Budgeting is an essential part of forming a limited liability company (LLC). But in order to prepare a budget, you must first know the costs of starting an LLC in Minnesota.
That’s why we’ve created this comprehensive guide to Minnesota LLC formation costs.
This article will teach you:
- The costs of starting a Minnesota LLC
- Extra expenses that can be useful for your business
- How to pick the most suitable LLC formation method
Keep reading to learn how much you can expect to pay to start an LLC in Minnesota.
Total Minnesota LLC Cost – Starting at $135
According to the Minnesota Fee Schedule, the lowest possible cost for forming a Minnesota LLC is $135.
This only includes one item:
- Minnesota LLC Articles of Organization filing fee: $135 (mail filing only)
You may also be required to register with the state tax office or obtain local or professional licenses, the costs of which vary.
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Minnesota LLCs – the Basic Costs
The exact cost of starting your LLC will depend on a few different factors. However, the bare minimum amount is $135. We’ve explained all of your potential required expenses in the sections below.
Articles of Organization Filing Fee — $135
Articles of Organization are the legal document that you use to create your Minnesota LLC. You must file them with the Secretary of State to form an LLC. But don’t let the name scare you! All you really need to do is list some basic info about your company.
The filing fee is $135 if you file by mail. However, a $20 expedite fee will automatically be added if you file online or in person. This will make the total cost $155.
Registering with the State Tax Office — Free
Businesses that sell goods or taxable services are required to register with the Minnesota Department of Revenue. This is because your LLC must pay sales and use tax, and you must be registered to do so.
There is no cost to register your LLC. You can review the Minnesota Sales and Use Tax Business Guide to learn more.
Professional Licenses and Business Permits — Various
LLCs in certain industries will need to obtain state-level licenses, permits or registrations to operate legally. Check out the state’s licensing web portal, Minnesota Elicensing, to learn whether your business needs a license.
On top of the state licensing requirements, many local governments also mandate that some LLCs obtain licenses. For instance, the city of St. Paul requires certain types of businesses to get a business license.
Minnesota LLCs – Optional Costs to Consider
In addition to your required costs, you should consider setting aside a bit more for some optional expenses. While it is not mandatory to do so, making a few extra expenditures can help your business thrive.
Expedited LLC Filing Fees — $20
If you file your Minnesota articles of organization online or in person, you will automatically be charged a $20 expedite fee. Online documents will be processed immediately. If you want to file in person, you can schedule an appointment. Your filing will be processed during your 25-minute appointment.
Registered Agent Fee — about $100 per year
Minnesota law says that all LLCs must maintain a registered agent to receive legal documents for the company.
You will list your Minnesota registered agent info in your articles of organization for no extra cost. However, there is a $35 fee if you ever need to change your agent.
New LLC owners often decide to name themselves as their LLC’s registered agent. Unfortunately, many find out too late that agents must have their addresses published online and always be available to accept papers during normal business hours.
That’s why we suggest you go with a professional registered agent service instead. These businesses only charge about $100 per year, and they handle all of your LLC’s registered agent needs for you.
Check out our Best Registered Agent Services article for some of our recommendations.
Operating Agreement — Variable
An operating agreement is a type of contract that LLC members use to lay out the rules for how the business will run. For instance, the LLC operating agreement can outline each member’s rights and duties or establish how members exit or enter the business.
In Minnesota, LLCs are not legally required to have operating agreements. Still, we suggest that all LLCs make one. And while you can choose to draft an operating agreement yourself, it’s usually not a good idea unless you have legal experience.
One option is to hire a lawyer to draft an LLC operating agreement. While costly, this method will ensure you receive a customized contract that prepares your business for anything. But if you prefer to spend less, you can also have an LLC formation service make your LLC an operating agreement for as little as $39.
DBA Fee — $30 to $50
Many LLC owners decide to run their businesses under a business name that is not the company’s legal name. For instance, it’s common to drop the “LLC” from the everyday name to make it sound less formal. You may also want your LLC to “go by” a completely new name as the business evolves.
If you want to use an alternate name for your LLC, you must register a “doing business as” or “DBA” name. In Minnesota, DBAs are called “assumed names.”
If you want to use a DBA in Minnesota, you must file a Certificate of Assumed Name with the Minnesota Secretary of State. You can submit the form by mail with a $30 filing fee or file online or in person for a $50 filing fee.
Name Reservation Fee — $35 to $55
If you’ve chosen a name for your LLC but aren’t quite ready to file the papers, Minnesota lets you reserve a business name for renewable 12-month periods. Reserving your name will keep other people from taking it.
Domain Name — about $20 per year
Your business should have a website to ensure maximum success in today's market. To build a website, you first must buy a domain. But the good news is that domain names are reasonably priced and easy to buy.
We strongly suggest purchasing your domain ASAP. If someone else buys it first, you will likely have to choose a different domain. This will also help you evade “domain squatters” who buy domains that new LLCs could want and resell them for a much higher price.
You can get a domain from GoDaddy.com or a similar website for around $20 to $50 a year. And these businesses often run sales, so you can usually get a domain for even less.
