If you are thinking of starting a business in Minnesota and want to form a Limited Liability Company, it is important to understand the process and requirements for setting up your entity right. In this guide, I’ll provide the information you need to get started, including the steps involved and the necessary paperwork. By following these guidelines, you can ensure that your LLC is registered correctly and operating within the law. Let’s get started!
What is an LLC?
The Limited Liability Company (LLC) is a popular business structure for many businesses starting in Minnesota. The LLC provides personal liability protection and has the potential to save money on taxes. With our guide, you can learn how to form an LLC in Minnesota without an attorney.
Unlike a sole proprietorship or partnership, where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal entity that protects the business owner’s personal assets. So, if the LLC is sued, the owner’s personal assets are usually protected.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
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What are the Steps to Form a Minnesota LLC?
Let’s break down the steps to complete the Minnesota LLC formation process.
Step 1: Choose an LLC Name
The first step in forming a Minnesota Limited Liability Company is to make sure the name you want is available.
It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of Minnesota. The Minnesota Secretary of State makes it easy to search and verify if your LLC name is available. Here is more information on how to do a Minnesota LLC name search.
In addition to making sure the LLC name is available, you also must include one of the following phrases or abbreviations at the end of the business name:
– Limited Liability Company
– LIMITED LIABILITY COMPANY
– L. L. C.
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
If there is a name you want to use but aren’t ready to form the LLC, the Request for Reservation of Name can be filed to hold the name for up to 1 year. The state filing fee for a name reservation is $35, paid to the Secretary of State.
The name must also not contain any words or phrases that indicate or imply the business is organized for anything other than a legal business activity.
A few other Minnesota naming requirements include:
– Words or phrases such as Insurance, Brokerage, or anything similar that may indicate the business is involved with insurance underwriting, unless permitted by the state to do so.
– The & symbol can’t be used.
– The only allowed characters are the numbers 0-9 and letters A-Z.
– The name must be under 250 characters.
Before finalizing a name, you may also want to see if a domain name is also available to have a matching website address.
If you plan to use a different name from the one that you register (perhaps you want to run multiple businesses under the LLC), you can use an assumed name (sometimes referred to as a fictitious business name, trade name, DBA, or Doing Business As name). To register an assumed name, file the Certificate of Assumed Name, along with the filing fee ($30 for filings by mail or $50 for online filings), paid will need to be sent to the Minnesota Secretary of State. Additionally, a legal notice is required to be placed in a newspaper in the county where the business is located for two consecutive issues.
Step 2: Appoint a Minnesota Registered Agent
Although not required, a registered agent can be appointed to act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
The basic requirements to be a Registered Agent in Minnesota include:
– The agent must be a Minnesota resident at least 18 years of age or a commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed)
– The agent must generally be available during normal business hours at the address provided to receive service of process
Learn more about the requirements for a Minnesota registered agent.
Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed. Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.
Step 3: File the Minnesota LLC Articles of Organization
The paperwork to officially create an LLC in Minnesota is called the Articles of Organization. To submit the paperwork, you can either file online through the Minnesota Secretary of State or download and mail the Minnesota Articles of Organization form.
If you have questions, contact the Minnesota Secretary of State
Address: Minnesota Building 60 Empire Drive, Suite 100 St Paul, MN 55103
Phone: 651-296-2803 (between 9 am and 4 pm)
When filling out the Articles of Organization, there are a few sections and terms that can be confusing. Let’s go over a few of these sections to help get your LLC started right.
The LLC Organizer is someone who is involved with filing the Articles of Organization. The Organizer may or may not be a member (LLC owner), such as a mentor, attorney, or accountant, but the initial members could also be an organizer.
Individual filers will leave this section blank, but if an attorney or entity formation service were completing the articles on your behalf, they would include a reference number to track the application.
Minnesota Business Snapshot
This is a voluntary section to include information regarding the number of employees, women, minority or veteran ownership, business classification, and more.
What To Do After Starting A Minnesota LLC
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare a Minnesota LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.
Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Obtain an EIN
If the LLC will hire employees or is owned by more than one member, an EIN is required.
The EIN or Employer Identification Number (also referred to as a Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.
If an Employer Identification Number isn’t required, the LLC can use either the owner’s social security number or register for an EIN.
How much does it cost to get an EIN in Minnesota?
There is no cost for an Employer Identification Number (EIN) when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
Related: How to Apply for an EIN
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- In some circumstances, a Minnesota Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing before they can start.
- Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
- Sales Tax Permit – To sell products and certain services, registration with the Minnesota Department of Revenue will be necessary.
File the Minnesota LLC Annual Renewal
LLCs are required to file an annual report every December 31st with the Minnesota Secretary of State. Unlike most states, the annual filing fee is $0.
Minnesota LLC FAQs
How much does it cost to start an LLC in Minnesota?
The Secretary of State filing fee to start an LLC in Minnesota is $155 for online filings and $135 for mailed-in forms.
What is the processing time to form an LLC in Minnesota?
LLCs formed online are processed immediately, while mailed-in forms can take up to one week.
Is there a yearly fee for an LLC in Minnesota?
The cost to renew an LLC in Minnesota is $0, though each year, an annual report must be filed.
Who can be a registered agent for an LLC in Minnesota?
Anyone can act as a registered agent, provided they are at least 18 years old, reside in the state of Minnesota, and are generally available to receive documents during normal business hours.
Which licenses are required for an LLC in Minnesota?
It’s sometimes thought that the LLC and business license are the same in Minnesota, but they aren’t. An LLC is referred to as a business entity, which is how the business is organized to conduct business. A business license is approval from a government entity to operate legally.
Most businesses in Minnesota will need to register with a variety of government agencies. Minnesota business license requirements are based on what the business does or where it is located in the state, not on the type of entity.
What is a Foreign Limited Liability Company?
A foreign LLC refers to an LLC that is physically operating in states outside of the state where it was formed. Physically operating means having a presence, such as having an office or employee in the state. The LLC will need to register as a foreign LLC in each state where it plans to operate.
What is a Professional Limited Liability Company?
Businesses that require occupational licensing in Minnesota, such as accountants, architects, veterinarians, etc., will want to file for a Professional Limited Liability Company (PLLC) instead of an LLC. Filing for a PLLC is very similar to that of an LLC.