If you want to start and run a Minnesota limited liability company (LLC), you'll need to prepare and file various documents with the state. This article covers the most important ongoing reporting and state tax filing requirements for Minnesota LLCs.
The State of Minnesota requires you to file an annual renewal for your LLC. You can mail in the renewal (blank forms are available to download) or complete it online at the Secretary of State website. Only a few pieces of information, such as your LLC’s state-issued file number, official name, registered agent and office address, the name and street address of at least one LLC manager, and a few other basic details, are required to complete the renewal.
The annual renewal must be filed each year by December 31.
When it comes to income taxes, most LLCs are so-called pass-through tax entities. In other words, the responsibility for paying federal income taxes passes through the LLC itself and falls on the individual LLC members. By default, LLCs themselves do not pay income taxes, only their members do. However, Minnesota does impose a separate fee on LLCs for the privilege of doing business in the state. The fee is graduated and applies to LLCs that have $500,000 or more of in-state property, payroll, sales, or receipts.
In addition, the owners of some LLCs choose to have their businesses treated like a corporation for tax purposes. This choice is made by filing IRS Form 2553 with the IRS. (See the IRS website for the form.) Unlike the default pass-through tax situation, when an LLC elects to be taxed as a corporation, the company itself must file a separate tax return. The State of Minnesota, like almost every other state, has a corporation income tax (which it calls a corporation franchise tax). In Minnesota, this corporate tax generally is a flat 9.8% of taxable income. However, additional or alternative taxes may also apply. In general, if your Minnesota LLC is taxed as a corporation, it will need to pay some kind of income taxes or fees to the state. The state's corporation franchise tax return (Form M4) is filed with the Minnesota Department of Revenue (DOR). For more details, check Nolo’s article, 50-State Guide to Business Income Tax, or the DOR website.
Does your LLC have employees? If so, you'll need to pay employer taxes. Some of these taxes are paid to the federal government (the IRS) and are not covered here. (But note that federal employer tax obligations start with obtaining a federal employer identification number (EIN).) However, Minnesota employers also must pay taxes to the state.
First, you'll need to withhold and pay employee income taxes to the DOR. Begin by registering your business with the DOR either online or on paper (Form ABR, Application for Business Registration). Once you've registered, you'll need to file withholding taxes on a periodic basis (for example, monthly or quarterly). This must be done online or by phone; the DOR does not accept paper returns. For more information, check the DOR website.
In addition, you'll probably need to register to pay state unemployment insurance (UI) taxes . These taxes are handed through the Minnesota Unemployment Insurance Program (UIMN). You must register for these taxes online. Then, on a quarterly basis, you'll need to file reports and payments via e-file. For more information, check the UIMN website.
If your LLC will sell goods to customers in Minnesota, you will need to collect and pay sales tax. This means you'll have to register with the DOR for a Minnesota state tax ID number online or by phone. Then, each year, you'll have to file a sales tax return with the state. For more information, check the DOR website.
If you will be doing business in states other than Minnesota, you may need to register your LLC in some or all of those states. Whether you're required to register will depend on the specific states involved: each state has its own rules for what constitutes doing business and whether registration is necessary. Often activities such as having a physical presence (a business location) in a state, hiring employees in a state, or soliciting business in a state (such as by telephone, print ads, mail, or the Internet) will be considered doing business for registration purposes. Registration usually involves obtaining a certificate of authority or similar document.
For more information on the requirements for forming and operating an LLC in Minnesota, see Nolo’s article, 50-State Guide to Forming an LLC, and other articles on LLCs in the LLC section of the Nolo website.