How to Start an LLC in Minnesota: Formation Guide 2022

Are you going to set up a business and are interested in the specifics of a limited liability company in Minnesota?

In this DIY guide, we’ll discuss how to start an LLC in Minnesota and the steps you need to take after you start operating. We will also touch on whether or not to hire an online incorporation service to create a Minnesota LLC, and then will cover such issues as LLC costs, taxes, and licenses.

Name Your Minnesota LLC

A carefully chosen business name is the key to successful development. It should be memorable and describe the specifics of the company. However, before you enter your Minnesota LLC name into the Articles of Organization, make sure it complies with the law. The main Minnesota naming requirements are as follows:

1. Uniqueness: The name you choose must be visually different in the Secretary of State’s records from other existing Minnesota business names, otherwise your application will be rejected. To check LLC name availability, use the Minnesota business name database;
2. Any words that clearly indicate the type of business: Your Minnesota business name must include words or abbreviations such as:
   • L.L.C. or LLC;
   • Limited Liability Company or Limited Liability Co.

3. No forbidden words: The name must not include words that could mislead the public, hinting at the company’s connection with the state. Furthermore, the use of the words like “university”, ” insurance”, and so on requires a license as well as the presence of a licensed person in the company;

The most common challenge you may face in forming an LLC is a lack of uniqueness. If a business database search on the Minnesota Secretary of State’s website shows that your chosen name is already in use, you need to come up with a new one or make some substantial changes. However, which can be considered as such? Remember that significant differences are NOT:

• Arabic vs. Roman numerals (4 vs. IV);
• Contractions;
• The articles “a,” “an,” or “the”;
• Special characters like @, #, $, and %;
• Capitalization;
• Business type identifiers like LLC or Ltd;
• Punctuation marks;
• Spacing;
• Singular vs plural nouns.

If your desired name is free, but you need time to make some preparations for opening a company, then use the reservation option. 

The name you choose can be reserved online from your desk. It costs $55, and the state will process your request immediately. This service allows you to reserve an LLC name for 12 months, so you can complete your registration preparations without being afraid that someone else will take it first.

If you prefer using paper documents, you can send a hard copy to reserve the name by mail or deliver it in person to the address:

Minnesota Secretary of State – Business Services
Retirement Systems of Minnesota Building
60 Empire Drive, Suite 100
St Paul, MN 55103

If you apply in person, it will cost $55 and will be processed immediately. Mailing the application is $35, but you should keep in mind that it takes 5-7 business days for the documents to be delivered by mail.

Of course, you can avoid the business name costs by skipping the reservation step and just file the Articles of Organization. Once it is approved, you can officially operate your business in Minnesota, and it will get the exclusive naming rights.

Get an Employer Identification Number from the IRS

Once a Minnesota LLC registration is complete, most companies need to obtain an EIN, which is provided by the IRS. The Employer Identification Number (EIN) is a unique 9-digit code designed to quickly identify a company’s tax records.

Although securing an EIN is not a mandatory part of opening a Minnesota LLC, it is generally necessary for its proper operation. The main purpose of an EIN is to pay LLC business taxes, but you will also need one if you plan to hire employees or open a business bank account.

Companies doing business in Minnesota can apply for an EIN by mail, fax, or online. The IRS provides an EIN with no filing fee, although some business formation companies charge an additional fee offering this service.

Online:

If you have a valid individual taxpayer number, such as a Social Security Number, you can file online. The procedure is available between 7 a.m. and 10 p.m. EST, Monday through Friday. 

You can use your EIN as soon as you fill out the form.

Fax:

If you prefer faxing, download the Form SS-4 to your computer, fill out, and print it. Then, send the completed document to:

(855) 641-6935

If you apply by fax, you will receive your EIN in 4 business days.

Mail:

This is the slowest way of filing because it will take up to 4 weeks to process the materials. However, if you like paper documents, you can send your Form SS-4 by mail. The completed form should be sent to the following address:

Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999

Appoint a Registered Agent in Minnesota

Are you just planning to start a business and don’t know how to answer the question: What is a registered agent for Minnesota LLC? That is not a problem.

Having and maintaining a registered agent is one of the mandatory requirements without which conducting business in Minnesota is impossible. The reason is that a registered agent’s primary responsibility is to provide state and legal communications by handling important paperwork including:

• Taxes;
• Lawsuits;
• Maintenance requirements, etc.

A registered agent must be at the registered physical office during normal business hours to receive the company’s official papers in person. Then, according to Minnesota Statutes, they must deliver the documents to the limited liability companies in Minnesota that they represent. In this way, the registered agent ensures that the state can always contact the business when it needs to.

Both individuals and legal entities who meet certain requirements may take on the duties of a Minnesota registered agent.

• Individual as Registered Agent: An individual who is a Minnesota resident, has a physical address in the state, and is at least 18 years old can become a registered agent. This can be:

• Owner of the company;
• Accountant;
• Attorney;
• A relative or friend, etc.

• Registered Agent Service: Unlike an individual registered agent, services like IncFile or Northwest Registered Agent guarantee your mobility and flawless record keeping. They also help maintain privacy, because registered agent data is an LLC’s public record and is publicly available.

Of course, the professional agency’s services require a fee. Nevertheless, both of these companies are willing to provide a registered agent service free of charge for one year if you hire them to set up your LLC.

Write Minnesota LLC Articles of Organization 

The official Minnesota LLC formation process begins with the filing of the Articles of Organization with the Secretary of State. This document generally contains the following basic information:

• Name of an LLC;
• LLC registered agent’s name;
• The mailing address of its principal office;
• Whether the LLC will be member-managed or have a manager;
• Name and address of at least one member or manager;
• Signature of applicant, etc.

