How to Start an LLC in Minnesota: Cost and Registration Steps

If you want to set up a business in Minnesota, you are probably already interested in registering an LLC. However, without professional help, it can be very challenging. Actually, if you want to, you can perfectly handle registering an LLC on your own. And this article will assist you in this.

You will learn:

• What steps do you need to take to start an LLC in Minnesota?
• How much will it cost to open a business in this state, and what will be the filing fee?
• How long will the process take, and what additional steps do you need to follow?

How to Form an LLC in Minnesota: Step by Step

Step 1: Name Your LLC

The first thing any company needs is a nice business name. In Minnesota, there are certain restrictions regarding LLC names. There are some words and phrases you can't use, but the others have to be included.

Words You Have to Use Starting an LLC in Minnesota

Any LLC name should contain phrases that indicate the type of business. Minnesota Statutes Section 322C.0108 says that the name has to contain either the LLC abbreviation or the full phrase —  Limited Liability Company.

Additionally, if your organization is a Professional Limited Liability Company, under Section 319B.05.5, you may also add the word "professional", or use the abbreviations "PLLC" or "PLC".

Words You Can’t Use

Some words are forbidden to be used in the LLC name under state law. For example, Section 322C.0108 specifies that the name should not contain the words "corporation", "incorporated", or any derivative of those words.

You cannot register a name that gives the impression that you are engaging in illegal activities, including violating state laws regarding licensing.

If your name implies that you offer services that require a license, you have to either obtain it or not use that desired name.

A basic rule of choosing an LLC name: If you need a permit to operate, ask the Secretary of State twice to be sure your name satisfies the law.

Moreover, the LLC name should be markedly different from any other entity registered in Minnesota. This is to avoid confusion when searching for companies.

Research the LLC Name You Want

Once you have chosen an LLC name, you need to make sure that it is free and available for registration. To do this, you can use the Minnesota Secretary of State’s Business Filing Search.

If a name is already taken or there is a very similar one to yours, then you cannot use it. There are exceptions when you get written consent from the owner of an already-registered organization to do so. Alternatively, if you have rights to that name, you can confirm them in court and register an LLC after that.

If the name is available, according to Minnesota Statutes Section 322C.0109, you may reserve it for 12 months, which is a renewable period. Name reservations are provided by the Minnesota Secretary of State.

Minnesota Secretary of State – Business ServicesFirst National Bank Building
332 Minnesota Street, Suite N201
Saint Paul, MN 55101.

You fill out the form, pay the $35 fee, and mail the documents along with a check to the address listed below. You may also submit the form online or in person, and the registration fee is $55.

Minnesota DBA: Using an Assumed Name

The official LLC name is often too long or insufficiently informative. In this case, you can consider "doing business as" (DBA). This alternative name can be used for advertising and everyday work, which is convenient in many cases.

You can choose any DBA for your business, the main thing is to register it in time as well. For example, you can have a DBA on your website, promotional materials, and business cards. The official LLC name will only be needed for legal documents.

Let's say your LLC name is "Cathy's Cake Shoppe, LLC". As an alternative name, you can use a shortened version called "Cathy's Cake Shoppe".
If, after a while, you want to render other types of baked goods, you can always register a new DBA, such as "Cathy's Bake Shoppe". And your customers will understand what kind of variety you have now.

In Minnesota, DBAs are called "assumed names". To register one, under Minnesota Statutes Section 333.01, you have to fill out a form, submit it online, or send it by regular mail. For paper documents, the fee will be $30, and registering online will cost you $50.

Step 2: Appoint a Registereto Register an LLC in Minnesota

You will need a registered agent, which is a person or a company responsible for receiving legal papers and other important correspondence for your LLC.

Under Minnesota Statutes Section 5.36, every business is required to have a registered office in Minnesota. You are not obligated to hire an agent since you may receive letters yourself. However, if you choose to use these services, the agent's office should also be in the state.

Accepting service of process refers to receiving documents that are sent to you during a lawsuit. Therefore, if someone sues your venture, your Minnesota registered agent will obtain all the paperwork. If you don't list your agent information, the documents will be delivered to your office.

In addition, your agent has to be available throughout the day at all times to receive paperwork and service of process. Other than that, the role of your agent can be performed by any person or entity.

Aspiring businessmen often decide that it is much easier to act as registered agents for themselves and simply provide their own addresses. Nevertheless, this leads to certain drawbacks.

On the one hand, there are certain advantages to handling the documents yourself:

• It's cheap. You don't have to pay anyone for services;
• It's easy and reliable. You will definitely receive all documents personally;
• It's convenient. You keep one address relevant (your own), and you don't have to worry about anything else.

On the other hand, such a solution causes many inconveniences and even problems:

• You can forget about privacy. Your name and address will be publicly available on the Secretary of State's website for everyone;
• You will have to sort spam and junk mail. A public address always receives a lot of different emails in addition to a small number of necessary letters, and it will take time to process them;
• You have to work without breaks. Any registered agent should be available all day long. So you cannot go out for lunch, on vacation, or sick leave;
• Business interruptions. If you have to meet someone serving the process, you should stop all work with customers. It's inconvenient, and you risk losing profits, as well as your reputation may suffer too;
• If you miss something, you will be the only person to blame. This goes for keeping your address up-to-date and receiving your letters on time.

