Have you decided to start your business? But you are wondering what all steps to follow? Then you have come to the right place. In this article, we will provide you with all the necessary information required to start an LLC. At the end of the article, you will be ready to set up your business. But before moving forward, first, let us take a look at the basics.
The first question that comes to mind is that what is an LLC?
LLC or Limited Liability Company is a business structure that provides the benefits of the sole proprietorship and partnership with the corporation- flexibility and limited liability, respectively. So, it is the best option for a start-up, and the owner’s assets will get protection from the business debts and lawsuits. If your business is in any obligation or gets sued, then your personal property such as home, car, savings will not be affected in any way. It is effortless to form an LLC in Minnesota, as it is a great place to establish a new business. The State comes with several advantages. The government provides business policies for entrepreneurs to help them in the smooth running of their business. The State allows incentives to the company, which is based on innovative ideas and researches. Even for some LLC who have a long-term investment but do not have the required resources, the government will temporarily provide an incentive such as no income tax. It is a piece of fantastic news for all the people who want to start their business here. The R & D department of the company helps the business to explore new ideas for future growth. The government promotes these developments by giving back the tax charged on these centers as a credit.
So, now we know what an LLC is and why Minnesota is a good choice, it is time to take a look at the steps required to form the LLC.
Step 1: Choose a Name for your Limited Liability Company
The first in starting any business is to pick a name for the company. It might sound easy, but it can be a challenging task. You have to make sure that the name you choose must follow all the State’s naming guidelines. The name holds weightage because it is what your company will be known by. The name will represent your brand identity. The unique name creates curiosity in the potential customers. For a business to thrive, it is essential to have a significant market presence. The title will help you do that. So, the name of the company holds a weightage in the business field. While naming, don’t forget that your name should not be similar to other companies out there. If you want to check whether your chosen name is distinct or not, you can check it out at the Business filing search of the state department.
There are some guidelines that you need to follow; let us take a look:
- Limited Liability Company or its abbreviations such as LLC must be present.
- The name of your company should not give any idea that it is affiliated with the government or government agencies in any way.
- The terms such as university, bank, and an attorney cannot be used, or if they are included, then a lawyer should be part of the LLC. This might also require some additional paperwork.
Reservation of the name
After following all the rules and guidelines, you have finally zeroed upon a name. You also have the option to reserve the name of your company. There might be a situation where your LLC is taking time to launch. In that case, if you think that someone might use the name before you, then you can hold the company’s name with the state department. The significant part is that the name can be reserved for one year.
How can you reserve the name?
The process is straightforward. There are three ways you can do it: online, mail, hand-delivery. You can go to the official site, and there you can fill the name reservation form. This will cost you $55. The processing of your request will be instant. Or you can download the form and sent the application to the following address:
Minnesota Secretary of State – Business Services
Retirement Systems of Minnesota Building
60 Empire Drive, Suite 100
St Paul, MN 55103
Submission by mail will cost you $35. It will take 5 to 7 working days for your application to get processed. For the hand-delivery, you can deliver the application to the similar address mentioned above along with the fee of $55.
Besides the name reservation, you should lock in the domain name. A website is a great way to promote your business and for the customer to reach you. Eventually, you might have to create one, so it is better to purchase the URL now.
Step 2: Assign a Registered Agent
Every LLC must have a registered agent. The State also corresponds to the LLC through the registered agent. So, a registered agent is vital for an LLC. It acts as a middleman between the government and the State. That is why it is necessary to have one. The Registered should be living in Minnesota and be present during the working hours so that he/she is available to receive the correspondence. So, the agent can be a person or a business/corporation who is present in Minnesota.
Who can be the Registered Agent?
There are three options for who can be the registered agents: a person, a business corporation, or a registered agent service. You can select anyone to be your agent unless they follow all the criteria. The law states that:
- An existing business or any living person can be a registered agent.
