In this blog post, you will learn How to Start an LLC in Minnesota. There are a few steps involved that we'll go over in detail.
Starting an LLC is an excellent way for small businesses to protect their assets from potential lawsuits and other financial risks.
It also has the advantage of not being taxed as much as corporations or a sole proprietorship often are.
To make sure your new LLC is on solid ground, you need to follow several steps that we'll explain here in greater detail and submit necessary documentation with the Minnesota Secretary of State.
So, let's start your Minnesota LLC today.
What Is & How to Get an LLC in MN?
As the name suggests, an LLC (limited liability company) is a company that limits the liability of its owners.
In other words, if your business goes under or you are sued for something related to it, your personal assets will be protected by law.
For example, let's say you own and run a pizzeria full-time but still have bills at home to pay like anyone else.
If someone gets sick from eating something they bought at your store, you could be held liable for damages.
If that happens, not only will your business have to close its doors, but you may also lose everything personal in the process.
On the other hand, if you had formed an LLC before getting sued, this will likely protect most of your personal assets.
That's the best reason to form an LLC. However, there are other perks as well that make it an excellent option for small businesses. For example, you only have to pay taxes on the profits from your company.
Start a Minnesota LLC in a Few Easy Steps
There are a couple of steps you need to follow in order to start an LLC.
First, you have to choose a name for your company that another one does not already have.
There are free tools online that can help with this process but using them usually won't guarantee uniqueness.
Other than that, you have to draft your articles of organization in the correct legal format.
A lawyer usually does this, but you can always do it yourself with an online service.
If you follow the steps laid out here, you'll have an LLC in no time and enjoy all the perks that come with it.
Choose a Name for Your Minnesota LLC
Choosing the right name for your LLC is not always easy. First, you need to ensure that it's available on all the usual business websites like Facebook and similar.
Usually, you can do this by simply typing in a domain name and seeing if it comes up as unavailable or taken already.
A business name needs to be unique as well. There are free tools online that can help you with this process, but for absolute certainty, it's best to seek legal advice and pay the fees they ask for their services.
The name of your Minnesota limited liability company is usually written in all capital letters or small caps on official documents so try to keep it consistent throughout your business materials like advertising.
The name also shouldn't be misleading or confusing. For example, you shouldn't choose a similar name to another business in your area because it may cause issues with customers and employees alike.
In the end, remember that choosing a good name for your LLC can make all the difference between success and failure, even if you do everything else right.
Find a Registered Agent
It's crucial that your business has a registered agent to receive important legal documents from the state.
In addition, if you're running your business out of Minnesota, your registered agent should also be located in the same place.
It doesn't matter who acts as a registered agent. Still, they need to be available at all times and have good communication skills.
They should respond quickly to any legal documents they receive on behalf of your LLC and provide you with a copy as soon as possible.
There is also a registered agent service as an option for you if you want someone with experience.
It's also important that registered agents don't have close ties to your company because such connections can create conflicts of interest in the future.
For example, an owner or employee should never be able to act as a registered agent at the same time for any LLC.
A Minnesota LLC registered agent is a person or company that accepts official government documents on behalf of your LLC.
Since these documents need to be received by the state, they'll send them directly to a registered agent or registered agent service who is usually located in the same place as your business.
Submit Minnesota Articles of Organization
Articles of Organization are the articles that an LLC uses to register itself with a state agency.
Because they're considered public records, Articles of Organization can be accessed by anyone online after submitting them to the Minnesota Secretary of State.
In order to file Articles of Organization or add information about your company online, it will be advisable to have a BSO account.
BSO account is entirely free and only takes a few minutes to set up if you already have articles of the organization prepared for your LLC.
Articles of Organization need to be filed with the Minnesota Secretary of State. It can be submitted by mail, online or in-person. The form can be found on the official website for you to fill or print.
Minnesota LLC Articles of Organization need to include the name of your company.
The articles also have a section for you to list any registered agent or registered agent service that will be receiving legal documents on behalf of your LLC if changes or additions are needed later and their address.
Also, you will have to write the name, address, and the signature of your organizer, your Minnesota limited liability company email address, and phone number.
If you send your Articles or organization online or in-person, your filing fee will be $155. But if you decide to send it by postal mail, your filing fee will be $135.
Formulate an LLC Operating Agreement
A Minnesota LLC operating agreement is a contract that outlines how your company will be managed and run.
Without one, operating expenses may not be used correctly, which could impact the overall success of your LLC.
An operating agreement can also help you avoid misunderstandings with other LLC owners or managers in charge.
Still, it's important to remember that operating agreements aren't legally binding, so they don't need to be too detailed.
The most important thing that an operating agreement declares is your business structure.
Now is the time to decide on that. Will it be member-managed or manager-managed? It will be wise to seek legal advice before you define anything.
Minnesota limited liability company operating agreements need to contain specific information about how profits and losses will be divided by LLC owners, any member contributions, what happens if someone wants out of business, and details on operating procedures for managers and members alike.
After an operating agreement is created, it should be signed by every single one of your members.
It's also vital that operating agreements are regularly updated because they can be changed or modified at any time during the life of your LLC.
Once an operating agreement is filed, it needs to include a cover sheet and additional documents like declarations, amendments, and exhibits, which should all be attached in one packet for filing purposes.
Obtain an Employer Identification Number
Up next, we'll discuss employer identification numbers.
An employer identification number (EIN), also known as a federal tax ID, is an identifying number that all companies use to open bank accounts and report taxes with the Internal Revenue Service.
This nine-digit number is assigned to businesses by the Internal Revenue Service (IRS) and used for tax purposes like reporting income, filing annual returns as well as opening accounts with financial institutions like banks and credit unions.