We recommend that you choose a registered agent in Minnesota, which will save you from all the troubles described above. The cost of the service is reasonable, about $100 a year. Agents will let you know when you receive your documents, and you can run your business on your own schedule and not be distracted by anyone else.

For those who have decided to use these services, we can offer our own rating of the best registered agents, as well as recommendations on how to choose a good provider.

If you conduct business not only in Minnesota, select large agencies that offer registered agent services in different states. That way, you will save time, and you will pay and collaborate with one company, which is very convenient.

Step 3: File Your LLC Articles of Organization

To complete a basic LLC registration, you need to file the Articles of Organization that contain key information about your entity. The document should be submitted to the Minnesota Secretary of State.

If you still find it difficult to create a Minnesota LLC on your own, or if you want to do it without the hassle, there are companies that provide business formation services. The best offers in this field are covered in our article on the best LLC registration agencies, where you can also find out about the criteria for choosing one.

What to Include In My Minnesota Articles of Organization?

Minnesota Statutes Section 322C.0201 tells you that your Articles of Organization should contain the following details:

• LLC name;
• Your registered agent's information;
• The names and addresses of all LLC members.

You can apply for the Articles of Organization by mail to the Secretary of State's address. However, it is much more convenient to do it online, which will also cut the processing time.

How Much Does an LLC Cost in Minnesota? Filing Fee

According to the Minnesota Secretary of State's website, the fee for processing the Articles of Organization will be $155 if the document is sent online while creating paper documents and sending them by regular mail will cost $135.

Processing Time

Applications that are sent online are processed as soon as they are received. If you want to apply in person, you have to make an appointment in advance. In this case, documents will be handled within 25 minutes immediately during the appointment. Documents that are mailed are processed on a non-expedited basis in the order they are received.

Step 4: Draft an Operating Agreement

An Operating Agreement stands for a special contract that all LLC members sign. It should describe the rules under which the organization will run and define the rights and obligations of every member.

In Minnesota, it is optional for an LLC to create this document. However, it is a good idea to ensure the smooth running of your business without any disputes or litigation.

A detailed and thoughtful contract will help each business owner understand their role in the firm. When signing it, each participant agrees to certain rules. This will allow you to avoid problems in various troublesome and potentially challenging situations for your business.

Imagine that one of the parties wants to sell their share. An agreement will describe in detail this process, the reallocation of the former participant's responsibilities, and other important nuances.

Here are some other key points that are described in the Operating Agreement and will help you in your day-to-day activities:

• The rights and duties of each owner are defined here. It outlines who handles current management, who deals with financial issues, accounting, etc.;
• The agreement shows what rights and duties managers have and what they are responsible for. It is important to describe all these issues;
• An Operating Agreement describes what activities an LLC may legally conduct and how the business will function;
• It covers the procedure for joining new members, as well as the rules for leaving the business, buying, selling a share in the business, and redistribution of obligations due to changes in the membership;
• A separate clause of the document describes how profits will be allocated: the terms and methods of payment. Such a plan will allow everyone to understand how much and when they can expect to receive money to their personal accounts;
• The paper defines who is responsible for different aspects of work, business owners or managers. It also describes the rules for hiring and firing employees;
• The procedure for closing down an LLC is also covered. In the future, for a variety of reasons, you may conclude that a legal entity should cease to exist. It is important to think through in advance how you will do this;
• A separate section is devoted to making changes to the Operating Agreement itself. You should establish a procedure in advance to help your business evolve dynamically and amend the rules in accordance with changes in the market or the company's development.

LLC members should be involved in drafting and discussing an Operating Agreement, then they will enter into a contract that they actually support. This will help avoid future disputes and ensure the smooth running of the business. Besides, make sure it does not violate state law.

In general, it is the main document that defines all the intricacies of your company, and if necessary, you will use it as a basis to resolve any complex issues. If your LLC does not have such a paper at the initial stage of its existence, you will have to handle disputes in court according to the state legislation.

Step 5: Get an EIN For Your Minnesota LLC Registration

The Employer Identification Number (EIN) is a unique nine-digit code issued by the Internal Revenue Service to organizations. It is similar to the SNN but for legal entities and is used for their identification and tax reporting, as well as other government activities.

Answer the following questions:

• Does your LLC consist of more than one member?
• Are you going to hire employees?
• Is your company taxed as a C corporation or an S corporation?

If you answer YES to at least one of the questions above, you are required to obtain this code.

If you are a single-member LLC and plan to operate without employees, you can use your personal SSN for taxation and other purposes. Nevertheless, it is still worthwhile to get an EIN. It will bring you additional benefits. As such, you will have no obstacles in opening a commercial bank account, it will be easier to do bookkeeping, and it will protect you from fraud.

You can obtain an EIN very quickly online or by mailing a Form SS-4 to the official IRS address. This procedure is completely free and the application is very easy to prepare. Hence, we do not recommend using the help of professionals in this matter if EIN filing is not included in the service package by default.

