Here's What You Need To Know About Starting An LLC In Minnesota

Thousands of new entrepreneurs emerge every year, which increases competition in the marketplace. Because of this, the pressure to survive also becomes higher. Despite hard work and perseverance, some startups fail even before they reach their fifth year. The success or failure of a company depends on various factors. That is why the decisions of a business owner require a deep understanding of circumstances and consideration of possibilities. Among the things you have to decide on when starting an LLC in Minnesota are its location and legal structure. The choices you make will determine the taxation and regulatory requirements for your company.

LLC Structure

The business entity structure of your company is crucial. It will affect your business throughout its existence.

A popular option for many new entrepreneurs is the limited liability company (LLC). This hybrid structure combines features from corporations and partnerships. If you choose this, your company can have pass-through taxation. At the same time, your personal assets will not be affected in case the company incurs debts or faces a lawsuit.

The owners of LLCs are called members. Generally, there are two types of LLCs based on the number of members. If you are the sole owner of the company, you will have to form a single-member LLC. If your business has multiple members, then it will be a multi-member LLC.

To better understand the appeal of the LLC, here are some of its advantages:

• It offers liability protection for the assets of the owners as long as they do not engage in fraudulent or illegal activities.
• The profits can go directly to the members, who will then report them on their personal tax returns.
• You can prevent double taxation.
• Compared to corporations, the filing, compliance, and management requirements are simpler.
• It will help establish the credibility of your business.
• It will help in building the credit history of the company, which will give you an advantage when you plan on obtaining loans or credits in the future.

Why Choose An LLC In Minnesota

When choosing where to operate, you have to consider the laws in the state. You also need to look into the processes and requirements you will have to complete. Additionally, you have to choose the one that offers the most benefits for your business.

Starting an LLC in Minnesota comes with many advantages, especially for new companies and small businesses. The business climate in the state is friendly. It also offers competitive tax rates and a low operating expense rate. It has pro-business policies and simple regulatory processes.

Aside from those, the state offers the following benefits for LLCs:

• Resources – The Department of Employment and Economic Development (DEED) offers various resources to help startups in their journey to innovation and growth. The department offers funding that varies depending on the program. Its goal is to help companies retain existing jobs and create high-quality ones. An example is the Job Creation Fund, which has a ceiling amount of $1 million. The Innovation Loans for Entrepreneurs (MILE) offers approximately $20,000 to $50,000.
• Opportunity Zones – This new community development program aims to encourage long-term investments from startups in low-income communities in the state. If you qualify for this program, you are eligible to receive temporary tax deferral on capital gains and permanent exclusion from taxable income on capital gains.
• Incentive Programs – Depending on your business and its location in the state, you may also benefit from other programs. Included are the Foreign Trade Zones, Border Cities Enterprise Zones, Emerging Entrepreneur Loan Program, Bioscience Incentive Program, Tax Abatement Program, Research and Development Tax Credit, and Business Expansion Tax Credits among others.
• Meetings – Unlike corporations, LLCs in the state do not have to maintain minutes of meetings and resolutions.

Forming An LLC

The process of starting an LLC in Minnesota depends on the state. Each state has regulations that companies have to follow. To prevent any legal issues, you will have to understand and complete all processes and requirements properly.

• LLC Name – Once you decide to form a business, you will have to think of a suitable name for the type of company and industry you will be in. It should also reflect the vision of your business. Additionally, it is necessary for you to follow the naming guidelines of the state.
  • The business entity name has to have the phrase “limited liability company” or any of its abbreviations.
  • You cannot include words that could confuse your business with a government agency.

If you do not want other business entities to get the name you are planning to use, you can reserve it with the Secretary of State. Submit a Name Reservation form by mail, in person, or online. Online and in-person filings cost $55, while mailed submissions cost $50. Doing this will reserve the company name for 12 months.

You also have the option to use a different name from the legal LLC name registered with the state. The state allows LLCs to use a trade name, which is also known as a fictitious name or doing business as (DBA). If this is the case, you have to register the fictitious name to the Secretary of State by filing a Certificate of Assumed Name. If you file online, the filing fee is $50. Mailed submissions cost $30. You also have to publish the Certificate of Assumed Name in a newspaper for the county of your company’s principal place of business for two consecutive issues. Keep in mind that you need to register your business first before filing for DBA.

• Compliance Requirements – Once you decide to do business in Minnesota, you will have to prepare for various state compliance requirements. This includes the submission of formal paperwork and completion of multiple steps.
  • Articles Of Organization – Register your LLC with the Secretary of State by filing the Articles of Organization and paying the corresponding fee. You can submit the paperwork online, in person, or by mail. The filing fee for mailed submissions is $135, while online and in-person filings cost $155. When completing the form, you will need the following information:
    • LLC Name
    • Name And Address Of The Registered Agent
    • Name, Address, And Signature Of The Organizer
    • Business Email Address
    • Business Phone Number
  • Registered Agent – As stated earlier, you will have to inform the state about your company’s registered agent. That means you need to appoint one for your business. Your registered agent, which can be an individual resident or a business entity authorized to transact in the state, will accept services of process for the company. They will be in charge of accepting legal correspondence and documents on behalf of your LLC.
  • Operating Agreement – While this document is not a requirement, having one will be beneficial to the company. The operating agreement will establish the processes to run the LLC, the rights and responsibilities of every member or manager, and the management structure of the business. It also preserves the limited liability feature of the business entity by showing that the company is a separate entity.
  • Ongoing – Aside from your obligations during the formation of your business, there will be ongoing compliance requirements. For instance, you may need to get an Employer Identification Number (EIN) from the IRS. This will be necessary to hire employees or open business bank accounts.Depending on the type of business and your location, you may need to acquire local or state business licenses. If you plan on selling goods that require the collection of sales tax, you also need to register with the Department of Revenue.LLCs need to file annual renewals with the Secretary of State as well. You can submit by mail, online, or in person on or before December 31. The filing fee for online and in-person filings is $45, while mailed submissions cost $25.

Entrepreneurship can be an exciting journey. However, it can also be challenging. As the business owner of an LLC in Minnesota, you will be in charge of handling many responsibilities. If you think you need help, you can leave the registration of your business to DoMyLLC. We can also serve as your registered agent. Contact us now to find out more about our services.