How to form an LLC in Minnesota in 6 easy steps
The entrepreneurial journey is one of the most exciting trips you can take on planet earth. We’re talking about starting your own business, and when it comes to formalizing that business idea floating around in your head, there are several paths you can choose from to bring it to fruition. The first stop along the way is selecting the proper business structure to meet your company's needs, and there’s no better location to do it than in the state of Minnesota.
One of Minnesota's most popular business entity options is the LLC, the Limited Liability Company. Fueling the Minnesota LLC’s popularity is that it provides flexibility to business owners who might need the legal and tax benefits of a corporation and the ease of operating as a sole proprietorship. By forming an LLC, you get both.
If you think you want to start an LLC, the following 6 steps provide a step-by-step guide to walking you through the process of establishing a Minnesota Limited Liability Company so you can successfully navigate the throes of paperwork and filing fees and emerge victorious as an LLC owner.
1) Check if your business name is available
It all starts with the LLC name. The first step to forming your Minnesota LLC is to choose a catchy, memorable company name that will attract clients and is one you feel good about using. But before you get too attached to a particular moniker, you’ll need to confirm the business name is available to use in the state of Minnesota.
To determine if your desired business name is available, you’ll need to conduct a name search on the Minnesota Secretary of State website using the Business Name search function. When you’ve confirmed the business name is available, you’ll then need to choose how you want the words “Limited Liability Company” to appear in the name, which is a requirement under Minnesota law and is not optional. The designation can also be written as the abbreviation “LLC” or “L.L.C,” and the entire business name must be different from other names in the database. Other naming requirements include: Not using any words like “incorporated,” “corporation,” “Treasury,” or “FBI.” You can include restricted words within your name like “Bank,” University,” or “Attorney,” but doing so will most likely create additional paperwork.
If you’re feeling unsure about your desired name but don’t want it to get scooped by a third party, you can reserve the name with the Minnesota Secretary of State via the Business and Lien System, which can be filed online or by mail for a fee and is valid for 12 months.
2) Claim your name
With your chosen business name in hand, the next step is to make it official. But before you formalize any paperwork, consider appointing a registered agent first. In Minnesota, you need to nominate a registered agent for your LLC in the form of a company (such as a registered agent service) or an individual who accepts legal documents on behalf of your business. The registered agent must be a Minnesota resident with a physical street address in the state or a business entity legally authorized to conduct work in Minnesota.
After solidifying your Minnesota registered agent, enlist them to help you officially register your LLC. To do this, you’ll need to file Minnesota Articles of Organization with the Minnesota Secretary of State. You can apply online for a filing fee of $155 or by mail for a filing fee of $135. When filling out the paperwork, you’ll be asked for information such as: Your LLC’s name, the name and address of your LLC’s registered agent, the registered office address, an email address and phone number, and the LLC organizer’s name, address, and signature.
Suppose you operate an LLC in another state and now want to expand the business to Minnesota. In that case, you’ll need to register a foreign LLC with the Minnesota Secretary of State Business Services. To file a foreign LLC, you can submit the necessary paperwork online along with a $205 filing fee, or by mail along with a $185 filing fee. However, if you’re setting up a Minnesota LLC to conduct business in another state, you’ll need to request a Certificate of Good Standing from the Minnesota Secretary of State. The request can be made online for a $15 filing fee or by mail for a $5 filing fee.
3) Write your operating agreement
An LLC operating agreement is not required for an LLC in the state of Minnesota, though we recommend creating one. Drafting an operating agreement will help you outline the day-to-day operating procedures for your LLC and clearly define its ownership structure. A detailed operating agreement might make the difference between a smooth-running LLC and a more disorganized entity littered with conflict between the owners.
In the event of a lawsuit, writing an operating agreement can help prove your LLC is its own separate entity, which provides a version of liability protection for your personal assets. Whereas, if you choose not to create an operating agreement, your LLC would be subject to the state laws of Minnesota, which may not align with how your LLC functions or offer the same protections outlined in the operating agreement.
When drafting your operating agreement, be sure to include information such as: The name of your LLC, the purpose behind your LLC formation, the relationship between your LLC’s members, the roles of the members within the LLC, the rights and responsibilities of the LLC managers, how you want your LLC to operate daily, and the process for amending the operating agreement.
