When you think of starting a business, there are a lot of factors you need to consider. Aside from making sure that you are financially and emotionally ready, you also have to research relevant information that can affect your business. Part of this is the business entity structure as well as the place where you will do business.
Business Entity Structure
Many startups choose a limited liability company (LLC) business structure. The protection and flexibility that it offers make it an attractive option. Now, another big question is where starting a business makes sense.
Each state has its own process for registration of business. Additionally, taxation, reporting, and other compliance requirements also vary. If you are looking for a state to form your company, consider Minnesota.
Forming a Business in Minnesota
A recent survey showed that Minnesota is currently the least stressed state in the country. This state also has a friendly business environment and is often seen as one of the top states for businesses.
Here are some of the advantages of starting a business in Minnesota:
- Good Business Climate for Startups: When looking for a state to do business in, it is best to look at the statistics. Is the survival rate for new businesses good? Knowing this will give you an idea about the business climate, economic cycle, and local economic conditions of the state. A key indicator is the five-year survival rate. In Minnesota, around 57% of new businesses accomplish this. The state also has a strong sense of community and high civic engagement, which help in easing the first few years of managing a company.
- Significant Benefits for LLC Formation: Unlike corporations, this type of business entity in Minnesota does not need to maintain minutes of meetings and resolutions. Additionally, the owners have protection against possible lawsuits against the company.
- Business Incentives: Once you register your company in Minnesota, you can have access to various incentives and programs that the state sponsors.
- Opportunity Zones: This community development program aims to encourage long-term investments from startups located in low-income communities. If your company is located in an opportunity zone, it will be eligible to receive temporary tax deferral on its capital gains and permanent exclusion from taxable income on the capital gains.
- Financing Programs: One benefit that a new business can enjoy in Minnesota is the availability of various resources that can help in achieving growth and promoting innovation. The Department of Employment and Economic Development (DEED) has multiple programs for these. DEED also offers financing programs to promote the creation of high-quality jobs and retain the existing ones. Check the available programs to see if your business qualifies.
Other available incentive programs in Minnesota that you can check out include the following:
- Foreign Trade Zones
- Emerging Entrepreneur Loan Program
- Greater Minnesota Business Expansion Tax Credits
- Border Cities Enterprise Zones
- Tax Abatement Program
- Bioscience Incentive Program
- Research and Development Tax Credit
Starting a Business in Minnesota
Once you decide to form your company in Minnesota, you have to go through a process to register it with the state and legalize your business operations.
- Choose a distinguishable name: Come up with a unique and easy-to-remember company name. Avoid words that are hard to pronounce. You should also conduct a business entity name search to see if no other company is using the name that you want. The state also has certain restrictions when it comes to business names. First, your company should have the phrase Limited Liability Company or one of its abbreviations like LLC or L.L.C. Second, you cannot use words that may confuse your company for a government agency. Third, there are words that you cannot use without proper licenses.
- Appoint a registered agent: State laws require you to have a registered agent in Minnesota. You can choose an individual who is at least 18 years old and is a resident of the state. You can also opt for a third-party organization like DoMyLLC that is authorized to transact in the state. This registered agent will act as the point of contact of the state. It will receive legal and tax documents on behalf of your company. Make sure your registered agent has an address that is open during normal business hours.
- File the appropriate paperwork: One of the most important steps is for you to submit formal paperwork. In Minnesota, this document is called the Articles of Organization. You have to file this with the Minnesota Secretary of State. You also need to pay the corresponding fee. To complete the form, indicate the name of your company, the name and address of your registered agent, and the duration of the business. You should also include the names, addresses, and signatures of the organizers of the company.
- Get an Employer Identification Number (EIN): Many people consider the EIN as the Social Security Number for companies. You can get one from the Internal Revenue Service (IRS). Submit a completed IRS Form SS-4 to apply. You can do this online.
- Create an operating agreement: The state does not require you to submit this document. However, having one can be advantageous for your company. This legal document will outline the ownership and the operating procedures of your business. It can help reduce the risk of conflicts in the future. It can also determine the responsibilities of each owner, also known as a member.
- Open a bank account: This step is optional. If you want to further protect your company’s finances, you can open a bank account under the name of your business entity. Doing this will separate your personal assets from the company’s, which will ensure personal asset protection. It will also make tax filing and accounting easier.
The friendly business climate in Minnesota makes it a good choice for emerging entrepreneurs. You can also enjoy state-specific benefits as long as your company qualifies. If you need help with the formation process or are looking for a registered agent for your Minnesota company, contact DoMyLLC.