacy for Owners
Minnesota is among the states that do not require full disclosure of an LLC’s members in the incorporation paperwork. The LLC may select an organizer to file the paperwork with the Secretary of State.
Favorable Taxes for LLCs
Even though LLCs are required to pay a minimum fee tax in Minnesota, the threshold for the tax fees is $970,000 — good news for newer small businesses still struggling to gain footing in their industry.
Minnesota has the 13th largest economy in the United States with eighteen Fortune 500 companies located in the Minneapolis/St. Paul/Bloomington metro area. The state’s overall GDP is an estimated $365 billion.
While Minnesota saw a sizeable increase in new jobs for the state (over 10,000 in May), employers are feeling the strain of the worker shortage. A historically low unemployment rate (3.1%) actually translates to slow expansion for private businesses who are looking for qualified workers.
High State Income Tax Rate
Minnesota has a tiered income tax rate that ranges from 5.35% to an astonishing 9.85% — among the highest tax rates in the US.
Heavy Corporate Taxation
Corporations are heavily taxed in Minnesota with responsibilities to pay the 9.8% corporate income tax and the minimum fee tax. Additionally, Minnesota has the third highest corporate tax rate in the nation.
Cost of Doing Business
- $155 filing fee
- $0 annual renewal
Phase One: Starting Your Minnesota LLC
Creating an LLC begins with a fair amount of paperwork — the process is not so difficult when you have knowledgeable and experienced assistance. Start your LLC with the following steps:
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Decide on a Registered Agent
- Step 4: File the Articles of Organization
- Step 5: Create your Operating Agreement
- Step 6: Register for an EIN
Step 1: Name Your Minnesota LLC
The first step in the LLC formation process is to name your business. Both the state and federal governments have some guidelines concerning what words can or cannot be used for business names.
Tip: Use a free business name search tool to ensure your company’s desired name is available.
Business Name Guidelines
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.
Creating an online presence is important in the current culture, even if you don’t have an online business. Choose a domain name for your LLC’s website and check availability through online web services sites.
Step 2: Establish Ownership
The owners of an LLC are called members and managers. Some LLCs will have managers while all LLCs have members. The primary difference relates to the business’s management structure.
LLC Management Structures:
- Member-managed: All members participate in operating and making decisions for the LLC
- Manager-managed: An appointed manager oversees the daily operations of the LLC and the members are not actively involved.
Minnesota LLC Member Guidelines
Required Number of Members
There must be at least one member or manager to form an LLC in Minnesota.
Member Disclosure Requirements
An organizer/authorized representative may sign and file the Articles of Organization in place of the LLC members.
LC members in Minnesota may be of any age.
There are no residency restrictions imposed on LLC members in Minnesota.
Step 3: Find a Registered Agent in Minnesota
All businesses formed in Minnesota must have a registered agent - your LLC formation is not complete without this post.
What is a registered agent?
A registered agent is a person or business who receives official government mail and service of process notices for the LLC.
Why do you need a registered agent?
The state government of Minnesota requires your LLC to select a registered agent so that your business always has an official contact person.
What are the main requirements for a registered agent?
- The registered agent must have a physical address — not a P.O. Box
- The registered agent must be available during business hours
Who can be a registered agent in Minnesota?
- A state resident with a physical address in Minnesota
- An LLC or corporation that is licensed to work in Minnesota
Is the registered agent’s contact information publicly accessible?
The name and contact information of the LLC’s registered agent is a matter of public record.
Can I be my own registered agent for my business?
You can be your own registered agent as long as you have a physical address in Minnesota.
Is being my own registered agent discouraged?
LLC business owners are discouraged from being their own registered agent since they would compromise their personal information.
Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in Minnesota. Find more information here.
Step 4: File the Articles of Organization
To officially create your Minnesota LLC, you must file the Articles of Organization with the Secretary of State.
What is the Articles of Organization?
The Articles of Organization is a legally binding document that is filed with the Secretary of State to legally form your LLC.
Why do I need the Articles of Organization?
Your Minnesota LLC will not be legally recognized by the Secretary of State without this document. The Articles of Organization is part of your business’s foundation.
What information is included in the Articles of Organization?
- The name and address of the LLC
- The name and location of the registered agent
- The name of the organizer filing the paperwork
- The duration of the LLC
Important: A Business Snapshot Survey must accompany the Articles of Organization — this form requests information about the proposed industry of the LLC and information regarding diversity.
Other Minnesota Filing Requirements — Professional LLCs
Minnesota allows certain professional service businesses to form an LLC, which is specifically known as a Professional Limited Liability Company (PLLC).
Professional Service Businesses:
- Physicians/Medical Professionals
- Professional Counselors and Psychologists
- Architects and Interior Designers
- Geologists and Engineers
- Counselors and Psychologists
- Social Workers
A few points to consider:
- All members of the PLLC must be licensed in the profession of the business.
