A Limited Liability Company (LLC) is a popular business formation because of the (1) limited liability to the members, (2) simplicity in management and (3) favorable tax considerations. This is a quick guide to forming an LLC in Minnesota. The steps may be more complicated based on your situation.
1.) Choose your Name
In Minnesota, an LLC must contain “LLC” or the words Limited Liability Company. (Ex: Holt Law, LLC) In Minnesota, an LLC name must contain the words “Limited Liability Company” or the abbreviation “LLC.” The name must be different from other business names already filed. Take a look at the Minnesota Business Name Database to see if your proposed business name is taken. If you have a great business name idea, but you are not ready to start the business, you can reserve a name for 12 months. There may be additional naming requirements based on your business industry.
2.) File Articles of Organization
To make the business official, articles of organization must be filed with the Minnesota Secretary of State. Online filing is $155 as of 1/1/14. The articles of organization include: LLC name and address; purpose; the name and address of the LLC’s registered agent; the name and address of at least one organizer; and whether the LLC’s duration will be perpetual or for a specified period.
The registered agent is responsible for service of process (able to accept legal papers.) The registered agent must be a Minnesota resident, a Minnesota business entity, or a foreign business entity authorized to do business in Minnesota. The LLC cannot be its own agent.
Minnesota LLCs must file an annual renewal. The renewal can be filed online or by mail.
3) Create an Operating Agreement (Optional, but highly recommended)
An LLC operating agreement is not required in Minnesota. It does not need to be filed with the Articles of Organization. An operating agreement provides the rules for the business. Rules are important to avoid costly legal disputes. Terms include:
- how the LLC will be managed
- the members’ ownership in the LLC
- the members’ rights and responsibilities
- the members’ voting powers
- how profits and losses will be handled
- rules for holding meetings
- buy-sell provisions to spell out what happens if a member becomes disabled, dies, or wants out of the business
4) Follow Tax and Other Industry Regulations
You will need to determine how to pay taxes for your business. As a single member, you may elect “pass-through” taxation where the LLC taxation is included with your taxes and SSN. If your LLC has two or more members, you must obtain an IRS Employer Identification Number (EIN). You may obtain an EIN by completing an online application on the IRS website for free.
Industry Regulations: Your LLC may need to obtain other local and state business licenses and insurance.
Contact Holt Law to help form and file your LLC. This is NOT legal advice.