Forming an LLC in Minnesota
If you're ready to form an LLC (limited liability company), you're well on your way to establishing your company's legal foundation and protecting your personal assets. The process of LLC formation is not difficult, but it does require several steps. Forming an LLC is a similar process in every state. However, some laws and procedures differ. Follow this step-by-step guide to start an LLC in Minnesota.
Steps to Form an LLC in Minnesota
Name Your LLC
Naming your Minnesota business is essential because it has both marketing and legal implications. From a marketing perspective, the name you choose is one of the first things potential customers will learn about your business. You want the name you choose to attract those customers to your products and services. From a legal perspective, you need to have an LLC name that satisfies the naming requirements in Minnesota.
Under Minnesota law, note that your LLC name must:
- Be distinguishable from all other business names on record with the Minnesota Secretary of State
- Include the term "limited liability company" or the abbreviation "LLC"
Also, avoid using restricted terms or phrases unless you have the required licenses or approvals. Don't use any words or phrases in your business name that suggest that your business is a governmental agency or indicate that your business is for an unlawful purpose.
Search For Your LLC Name
Make a list of a few potential names, and then head to the Minnesota Name Database to check for name availability. If a name on your list is already in use or reserved, you need to choose a different name for your business. You can reserve a name with the Minnesota Secretary of State if you settle on an available name but are not yet ready to file your registration. To secure the name, file a name reservation application online and pay a fee of $55. The reservation holds the name for one year.
To avoid infringement on another business's name, do a quick internet search to ensure the domain name is available and look on the United States Patent and Trademark Office (USPTO) website to see if it is registered. If the name isn't in use, you may want to reserve your name so others can't take it.
Protect Your LLC Name
Your business name is your identity and brand. There are two ways to stop others from using it: register the name as a trademark and a domain name.
- Trademark. You can trademark the name with the USPTO. While the application is pending, a trademark protects the name under common law. Once you receive your federal trademark, you can register it as a Minnesota trademark or service mark. You may also trademark the LLC only in Minnesota. The online or in-person fee for a state trademark is $70. If you register by mail, the fee is $50.
- Domain Name. Do a name search on the internet to determine that your internet domain name is available. If available, find an approved ICANN registrar to register the domain name.
Get a Registered Agent
You'll need to choose a registered agent to handle service of process for your company. If someone decides to sue the company, there must be someone to accept the legal documents on behalf of the company. You must choose a person or company to serve as your Minnesota registered agent.
A registered agent must be:
- A resident of Minnesota or a business entity registered in Minnesota with a physical street address
- Available during regular business hours
Busy entrepreneurs often enlist a registered agent service company to serve as the registered agent for their small business since they can't always be around to accept service of process.
File Your Articles of Organization
The filing must consist of the following information:
- The LLC's name (with "limited liability company" or the abbreviation "LLC")
- Registered agent's name and office address (a physical street address, not a P.O. Box)
- Name and address of at least one LLC organizer
- An email address for official notices
- A name and daytime phone number of someone to contact about the form
State fees for Minnesota articles of organization are $135 for filings by mail and $155 for in-person expedited or online filings.
Draft an Operating Agreement
An LLC operating agreement is an internal document covering your organization's rules and procedures. Without it, you might have to rely on Minnesota's LLC default statutes if or when a conflict arises.
Operating agreements address the rights and responsibilities of the members, liabilities, procedures for admitting new members, procedures for voting, and the distribution of profits and losses.
Even if you are a single-member LLC, an operating agreement is helpful (and often necessary) when getting financing, attracting members, or trying to sell the business.
Get an EIN
Business owners need an EIN (Employer Identification Number) or Tax ID number if they hire employees or the LLC has more than one member. An EIN is like a Social Security number for your business. You'll need this number to open up a business bank account and set up employer accounts.
Getting an EIN is simple and free. You can apply for an EIN on the IRS website.d often necessary) when getting financing, attracting members, or trying to sell the business.
Set Up Business and Tax Accounts
LLC owners choose how the federal government taxes their businesses. The Minnesota Department of Revenue (DOR) handles state taxes. You may need to register your business entity with the DOR to get a Minnesota tax identification number.
And depending on your type of business operations, you may need to apply for business licenses and permits, sales and use tax accounts, and employer accounts.
When you establish an LLC in Minnesota you must follow all tax and license obligations. Register your business with the Minnesota Department of Revenue to determine your tax and license requirements.
State Business Tax
How you set up your LLC tax structure determines if your LLC pays a state business tax. If the LLC pays taxes as a corporation, the LLC pays a state income tax. If the LLC is a pass-through business entity, the LLC's profits go on the individual members' tax returns. A single-member LLC will be taxed as a sole-proprietor. A multi-member LLC will be taxed as a partnership. The members pay a state income tax.
State Employer Tax
As an employer, your LLC is subject to state rules—even if the employees are also members. Set up wage withholding tax accounts with the state. Additionally, an employer in Minnesota must:
- Register all new employees with the Minnesota New Hire Reporting Center within 20 days of the employee's hire date
- Obtain worker's compensation insurance for employees
- Set up an employer account with the Minnesota Unemployment Insurance Department
Sales and Use Taxes
If your LLC sells tangible goods or provides services, there is a 6.875% sales and use tax. This tax is charged to your customers and collected by you. You must remit the tax to the state. Register for a seller's permit at the Minnesota Department of Revenue when you set up your business.
Business Licenses and Permits
You may need a business license or business permit for your Minnesota limited liability company. Requirements vary based on the location and the type of business you're running. For this reason, it's best to contact your local and state agencies to determine the requirements for your specific type of business. Minnesota has an elicensing website to search for your business category. Check local licensing requirements with the city and county where you operate your principal place of business.
Registration in Other States
If you want your Minnesota LLC to operate in another state, you must register in that state as a foreign LLC. Contact the secretary of state's office in that state to apply. You may need to provide a Certificate of Good Standing for your Minnesota LLC. You can order the certificate on the secretary of state's portal to request a Certificate of Good Standing. The fee is $15.
You must file an annual renewal if you have a registered LLC in Minnesota. The good news is that so long as your LLC is in good standing, there is no fee for the report filing. The limited liability company annual renewal form can be filed online or mailed in. The due date is December 31st each year.
However, if your LLC changed its name or registered agent or office, you must file an amendment and send it along with the renewal form. And if the state dissolves your LLC for non-compliance, there's a filing fee for the reinstatement.