Starting an LLC is an excellent way for small businesses to protect their assets from potential lawsuits and other financial risks.
To make sure your new Minnesota LLC is on solid ground, you need to follow several steps that we'll explain here in greater detail and submit the necessary documentation to the Secretary of State.
To help you go through this process stress-free and fast, we have decided to step in. As a team of experienced business professionals and legal experts, we have spent weeks testing and recording our process of forming an LLC.
- Starting an LLC includes different steps from choosing a name for the business, finding a registered agent, and obtaining an EIN.
- A Minnesota business structure offers LLC owners personal liability defense, pass-through taxes, and a flexible management structure.
- Your filing cost will be $155 whether you submit your Articles of Organization in person or online. However, your filing cost would be $135 if you choose to mail it.
Formation Steps of A Minnesota LLC
To start an LLC (limited liability company) in Minnesota, there are several things you need to do.
Seek professional guidance for personalized advice to start an LLC and to ensure compliance with all legal and regulatory requirements.
Also, you will have to write the name, address, and signature of your organizer, your Minnesota LLC email address, and your phone number.
1. Choose a Name for Your Minnesota LLC
Choosing the right name for your LLC in Minnesota 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 business 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 Minnesota LLC business 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.
Read our article to learn how to look up an LLC in Minnesota.
2. Find a Registered Agent
Your business needs an LLC registered agent to receive important legal documents from the state, acting like your Minnesota secretary.
In addition, if you're running your business out of Minnesota, your own registered agent should also be located in the same place.
It doesn't matter who acts as your own 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 Minnesota LLC and provide you with a copy as soon as possible.
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 an LLC.
A Minnesota 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 which is usually located in the same place as your business name.
3. 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, LLC Articles of Organization can be accessed online by anyone after submitting them to the Secretary of State.
To file LLC 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 about 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 out or print.
Minnesota LLC Articles of Organization need to include the name of your company.
The articles submitted to the Minnesota Secretary of State 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 signature of your organization, your Minnesota LLC email address, and your phone number.
If you send your Articles of 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.
Here is further information on how much it costs to form an LLC in Minnesota.
4. 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 your operating agreement. Will it be a member-managed or manager-managed LLC? It will be wise to seek legal advice before you define anything.
Operating agreements for Minnesota limited liability companies must include detailed information on how earnings and losses will be split among LLC owners, any member contributions, what happens if someone wishes to leave the organization, and specifics on how management and member operating procedures will be laid out.
Every single member of your organization should sign the operating agreement once it has been created. The good news is you need not file them to the Secretary of State as per Minnesota law. It applies even when you are a sole proprietorship LLC.
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.
5. Obtain an Employer Identification Number
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. It is required by both federal and Minnesota law for all Minnesota LLCs.
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?
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 state-required business licenses, permits, or registration to operate very efficiently.
Also, there is local licensing too. In some cases, cities or counties will require a general LLC 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 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 business licenses even if they work out of their home offices.
Separating Private and Business Assets
Separating private and business assets is important 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.
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 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 file and pay LLC taxes in Minnesota.
Minnesota LLC Tax Requirements
Minnesota LLC tax requirements are easy to track as LLCs in this state are pass-through tax entities.
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.
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, you must 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 Starting an LLC in Minnesota Free?
Starting an LLC in Minnesota 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.
Is an LLC in Minnesota Easy to Start?
An LLC in Minnesota is easy to start as long as you file all the necessary paperwork and pay any fees required by your state.
Can I Form an LLC in Minnesota on My Own?
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.
What Is a Professional LLC in Minnesota?
A professional limited liability company in Minnesota 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 in Minnesota?
Foreign LLCs in Minnesota are LLCs formed in a different state other than the one you're in. You can operate a foreign LLC in Minnesota.
Starting an LLC in Minnesota
Although forming an LLC in Minnesota may sound intimidating, it's a fairly straightforward process that doesn't take up much of your time. It applies even when you're working on business insurance.
The process is simple as long as you follow the steps listed above. However, if unsure, you can seek advice from experienced companies, such as ZenBusiness. This way you can be sure that you will have the right support and professional guidance through every step.