Do You Need a Business License for Your Minnesota LLC?
Your business license is a business registration that's required by law. It provides information about your business, including where it operates, how long it will be in business, and any license or permit numbers associated with the LLC itself.
When you operate an LLC in Minnesota, you may need a general business license before doing business.
You can check if your business needs a state-required license, permits, or registration to operate very efficiently.
Also, there is local licensing too. In some cases, cities or counties will require a general business license.
In some other cases, you may need to comply with local ordinances specific to a particular type of business.
Make sure to check this before you start on your business. Contact your local county clerk and get the information you need.
Some examples of service-based business start-ups in Minnesota include CPAs, architects, and engineers.
Still, it's important to note that these professionals need a business license even if they work out of their home offices.
Separating Private and Business Assets
It's crucial to keep personal and business finances separate in order to maintain personal liability protection.
For example, business expenses are tax-deductible, but you can't write off personal purchases against LLC profits unless it's for something that directly benefits the company, like supplies or equipment.
When you're operating an LLC, your personal property is considered safe from any debts or lawsuits that might arise when running a business.
Separating personal and business finances is one of the best ways to protect yourself and your personal finances from any liability.
Get a Business Bank Account
Every LLC business needs a business bank account which should be separate from any personal accounts.
Having company and personal finances in the same place can make it challenging to monitor spending and to keep up with payments and generate confusion about profits and losses between business and family members.
If you're operating an LLC, there's no limit on how much money your business can generate so long as you pay taxes.
Minnesota LLC Tax Requirements
LLCs in Minnesota are business entities that are separate and distinct from their owners; however, they're considered a pass-through tax entity.
This means that business income is taxed at the owner's individual income tax rate, which can save money compared to other business structures like corporations.
LLC taxes in Minnesota depend on how much profit you earn as well as what kind of business you operate.
Minnesota LLC taxes have been simplified over the years. Business owners no longer need an accountant to file business taxes on their behalf.
However, you still need to keep detailed records of business income and expenses if the IRS audits your business filings.
As a business owner operating an LLC in Minnesota, it's crucial that you know how much money is going into or out of your company bank account at all times.
However, it will be best for you to ask for legal advice on this matter so you can avoid any problems and unpaid taxes.
Minnesota Employer Tax
Employer tax requirements vary depending on where you're located, the number of employees you have, and how much money your business brings in each year.
Business owners operating LLCs are responsible for paying federal employer taxes like Social Security and Medicare, and Minnesota Unemployment Insurance Tax rates.
Depending on various factors, they can increase or decrease, including employee wages, benefits paid out to former employees, and your business's total revenue.
You can register for Unemployment Insurance Tax through the Minnesota Department of Employment and Economic Development website.
Also, you need to register for Employee Withholding Tax through the Minnesota Department of Revenue website.
Minnesota Sales Tax
A sales tax is a percentage of sales that state and local governments levy in Minnesota on almost all finished goods.
This sales tax is usually calculated as the purchase price times the sales tax rate, which varies depending on where you're located, what kind of product or service you sell, and sometimes even how much money your business makes each year.
You will need to register for a seller's permit through the Minnesota Department of Revenue.
This is usually obtained by applying for a Minnesota Business Tax ID Number.
Is Forming an LLC Free?
No, forming an LLC is not free. LLC costs vary depending on the state you're located in, as well as how much preparation work you need to do before filing your business paperwork.
How Much Does It Cost to Make an LLC in Minnesota?
Since you need to file Articles of Organisation for your limited liability company to be official, your cost will depend on how you choose to do that.
The filing fee will be $155 if you choose to do it online or in-person, $135 if you do it by postal mail.
How Long Does It Take To Get LLC Approved in Minnesota?
It can take between a few weeks to a month for LLC approval in Minnesota, depending on how you file your business paperwork with the Minnesota Secretary of State.
Is an LLC Easy to Start?
An LLC is easy to start as long as you file all the necessary paperwork and pay any fees required by your state.
What Taxes Does an LLC in Minnesota Pay?
LLC taxes depend on many factors. Some of them are your profit, the type of business you are doing, and the county or city you are operating from.
There are also Employer taxes if you have employees and Sale taxes if your business belongs to one of the categories which require that.
Can I Form an LLC in Minnesota on My Own?
Yes, you can form an LLC on your own. You just need to file all the proper paperwork with your state and pay any applicable fees.
How to Dissolve an LLC in Minnesota?
The first thing you need to do is file a Statement of Dissolution as a sign of putting your LLC into liquidation.
When all that is done, you must file a Statement of Termination by mail, online or in-person.
What Is a Professional LLC?
A professional limited liability company is an LLC for people working in certain professions, such as lawyers, doctors, and others. Minnesota LLCs can be registered as professionals if you're in one of those jobs.
What Are Foreign LLCs?
A foreign LLC is an LLC formed in a different state other than the one you're in. You can operate a foreign LLC in Minnesota.
Starting an LLC in MN: Conclusion
Although filing an LLC online may sound intimidating, it's a fairly straightforward process that doesn't take up much of your time.
However, if this is your first time applying for an LLC and you don't know what you're doing—or have the money to hire a professional—it might be best to get help from someone who does.
Seek legal advice or professional assistance if you are not sure what you are doing.
On the other hand, if you think you can handle this and want to start your Minnesota LLC today, follow our basic steps: name your LLC, find yourself a registered agent, file Articles of Organization with the Minnesota Secretary of State, write the operating agreement, obtain EIN, open your LLC bank account and you are good to go.