- The PLLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern the PLLC’s profession.
Step 5: Create an LLC Operating Agreement
Although an LLC Operating Agreement is not required by the state of Minnesota, it is still considered a necessity for the continued success of your LLC.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legal document that defines the roles of the owners/members and lays out the details involving voting rights and other operational procedures.
Why do I need an LLC Operating Agreement?
The LLC Operating Agreement is necessary because it provides structure for the business through the explanation of members’ responsibilities, protects business assets from creditors, and reduces disputes among members.
Do I need to file the LLC Operating Agreement?
You do not need to file the Operating Agreement with the state; it is for the benefit of your LLC and remains in-house.
What goes into an LLC Operating Agreement?
Most LLC Operating Agreements will include part/all of the following information:
- List of the members/managers and their roles
- Designation of authority in the LLC
- Initial capital contributions of the members
- Voting designations and percentages of the members
- Member transfer/addition rules and restrictions
- Distribution of profits
- Meeting schedule
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 6: Register for an EIN
Most businesses in Minnesota must have an EIN. Without an EIN, your Minnesota LLC will not be able to conduct business.
What is an EIN?
EIN stands for Employer Identification Number and is a nine-digit number that the IRS assigns to your business. The EIN identifies your business with the federal government much like a personal Social Security number.
Are all businesses required to have an EIN?
Federal law dictates that certain types of business entities register for an EIN:
- Any business with employees (even if owned by one person)
- Any business with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is not required to have an EIN, but it is still recommended.
Why does my LLC business need an EIN?
The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
In short, if you make money through your business and it has employees, you must have an EIN.
Is the EIN publicly listed?
The EIN for your LLC will be part of public record.
Can I use my Social Security Number as the EIN?
If you are a sole proprietorship who wants an EIN for your business, you can elect to use your social security number; however, your EIN is part of public record.
Swyft Filings offers EIN services for small businesses in Minnesota. Find more information here.
Phase Two: Maintaining Your Minnesota LLC
The next phase of setting up your Minnesota LLC involves steps that position your business for official operations. These following steps are:
- Step 1: Register for Taxes in Minnesota
- Step 2: Apply for Permits and Licenses
- Step 3: File the Annual Renewal Form
- Step 4: Request a Certificate of Good Standing
Step 1: Register for Minnesota State Taxes
All Minnesota businesses are required to pay a Minimum Fee Tax that is based on the combined total of the business’s property, sales, and payroll. See the chart below for fees:
State Income Taxes
LLC members will also be responsible for paying the state income tax in Minnesota. The chart below lists the most recent tax rate information:
Corporate Tax Information
You can also choose to have your LLC taxed as a corporation; if so, you will be responsible for paying the corporate income tax rate on your business’s earnings. Corporations in Minnesota must pay a 9.8% corporate income tax.
Additional Tax Information
Other taxes your LLC may need to pay:
- Sales and Use Tax at 6.875%
- Employee Withholding Tax
- Unemployment Tax
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in Minnesota can vary, depending on a number of variables:
- Location (city and county)
- Type of Business
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File the Annual Renewal Form
All businesses formed in Minnesota are required to file an annual renewal with the Secretary of State.
What is an annual renewal?
An annual renewal, which is also called an annual report, is a legal form that is filed with the Secretary of State to update your business’s information with the state.
What kind of information is in the annual renewal?
The information requested in the annual renewal is similar to what was listed in the Articles of Organization:
- The name and address of the business
- The name and address of the registered agent
- The name of the chief manager
- The business’s state file number
Is the annual renewal part of public record?
The annual renewal filed on behalf of your LLC is a matter of public record.
Fees and Due Date
Fee: $0 (if your business is in good standing)
Due Date: December 31st
Implications of Late Filings: Dissolution of LLC
Swyft Filings helps you stay compliant by providing stress-free solutions. File your annual renewal with us today.
Step 4: Request a Certificate of Good Standing
Once your Minnesota LLC is ready for business, you just need to obtain a Certificate of Good Standing.
What is a Certificate of Good Standing?
The Certificate of Good Standing is an official notification that confirms your business is in compliance with all state regulations.
Who issues the Certificate of Good Standing?
The Certificate of Good Standing is issued by the Secretary of State.
When can I request a Certificate of Good Standing for my business?
You can request a Certificate of Good Standing from the Secretary of State after your LLC is officially created.
Why do I need a Certificate of Good Standing?
Many businesses and financial institutions want some form of proof that your LLC is in good standing with the state before continuing with any business dealings.
Some states require a Certificate of Good Standing before a business can apply for Foreign Qualification.
Does the Certificate of Good Standing have an expiration date?
The Certificate of Good Standing does not expire/does not need to be renewed.
Swyft Filings can create a Certificate of Good Standing for your Minnesota LLC. Click here for more information.