How to start an LLC in Minnesota
Looking to get a new business off the ground? One of the first steps that you will need to take is to form the business as a legal entity – either a sole proprietorship, corporation, partnership, or limited liability company (LLC). For many entrepreneurs, LLCs make the most sense, as they are simpler to set up than a corporation, and still offer excellent personal liability protection.
But how do you form an LLC? The process is handled on the state level, and as such, the specifics vary depending on where you live. This guide will show you how to start an LLC in Minnesota.
In MN, new business registrations are handled by the Minnesota Secretary of State. The applications can be processed online, in-person, or through the mail. Below, see our step-by-step guide to starting a limited liability company in Minnesota.
Consider utilizing an LLC formation service
The first step is to decide whether you will form the new company on your own, or use the help of a professional LLC formation service. The process certainly can be handled alone (see the steps below), but it’s much easier with some help.
There are two LLC formation companies that are highly recommended: Northwest Registered Agent, and ZenBusiness. Of these, Northwest is known for having excellent service, while ZenBusiness has lower pricing and a wider range of services.
If you choose to work with one of these companies, expect to pay an extra $50-$150 on top of Minnesota’s state licensing fees ($155). The company will then walk you through the entire process of getting your new company registered and set up. Using a service can expedite the process, while also reducing the risk of errors. For most entrepreneurs, it’s worth the cost to use one of these services.
Name your new company
Before registering, you will need to select an available – and compatible with the naming rules in Minnesota. The biggest requirement is that your business name must be unique from other businesses in the state. You can search a database of all registered business names here. Use this search function to confirm whether a name is taken or not.
In addition to finding a unique (not-taken) name, you must also choose a name that meets certain requirements laid out by the state. This includes the use of “limited liability company”, “LLC”, or “L.L.C.” in the business name – so if you want to operate as “Dan’s Plumbing”, you will need to register “Dan’s Plumbing, LLC” as your formal business name.
In addition to this, there are certain words that cannot be used, or cannot be used without special permission. This includes government-related phrases, and phrases from protected industries like banking, legal services, and medical services. You can find more information here.
Using a Trade Name in Minnesota
Minnesota allows for the use of “assumed names”, otherwise known as trade names or DBA names. Assumed names can be registered by filing the Certificate of Assumed Name Registration, at a cost of $50 for online filings, and $30 for by-mail filings.
Assumed names are secondary names that are attached to the primary business registration. This allows an LLC to operate under a different name. For example, “ABC, LLC” could register an assumed name under “ABC Plumbing”, if that name were available. In general, assumed names must meet similar requirements to primary names. Even so, this gives business owners much more flexibility.
Appoint a Registered Agent
Businesses in Minnesota are required to appoint what is called a Registered Agent. This agent represents the business and handles important documents and notices on behalf of the company. For example, tax forms, a notice of lawsuits, and other important documents will generally be sent to the Registered Agent. And it is the Registered Agent’s address that is publicly listed on the business registration records.
Any Minnesota resident can be a Registered Agent for an LLC in Minnesota. That means you yourself can be your own agent, or you can appoint an employee. Alternatively, you can use a professional Registered Agent service, such as Northwest Registered Agent or ZenBusiness.
There are several advantages to using a professional service. The first is enhanced privacy. The agent’s address will be publicly listed, instead of your own. Another advantage is accuracy and efficiency. With a professional service, there is no risk of a document going unnoticed – even if the business owners are on vacation. Expect to spend around $100-$150 per year if you choose to use a professional service.
Create an operating agreement
Note: This step is optional, but recommended.
An operating agreement is not required by Minnesota, but it’s still strongly recommended for most businesses. It is an internal document, which means that it is kept on file by the business, rather than being submitted to any government agency. This is the reason why the document is optional.
The operating agreement details various aspects of the new company – most importantly, its operating procedures and ownership structure. It is a particularly important document for multi-owner businesses because it allows you to clearly define ownership rights, which can prevent future conflict.
File LLC Articles of Organization
The Articles of Organization are the formal documents that establish a new LLC as a legal entity in the state of Minnesota. They are filed with the Secretary of State department, and the process can be done either online or by mail. The fee is $155 for online filings (or expedited in-person filings), or $135 if filed by mail. This MN LLC formation fee goes directly to the state. If you use a service like ZenBusiness, you will pay the ZenBusiness fee (starting at $49) plus the state fee ($155).
To file online
Create an account with the Secretary of State website, and follow the instructions to register a new LLC. File the Articles of Organization, and pay the $155 fee via credit card or bank transfer.
To file by mail
Fill out the form and mail it, along with a check or money order for $135 payable to the Secretary of State, to:
Minnesota Secretary of State — Business Services
Retirement Systems of Minnesota Building
60 Empire Drive, Suite 100
St Paul, MN 55103
The processing time is generally 1 to 2 weeks, depending on the filing type and the current backlog at the Secretary of State’s office. Keep in mind that these steps are for a new domestic LLC – for existing companies expanding into the state, the process is different as you will be creating a foreign LLC in Minnesota.
Apply for an EIN
An EIN, or employer identification number, is required to hire employees – so it’s quite important for most businesses. This is a federal tax ID number that is used by the Internal Revenue Service (IRS). It’s also required for important activities like opening a business bank account.
It is easy (and free) to apply for an EIN. Simply fill out this application on the IRS website to obtain your employer identification number.
Apply for business licenses & permits
Once your application is processed, your LLC will be formed as a business entity. However, there are additional steps you’ll need to take in order to operate your business legally. This includes various tasks on the federal, state, and local levels.
In Minnesota, many businesses will not require any sort of statewide business license. However, some industries are more regulated and will require permits or licenses on the state level. These can typically be applied for via the eLicensing system.
Many counties and cities in Minnesota also require local business licenses (general-purpose), as well as licenses or permits for specific industries. You will need to check with your local city/county government for details. Additionally, certain highly regulated industries (oil & gas, medical, etc.) may require federal licenses.
Keep your business in good standing
The initial business formation process is detailed above – but there are many ongoing compliance tasks that you will need to stay on top of.
Basically, you will need to complete various tasks in order to keep your company in good standing with federal, state, and local governments. This includes tax returns, annual reports, business license renewals, and more.
The specifics required of your business will vary depending on the type of business you run, and the location or locations you operate in. Because of this, it’s difficult to construct a complete list of all the steps required – it’s a good idea to do your own research and check with local/state officials to ensure you’re staying compliant. As a general guideline, the list below covers some common requirements that may or may not apply to your company.
Minnesota Annual Renewal/Annual Report
Minnesota tax filings
Local city/county tax filings
Sales tax filings
Employer tax filings
Federal tax filings
Annual business license renewals
Registered Agent (you must always have a Registered Agent appointed for the life of the company)
It’s wise to do the research now and make a list of all the required filings that you will need to complete every year. Then, add key dates to your calendar so that you don’t miss any important due dates. In this way, you can stay on top of compliance requirements and keep your company in good standing.
Open a business checking account
It is very important that you keep your finances separate – meaning your business finances should be completely separated from your personal finances. The best way to do this is to have both personal and business banking accounts, credit cards, etc.
As soon as possible after forming your company, you should open a business checking account (and if desired, a business credit card or line of credit). Most financial institutions, including banks and credit unions, offer business accounts nowadays – so it’s just a matter of finding one that suits your needs well. Be sure to call ahead to see what their requirements are, as each bank will have slightly different account opening requirements.