4) File your Statement of Information
To keep your LLC firing on all cylinders, you’ll need to remind your registered agent to file a Statement of Information—or annual report—each year. In Minnesota, the annual report is also called the “annual renewal,” for which there is no fee to submit, and the form must be received by the Minnesota Secretary of State Business Services by December 31st.
Minnesota immediately dissolves all LLCs that do not file before the deadline, so it’s essential to mark your calendar and prioritize submitting this form. If you need to make any changes to the report, you’ll need to file an amendment form in addition to the renewal, along with a $55 online filing fee or a $35 filing fee if submitting through the mail.
5) Pay your taxes
Accompanying the LLC designation is the freedom to choose how you’ll be taxed. You can either elect to be taxed as a sole proprietor or as a corporation, which each has its own benefits and results in two different processes.
If you’re a single-member LLC with no employees and you choose to be taxed as a sole proprietor, your Social Security Number will be used as the means to track and report your income tax. Whereas, if you choose to be taxed as either a C corporation or S corporation, your LLC will be taxed as a separate entity and require you to apply for a Federal Employer Identification Number from the Internal Revenue Service.
There is no cost to apply for a Federal Employer Identification Number, or Employer Identification Number, which is the number the IRS uses to track your LLC's transactions for your tax return and other tax purposes. Think of the Employer Identification Number as a Social Security Number for your business, which you can also use to open a business credit card or business bank account and is necessary for when you start hiring employees. You can apply for a Federal Employer Identification Number either online or by mail.
On the state filing level, you’ll also need to apply for a seller’s permit—or tax identification number (tax ID)—from the Minnesota Department of Revenue and will need your Federal Employer Identification Number to do so. The additional information you’ll need to submit with your application includes your legal name, your business address, the trade name or “Doing Business As” (DBA) for your LLC if it has one, the Social Security Numbers of your LLC officers, and the name and email address of a contact person—presumably your registered agent.
6) Wrap up other regulation and sales tax requirements
Woohoo! You’re just about finished filing your LLC with the state of Minnesota. While it’s exciting, be sure to review some final housekeeping items, so nothing slips through the cracks.
At this point, it might make sense to hire a business accountant who can ensure your LLC remains compliant with state tax and federal tax laws, especially when it comes to paying state fees, filing your LLC taxes, and other business taxes.
If you’re selling a product and have obtained your seller’s permit, remember the sales tax rate in Minnesota is 7%, with an additional local and county rate maximum of 2%. So the average Minnesota sales tax falls more between 7% and 9%. For any other potential business licenses and permits that you may need to operate your specific LLC in the state of Minnesota, consult the Small Business Administration (SBA) guide and Minnesota’s ELicensing website at mn.gov.
If you’re planning to hire employees, you’ll need to register for unemployment insurance tax through the Minnesota Department of Employment and Economic Development. You’ll also need to register for employee withholding tax through the Minnesota Department of Revenue.
You should also explore Minnesota’s business insurance requirements because LLCs containing one or more employees—excluding business owners—must purchase workers’ compensation insurance. There might also be other popular policies that make sense for your company, like professional liability insurance or general liability insurance, which cover different types of business services and professional services.
Get LLC insurance in minutes by following these steps
After all the time, money, and energy you’ve put into forming your LLC, give it the protection it deserves with LLC insurance. While there are many insurance options to consider, Huckleberry helps you cut through the clutter so you can easily find a policy that best fits your LLC’s needs. Here’s how it works:
- Go to Huckleberry.com and choose the “Instant Estimate” option. Within minutes, you’ll receive insurance coverage options specifically designed to meet the needs of your LLC.
- Add your business's specific industry so Huckleberry can filter selections to those most relevant to your needs.
- Provide some more information about your LLC’s formation that will help Huckleberry draft accurate quotes.
- In less time than it takes to play a pickup game of hockey, you’ll receive quotes for a variety of small business insurance options.
- The quick rate estimator can provide you with a ballpark figure on insurance costs if you're in a rush. Whether you need coverage like professional service liability insurance or general liability insurance the Huckleberry calculator provides an accurate cost estimate.
As you settle in as the new owner of a Minnesota LLC, give yourself peace of mind knowing you’re protected by purchasing small business insurance. Having a small business insurance plan in place means you can focus on growing your business without worrying about “what ifs,” leading to higher productivity, less stress, and a lot more fun.
For all of your small business insurance needs, think Huckleberry. From personal liability insurance to workers’ compensation insurance, we’re here to help you prepare for the future so you can focus on doing amazing work today.