Registering Minnesota LLC business may be done online, in person, or by mail. 

Online Filing:

To file LLC formation documents online, you need to fill out a form using the online filing system, where you can also pay a fee of $155.

By Mail or In Person:

Download and fill out the paper form, then hand-deliver or mail it along with your payment to the address:

Minnesota Secretary of State – Business Services
Retirement Systems of Minnesota Building
60 Empire Drive, Suite 100
St Paul, MN 55103 

If you choose to mail the documents, this will cost you $135 and take 5-7 business days. Filing in person costs $155 and is usually processed immediately.

Draft an LLC Operating Agreement

If you want your business to work smoothly, you need a clear guide in case any issues arise. Although an Operating Agreement in Minnesota is an optional procedure, it is highly recommended.

An Operating Agreement is a legal document that describes a company’s basic policies and procedures as well as its management structure. Since it is an internal document, you do not need to register or notarize it when you apply for an LLC in Minnesota. Just keep it with the other papers of the LLC.

If you do not have an Operating Agreement, of course, the Secretary of State will not refuse you to commence an LLC in Minnesota, but the business itself will not benefit. The main perks of having a high-quality and personalized Operating Agreement include the following:

• Limited liability protection by fixing the division of personal and business assets. In the event of litigation, it will be a strong argument in defense of the company’s status as a separate business entity, different from its owner. Thus, creditors will claim only the company’s capital, rather than the personal assets of its owners;
• Optimization and acceleration of LLC operations through standardization of the main processes;
• Prevention of possible managerial conflicts by determining the rights and obligations of the participants;
• An opportunity to avoid Minnesota default laws, which are for a wide range of businesses and are not well adapted to their individual features, etc.

Since the Operating Agreement is an optional document, there is no official template. You can hire an attorney to write it, or you may create one on your own using free online templates, most of which are quite suitable. However, the best way to get a template is through online companies which can also help you open Minnesota LLC and support your business. For example, a popular company like ZenBusiness includes a free LLC operating agreement in every service package.

Run Your Minnesota LLC

Submit Minnesota LLC’s Reports and Taxes

Each LLC must file the Annual Renewal in a timely manner to keep the state’s information up to date. You should file a report online every year before December 31. 

You can do it online or send your annual report by mail to the address:

Minnesota Secretary of State — Business Services
Retirement Systems of Minnesota Building
60 Empire Drive, Suite 100
St Paul, MN 55103

In addition to the Annual Report, another important thing you need to keep in mind is LLC taxes in Minnesota, which can be provided on three levels:

1. Federal: In most cases, LLCs do not pay federal income taxes because they are treated as “pass-through” tax units. It means that business profits and losses pass through the business entity to its owners, who report them on personal tax returns and Schedule C. However, if the owners wish, they can establish a corporate LLC tax structure by which the company files its own return;
2. State: Concerning State LLC Taxes, the general rule says that LLCs are not subject to income taxes. The good news is also that there are no “franchise” or “privilege” taxes in Minnesota;
3. Local: Some counties, cities, and municipalities impose taxes on LLCs doing business on their lands. Check out the local government’s website for more information on this.

Depending on the location of the company, it may be subject to additional taxes related to its characteristics and the nature of its business.

If your business hires employees, then you have to pay Unemployment Insurance Tax and Withholding Tax by registering with the Department of Revenue.

In addition, if you sell any goods, then your LLC will be responsible for paying Sales Tax and Use Tax. 

Get Permits and Licenses For Your Minnesota LLC

Once you create a Minnesota LLC, it’s time to think about obtaining business licenses and permits, which vary depending on the nature of your company. Although it is not a mandatory step in launching an LLC in Minnesota, in most cases you cannot operate without licenses or permits.

Keep in mind that along with state regulations, there are local license requirements, which you can check with your local clerk.

If you still don’t know how to get an LLC license or are in doubt about whether your company needs one, visit the State of Minnesota Elicensing portal for more information.

Open a Bank Account for an LLC in Minnesota

One of the benefits of running an LLC in Minnesota is the opportunity to protect the personal assets of its members in the event of a lawsuit. 

The principle of limited liability ensures that regardless of the financial status of the LLC, creditors’ claims will be limited to corporate funds. Private property of the owners like cars, investments, houses, etc. will not be affected. However, such asset protection is valid only under the condition of funds division.

Besides providing a line between business and personal transactions to protect your LLC status, opening a bank account offers a number of additional advantages. It simplifies bookkeeping, makes it easier to file Minnesota LLC taxes, and expands fundraising opportunities.

Getting a commercial bank account is easy. After you set up an LLC in Minnesota, all you need to do is apply to any local bank branch, providing the following documents:

• A copy of the Articles of Organization;
• The operating agreement;
• The LLC’s EIN.

If you don’t want to handle a commercial bank account yourself, there are many business services that will take care of it for you. Most of them are affordable and have quick turnaround times, which will save you time and energy by allowing you to focus on running your business.

LLC Formation Services

If you are just going into this business and are still wondering how to start an LLC in the fastest and most efficient way, take advantage of online services. It will make the process of starting a business much easier and save you from dealing with paperwork.
To make your cooperation comfortable, we recommend that you choose a reliable online company. Check out The 7 Best LLC Services that can professionally file an LLC online, as well as handle LLC maintenance such as filing annual reports. Any of them will help you avoid possible difficulties related to naming an LLC and other crucial nuances of registration. Additionally, some online companies offer a free registered agent for one year when you purchase their formation packages, which is a really good deal.