Minnesota is known for its beautiful natural environment, competitive tax rates, strong pro-business policies, and streamlined regulatory processes. It also has the same advantages as much of the Midwest: a lower cost of living and low operating expenses.
Meanwhile, an LLC is a simplified business structure that offers you liability protection and simplified administration, so your business can be up and running within a couple of weeks. Read on to find the simple steps for how to start an LLC in Minnesota.
What Is a Minnesota LLC?
A limited liability company or LLC is a business structure that blends some of the characteristics of corporations with sole proprietorships or partnerships. An LLC is a legal business entity. A Minnesota LLC is an LLC based in Minnesota or doing business in the state. All Minnesota LLCs must file their Articles of Organization with the Minnesota Secretary of State.
What to Consider Before Forming an LLC in Minnesota?
Before forming an LLC in Minnesota, you should decide on the type of business you want to pursue, choose a name, create a business plan, conduct market and customer research, and decide why you want to choose an LLC as your business entity. You can carry out most of these steps in the three to four weeks it takes to file the formation documents with the Secretary of State.
For many business owners, an LLC is the most flexible legal entity. It offers the owners, called members, liability protection but also has simplified administration. For example, with pass-through taxation, you can file all LLC profits as part of your individual income tax return, so you don’t have to file separately.
8 Steps to Start an LLC in Minnesota
If you’re ready to start an LLC in Minnesota, there are just four simple steps.
Step 1: Decide on a Business Name
Your business name will be the first interface your business has with the world. This should be unique and must be distinguishable from existing business entities. You can’t have the same name as other business entities in the state. For this, you’ll want to search for other businesses with the same names.
Remember that you’ll need to include “limited liability company” or LLC in your name. For most businesses, checking on possible web domains is part of the name selection process. You can start by doing a Google search of the intended name. That will show you what websites already exist with that name or similar names. Also consider whether you want to use a DBA or fictitious name, or the LLC name.
Next, you can check with the Minnesota Secretary of State’s database to ensure your chosen business name isn’t already taken. Finally, you can search in the US patent and trademark office to ensure that the name you want to use isn’t trademarked.
Step 2: Choose a Registered Agent
A registered agent is an individual or business entity that is designated to receive and accept legal documents on behalf of the business. The LLC registered agent must have a physical address in Minnesota and be available during normal business hours to accept service of process if the business is sued.
According to Minnesota Statutes Section 5.36, a Minnesota registered agent may be a person residing in this state, a domestic corporation, an LLC, or a foreign corporation or foreign LLC authorized to do business in the state. If you live in Minnesota and can be available during regular business hours, you can be the LLC’s registered agent.
Step 3: Prepare and File LLC Articles of Organization
This legal document provides the necessary information about the LLC, such as its name, address, purpose, and the names of its members or managers. By filing the Articles of Organization with the appropriate state agency, the LLC becomes a legally recognized entity, separate from its owners. This offers liability protection to the owners, as their personal assets are generally separate from the company’s debts and liabilities. You can find the Articles of Organization form for Minnesota here.
Step 4: Draft an LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the rights, responsibilities, and operating procedures of the members of an LLC. It serves as a contract between the members and governs the internal affairs of the company, including the distribution of profits and losses, management structure, decision-making process, and dispute resolution.
Common elements of an LLC operating agreement include:
- The LLC’s vision and mission
- Percentage of ownership for each member
- Voting rights
- Responsibilities of each member
- Powers and duties of managers
- Distribution of profits and losses
- Meeting schedule and requirements
- Buyout and buy-sell rules
What’s Next After Filing an LLC in Minnesota?
After filing an LLC in Minnesota, it’s important to keep the LLC active and compliant. This includes maintaining a registered agent and office, as well as setting up the business to function with an EIN and business bank account. Here are the next steps:
Step 5: Apply for EIN
An employer identification number or EIN is required to ensure that you are compliant with the state’s tax laws and can hire employees, open a business bank account, or file taxes as a business entity. Each LLC or business entity needs its own EIN.
Applying for an EIN only takes a few minutes with IRS form SS-4. You can apply online or mail the application to the IRS. If you already have applied for an EIN but have lost it, there are ways to find or recover your EIN.