Getting an Employer Identification Number (“EIN”) — Free
An EIN is a 9-digit identification number that is given to a business by the IRS. Think of it as the company’s social security number. While the IRS requires some LLCs to get an EIN, it’s optional for others.
However, we suggest that all LLC owners apply for an EIN. For one thing, most banks require an EIN to open a business account. An EIN will also help keep your SSN private, which can protect you from identity theft.
Foreign LLC Qualification Fees — about $100 per extra state
If you want to expand your business into additional states, make sure you set aside some extra funds. While you don’t have to form a new LLC in every state, you must register as a foreign limited liability company in the states where you plan to do business.
Foreign LLC filing fees vary between states, but it usually costs around $100 per state.
Writing Formation Costs Off
Your LLC formation costs can generally be deducted as business startup expenses on your income taxes. The IRS provides a substantial amount of guidance on this topic, so we suggest that you review the IRS website to learn more.
LLCs are typically considered to be “pass-through” tax entities. So, LLC owners can deduct up to $5,000 in startup expenses in the business's first year.
Hillary decides to start a single-member LLC and open a yoga studio in St. Paul, Minnesota. Her formation costs are as follows:
- Minnesota LLC Articles of Organization: $135
- Online Expedite Fee: $20
- St. Paul Health/ Sports Club License Fee: $375
- Operating Agreement: $50
- Registered Agent Fees: $120
- Name Reservation Fee: $55
- DBA Fee (online): $50
- Web Domain Costs: $35
Since LLCs are pass-through entities, the company itself won’t have to pay any income taxes. But, Hillary will be required to report her income from the LLC and any deductions on her state and federal income taxes.
Hillary’s total formation costs were $840. Before she deducted these expenses, her total taxable income was $38,000. But by deducting her start-up costs, she lowers her taxable income to $37,160. This will drop her 2022 federal income taxes from $4,361 to $4,260.
While this might not seem like significant savings, LLC owners who regularly deduct their costs will feel the impact over time.
Cheapest Way to Start an LLC in Minnesota
When selecting an LLC formation method, make sure to consider the unique needs of your business. We’ve discussed some of the most common methods below.
Formation Service – $39 + state fees
One option is to hire an LLC formation service to start your LLC. While they aren’t lawyers, they specialize in business entity formation. You can pay one of these companies to handle the entire process for you.
Formation services are a great option for many LLCs. The benefits of this method include:
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
Still, formation services aren’t the best choice in every situation. The drawbacks of this approach include:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products or business services you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
If you choose to hire a lawyer, you can be confident that your LLC will be formed the right way. Just remember that quality comes at a price. Many attorneys charge an hourly rate for their services, often several hundred dollars per hour.
In spite of the price, working with a lawyer has some clear advantages:
- Lawyers help you manage risk. If you are starting a business with complicated legal issues, hiring a lawyer would be the best choice.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
However, the disadvantages of this method often outweigh the benefits for many business owners:
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very careful people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Another approach is the classic do-it-yourself method. But before you decide to start your Minnesota limited liability company on your own, consider the value of your time. Many new business owners find that the time they would spend filling out paperwork could be better spent working on their business.
The advantages of a DIY approach include:
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t account for the value of your time, a DIY solution is the cheapest option.
Just make sure to weigh those against the negative aspects of this method:
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that can cost them even more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Minnesota LLC Fees: How Much Will it Cost to Maintain your LLC?
To keep your LLC in compliance with Minnesota law, you must renew your registration with the Secretary of State each year. There is no filing fee for this annual renewal. You can file online or submit an annual renewal form in-person or by mail.
You may also need to periodically renew your business licenses or permits, the cost of which may vary.
Finally, some optional costs will need to be paid each year. The expenses might include:
- Registered agent service fee: approximately $100
- Domain name registration: $20 to $60
How Much are LLC Taxes in Minnesota
Because LLCs are pass-through tax entities, they typically are not subject to income taxes. Instead, the owners of an LLC will be taxed on its profits.
You may also be subject to Minnesota business tangible personal property tax. This is a tax on the property that your LLC uses, excluding real estate and inventory.
Additionally, LLCs that file taxes as a partnership will be subject to Minnesota partnership taxes if their in-state property, payroll, and sales exceed a certain threshold. For the 2021 tax year, this limit is $1,050,000, but it will be adjusted every year for inflation.
Minnesota LLC Formation Costs Quick Links
- Minnesota Online Filing
- Minnesota Fee Schedule
- Minnesota Secretary of State
- Minnesota Department of Revenue
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
Minnesota LLC Formation Costs FAQs
How much does it cost to start an LLC in Minnesota?
The minimum cost is $135. But depending on the type of business you are starting, how you file your paperwork, and where you will operate, it may cost you more.
What is the cheapest way to start an LLC in Minnesota?
A DIY approach is the least expensive in terms of cash out the door. But when you consider the value of your time, the most cost-effective approach is often an affordable business formation service.
Do I need to hire an attorney to form an LLC in Minnesota?
No. Many LLCs can be started without an attorney’s assistance. Typically, it will be sufficient to do it yourself or hire an LLC formation service.
Can I pay to form an LLC more quickly in Minnesota?
Yes. If you file online or in person, an automatic expedite fee of $20 will be added to the total cost.