- The owner can also be the registered agent
- The assigned agent must be a resident of Minnesota and be present during the business hours
Yes, you can also be your company’s registered agent, but you have to keep in mind that you should be present in the office to take up the essential letters. That means you cannot go out on vacation. So, a solution is you can hire your friend, family, other members, or any services.
Step 3: Submit the Articles of Organization
This step legitimizes your business. Filing the articles of the organization will make your business legal with the State. If you want to establish your business, carefully submit the Articles of Organization to verify your business. You have to mention the details about your business in the form such as:
- The name and address of your company
- The registered agent information- name and address
- The organizer’s name and address
- The sign of the incorporator
- The company’s phone number and email address
There are three ways for you to submit the articles of organization:
For this method, you have to go to the official website of the secretary of State and fill the online form. You can complete the process through the State’s online filing portal. You also have to pay the fee of $155 to finish the process. The online method is one of the easiest ways. Your application will be processed instantly.
You can also mail the form to the office. You can download the application from the official website, print it, and complete the form. After that, you can send the paper through the postal mail service to the following address:
Minnesota Secretary of State – Business Services
Retirement Systems of Minnesota Building
60 Empire Drive, Suite 100
St Paul, MN 55103
Also include the payment of $135 along with your application. The mail application will take around 5 to 7 working days to get processed.
If you want to deliver the application personally, you can do so by providing it to the address mentioned above. The application will get processed instantly.
Step 4: Draft an Operating Agreement
If you want the smooth running of your company, then an operating agreement is the solution. The State does not mandate this document, but it is essential. The operating agreement is an internal document of a company that consists of all its rules and regulations. It includes details such as what are the responsibilities of each member. Besides, it also shows that the LLC is a separate entity, helping protect your limited liability. It guarantees that your LLC will work with stability, and it also protects your property in criminal disputes and more. However, if you don’t form this agreement, your LLC will be operated by the LLC state law. Since these State laws are not specific to a particular company, they are general; they might not be in your favor. The operating agreement consists of the mutually agreed contract between the members, so if any member disobeys the rules, this agreement can be used as evidence. So, be inclusive in your agreement, try to include all the essential points, some of them can be:
- How the income will be divided
- How much percent does each member hold in the LLC
- The voting patterns
- How will the addition, transfer, or removal of a member takes place
- How the meetings will be conducted
These are a few examples you can add or remove anything you want. If you wish, you can formulate your company’s operating agreement with the help of online templates. Or you can assign a lawyer or attorney to do that for you. The lawyer will ensure that not a single detail is left out.
Step 5: Obtain Employer Identification Number- EIN
EIN is a nine-digit number which the Internal Revenue Service or IRS provides. The IRS uses this number to identify your business and get a record of your taxes. It also has other names such as Federal identification number (FTIN) or Federal employer identification number (FEIN). This number is required to file your taxes, open a bank account, and hire/pay employees. The LLCs are considered pass-through units, which means it does not file the taxes directly to the government. But there is some situation where they do have to pay the tax. If the company is selling goods, hiring personally, or choosing itself as a corporation, it does have to file the taxes, and you will need EIN.
You can get the EIN from the IRS entirely free after forming the organization. You can obtain it in the following three ways:
You can apply for an EIN online if you prefer a quick and convenient method. It’s one of the three options. Monday to Friday, from 7:00, am to 10:00 pm; you can submit this application. After completing the online form, you will receive your EIN right away. You must have a taxpayer number, which is similar to the SSN or social security number.
If the online submission does not meet your needs, you should submit fax. You’ll need to download and fill Form SS-4 for this process. Fax the completed form to the office at (855) 641-6935. You’ll obtain your EIN in four working days.
You may prefer the old-fashioned postal mail. It’s a slow form of submitting, as we all know. But if it’s the only option that works for you, go for it; you’ll need to complete Form SS-4. Fill it out and post it to the address below:
Internal Revenue Service Operation
Attn: EIN Operation Cincinnati, OH 45999
Step 6: Federal, State, and Local Taxes
This step usually comes after you have completed all the formalities for your LLC; you are ready to go on the floor, but you should be informed about the details after forming the LLC before taking the next step. One of the vital aspects in that manner is the Taxes. It would be best if you never avoided the taxes as it is illegal. Be regular in filing the taxes so that you continue to have a good status with the State. Here we will look at some of the taxes at both the national and local levels.