Step 6: Open a Business Bank Account
Opening a business bank account for your LLC is an important step in managing your company’s finances and separating personal and business expenses. It’s important to keep your business accounts separate from your personal bank account.
By opening a separate account, you can track your business transactions easily, maintain accurate financial records, and demonstrate the legitimacy of your business to clients, suppliers, and financial institutions. It also helps to protect your personal assets and ensures that you comply with legal and tax requirements.
Consider questions when opening a business bank account like total monthly fees, interest rates, and additional fees. Learn other tips for choosing a business bank account here.
Step 7: Obtain Licenses or Permits
Check with the Secretary of State and local Chamber of Commerce to ensure you have all necessary licenses. Depending on the nature of your business, you may need to register with the Secretary of State, apply for a business license from your city or county, obtain a federal Employer Identification Number (EIN), and obtain additional permits or licenses from the state or local government.
Step: 8: Get Business Insurance
In Minnesota, business owners are required to have certain types of business insurance coverage, including general liability insurance, workers’ compensation insurance, and other protection for various types of risks. Depending on the type of business, additional coverage may be necessary.
Other types of business insurance to consider include:
- Professional liability insurance
- Umbrella insurance
- Directors and officers’ liability insurance
- Liability insurance
- Property insurance
- Commercial vehicle insurance
- Business owner’s policy
- Cyber insurance
4 Types of LLCs to Consider in Minnesota
Here are four different LLC structures you can consider:
1. Single-member LLC
A single-member limited liability company, as the name implies, is formed with a single owner or member. This is the best business structure if you’re forming an LLC on your own. A single-member LLC offers the legal protection of any LLC structure, with simplified administration and management as there is a single owner. With pass-through taxation, you could report LLC income on your individual income tax return.
2. Multi-member LLC
A multi-member LLC is any limited liability company with two or more members. According to the IRS, no limit exists on the maximum number of members an LLC can have. A multi-member LLC is best for business partners or several individuals planning to form a business together. You’ll gain liability protection, a legal business entity, and simplified administration.
3. Series LLC
A series LLC is an umbrella company; it’s a limited liability company formed to provide liability protection across multiple companies or lines of business within your overall operation.
While you cannot form a series LLC in Minnesota, Minnesota does allow series LLCs formed in other states to operate in Minnesota.
A professional limited liability company (PLLC) is a business entity for business owners in licensed occupations like law and medicine. A PLLC offers the same personal liability protection as other LLCs. In Minnesota, filing a PLLC requires additional work in your articles of incorporation.
Easily Set Up an LLC in Minnesota
Forming a business is a big step. It requires research, persistence, and a great team to support you. You can take some of the pressure off with doola LLC formation services. With doola, you can get the formation process streamlined.
For a low fee and fast service, doola guarantees business formation in any state, including Minnesota LLC. You get company formation services, an EIN, and help in opening your business bank account so that you can focus on building your business and team.
Why should I file an LLC in Minnesota?
Filing an LLC in Minnesota will protect your personal assets and allow you to separate personal accounts from business accounts.
How long does it take to get an LLC in Minnesota?
It typically takes three to four weeks to form an LLC in Minnesota. However, if you apply online, you could get immediate approval.
How much does an LLC cost in Minnesota?
The Minnesota filing fee to form an LLC is $35 by mail and $55 when submitted online or in person.
How is an LLC taxed in Minnesota?
In Minnesota, LLC members can use pass-through taxation. They must pay federal income tax including self-employment tax, plus state income tax at a graduated rate. LLCs must also pay a state sales tax of 6.875% as applicable, plus any local municipality taxes.
Can I change the name of my LLC in Minnesota after it’s formed?
Can an LLC in Minnesota be taxed as an S-Corporation?
Yes, Minnesota LLCs can elect to be taxed as either an S-corp or a C-corp.
Do I need to have a physical office for my LLC in Minnesota?
You need a registered office in the state of Minnesota. The registered office must be a physical address with someone available during regular business hours.
Can I dissolve or close my LLC in Minnesota if I no longer need it?
Yes, you can dissolve an LLC in Minnesota if it is no longer needed. You need to file the articles of dissolution and termination form with the Minnesota Secretary of State.