Read a separate article on how to apply for an Employer Identification Number in Minnesota.

First Tasks After Creating an LLC in Minnesota

Now, your Limited Liability Company is set up and ready to start operating. However, before you actually launch your business, we recommend that you take some more steps that are not required by law but will help your venture run more successfully and, in case of any problems, get protection.

Open a Business Bank Account

You don't have to open a business checking account for your entity, but there are many advantages to such a solution. A separate account helps you manage your business because it makes bookkeeping much easier. It also gives you more options, and most importantly, it allows you to protect the owners' personal assets.

The main benefits of a business bank account are:

• Convenience. You keep your own expenses and income from your business separate. It noticeably simplifies accounting;
• More opportunities. A corporation or other large organization often refuses to cooperate with small firms as it is ready to make payments only between legal entities. A business account helps you avoid such restrictions. Also, you will only be able to receive credit card payments if you have a bank account;
• Personal asset protection. If you blend your own funds with company finances, you will risk paying LLC debts out of your personal savings.

The most important perk is the latter one, namely the protection of assets. It is often the reason why LLCs are created, even if the firm is single-owner.

In most cases, the LLC owner is not liable for the debts of the entity, all payments are made out of the company's funds. This is called a "corporate veil". But such a legal concept will only work if your assets and business finances are segregated.

Otherwise, it is very easy to "pierce" such a veil in court, and your creditors will be able to claim funds already from your personal accounts.

Therefore, we recommend that you open a separate bank account for your LLC as it will secure you in case of lawsuits against your venture or bankruptcy and help the company operate more successfully in general.

Get Business Insurance For Your Minnesota LLC

You probably insured your health, home, and other assets a long time ago. Businesses also need proper defense so that if some disasters happen, you won't be left with absolutely nothing.

Consider in advance what risks are most typical for your area of business, and obtain business policies that are the most relevant to you. In this case, you will be able to work with peace of mind because you will know that you have protected your business.

The most common types of LLC policies:

• Commercial vehicle insurance. It is similar to personal car insurance, but this one covers corporate cars and drivers;
• General liability insurance. This policy will be useful if someone is injured on your property. It can help pay for damages and a lawyer if one is needed;
• Commercial property insurance. It covers your belongings in case of various damages. Keep in mind that you will most likely need a separate policy against flooding, which is rarely included in standard insurance;
• Workers' compensation insurance. This policy is mandatory in Minnesota. All employers are required to have it. You can get it from an insurance company or become self-insured;
• Professional liability insurance. It is good for lawyers, architects, doctors, and other professionals in the service industry since this policy can protect them from malpractice;
• Business income insurance. If you need to close your business for any reason, this policy will cover the loss of income. However, each company has different rules, so read the terms carefully before you sign the contract.

Keep Your Company Compliant

Any LLC owner is required to comply with state laws and regulations that govern the operation of the venture and your area of business. You may need to obtain a license or permit every year, file additional reports, and pay taxes.

We recommend that you constantly monitor the local laws that govern your LLC. If you keep track of changes, you won't fail to comply with them, and you'll be able to avoid any problems.

Business Permits and Licenses

Most LLCs can function in Minnesota without any special permits. But some industries are a little stricter. You may have to get a license to do business. To see whether you need such licenses, check out the Minnesota government’s guide to Business Licenses and Permits.

Tax Requirements

Limited Liability Companies in Minnesota with two or more members are considered partnerships and are subject to state taxes if their sales and payroll reach a certain amount. For the 2020 tax year, this number was $1,040,000, but the amount is adjusted for inflation each year.

In terms of federal taxation, LLCs are treated as "pass-through" legal entities. This means that the venture does not pay income taxes. The LLC members report all revenues and losses from the business on their personal returns, for which they use Schedule C. Thus, they pay these taxes.

However, LLCs have to pay Social Security and Medicare taxes. It doesn't matter whether you have employees or not. And if you do have them, you should also withhold taxes from their wages.

Annual Report and Other Filing Requirements

Minnesota Statutes Section 322C.0208 requires you to renew your company registration annually with the Secretary of State. You can do this online, in person at the office, or by mail. Moreover, there is no filing fee.

Minnesota Business Formation Quick Links

• Name Availability Guidelines (SOS)
• Fee Schedule (SOS)
• Starting a Business
• Forming a Limited Liability Company
• Business Licenses and Permits
• Partnership Taxes and Minimum Fee
• IRS — apply for an EIN online
• IRS information regarding the federal tax treatment of LLCs
• Business Filing Search (SOS)
• Online Filing (SOS)

Statutes:

• Name Guidelines: Minnesota Statutes Section 322C.0108
• Name Reservation: Minnesota Statutes Section 322C.0109
• Assumed Name: Minnesota Statutes Section 333.01
• Registered Office: Minnesota Statutes Section 5.36
• Articles of Organization: Minnesota Statutes Section 322C.0201
• Operating Agreement: Minnesota Statutes Section 322C.0110

FAQ About How to Get an LLC in Minnesota