Federal income Taxes
We have mentioned in step 5 that LLC only has to file the taxes to the federal government if it follows some conditions such as selling goods, hiring employees, etc. Generally, the owners pass through the profit and loss of their business through their income tax returns. If you want, you can also choose to pay tax like a corporation; in that case, you have to pay a separate corporate income tax return. Let us move on to the next set of tariffs.
State and Local Taxes
These state taxes work in the same manner as the federal taxes, where the owners pass the business income and loss through their income tax return. Minnesota also provides relief to the business owners by not charging the privilege or a franchise tax.
These taxes depend on where your LLC is situated. Each local body might have different provisions for taxes. You should check with your local body and government to know more details about the local taxes.
Apart from the federal and State taxes, there are some additional taxes too that you might have to incur. These taxes depend on your type of business. If you have employees, you have to pay for the Unemployment insurance tax; similar if you sell goods, you have to file the Sales and Use tax. You can register with the Department of Revenue to pay for these taxes.
Step 7: Business Licenses and Permits
You might have to obtain some permits and licenses for your business if you want to operate hassle-free. These permits depend on your business type and also the location. You might have to acquire State and local business licenses. For example, if you open a restaurant, you have to get a business license, Food and service license, and health permit. Similarly, different businesses have different license requirements. You can check the Minnesota Licensing portal to get more information about the state licenses. If you want to get more details about the local permits, check it out at the city office for more information.
Step 8: Submit the Annual Report.
Every LLC in Minnesota has to submit an annual report; they have to offer the Secretary of State. It is also known as the yearly renewal. So, you have to remember to file the annual renewal every year. You can submit the report in three ways: online, mail, in-person. The due date is 31 December. You have to pay $45 if you submit the information online or in person. For the mail submission, the fee is $25. Before the deadline, the company’s registered agent will receive the reminder. You have to remember to file the report in time if you want to maintain a good position with the State.
With this, we can conclude the article. But still, it is not the time to start your business not before taking a look at a few more points.
Steps to Take after Forming the LLC
We have learned how to form an LLC; now, let us quickly look at all steps you should take after forming the LLC.
Set up a bank account.
After forming the LLC, the first step is to have a bank account solely for your business. This will help you to keep the business and personal expenses separated. If you have a separate bank account for your company, accounting and monitoring become easier. It will guarantee that only your LLC assets can be used to settle any legal or financial obligations.
Obtain a credit card for your business
A credit card for your business will help you manage your finances and keep track of all the expenses. This way, your personal finance, and business finance will be separated. Also, you will be able to get loans for your business quickly.
Company’s phone number
It is better to get a phone number for your business. Providing your number can breach your privacy; it is better to have a phone number, especially for your business. It will look professional, and if you want, you can also forward the calls to your cell phone so that you don’t miss any important calls.
Branding and marketing
Create a website: we have already secured the domain name in the first step. Remember? So you don’t have to go through that again. You have your preferred domain one; you only have to create one website. Marketing is a crucial step for a company to grow, and forming a website is one of them for any new business. The customer will have a place to go to if you want to know more about your business or want a way to reach you. The website will have all the details and the phone number we set up in the last step. It is better to bring your company online if you want to reach a larger audience. You will be able to attract new clients in this manner.
Invest in company insurance
This is the most critical move, and insurance is a safety net in case anything goes wrong. It would be best if you were assured that your company’s insurance could protect you in the event of a disaster. If your business is insured, you can work without having to worry about if any miss-happening occurs. Insurance assures that you are covered up.
At last, we have finally reached the end of the article. Now you are entirely ready to start your own business. Congratulations! By following all the steps, you will begin your LLC in Minnesota without any issue. The process might look long and lengthy, but it is worth your time. So, move forward with your ventures and achieve all of your dreams.