How to Start an S Corp in Minnesota

Is an S Corporation the Best Strategy for Your Business?

For help with choosing the right structure for your business, visit ourChoosing a Business Structureguide.

S Corporation Restrictions

S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read ourWhat Is an S Corporationguide for full details.

Are S Corp Tax Advantages Right for You?

S公司名称,可以征税elected by a limited liability company (LLC) or corporation. With an S corp, business owners are considered employees of the company and must receive areasonable salary. Since all S corps technically have employees, the s corp must run payroll.

为了受益于明尼苏达州股份公司税收designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take largedistributionsin addition to their salary.

To learn more about the tax advantages of an S corp, read ourLLC vs. S corpguide and take a look at ourS corp tax calculator.

Steps for Forming an LLC and Electing S Corp Status in Minnesota

Starting a Minnesota LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider likeNorthwestto guide you through this process.

There are five basic steps to start an LLC and elect S corp status:

Step 1:Name Your LLC

Step 2:Choose a Registered Agent

Step 3:File the Articles of Organization

Step 4:Create an Operating Agreement

步骤5:Get an EIN and File Form 2553 to Elect S Corp Tax Status

Step 1: Name Your LLC

Choosing a company name is the first and most important step in starting your LLC in Minnesota.

Be sure to choose a name that complies with Minnesota naming requirements and is easily searchable by potential clients.

1. Follow the naming guidelines for a Minnesota LLC:

• 你r namemustinclude the phrase “limited liability company” or the abbreviation “LLC.”

• 你r namecannotcontain the words "corporation" or "incorporated" or abbreviations of either word.

• 你r namecannotimply that the LLC is organized for a non-permitted purpose.

• 你r namecannotinclude words that could confuse your LLC with agovernment agency(FBI, Treasury, State Department, etc.).

• Certainrestricted words(e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual to be part of your LLC.

• 你r namemust be distinguishablefrom any existing business in the state.

你can also read theMinnesota state statuteabout LLC naming guidelines for more information.

2. Is the name available in Minnesota?你can use the business entity search on theMinnesota Secretary of Statewebsite to see if your desired LLC name is available.

3. Is the URL available?We recommend checking to see if your business name is available as a网络域. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.

Minnesota S Corp Annual Renewal

你must file your annual renewal — also known as an annual report — each year with the Minnesota Secretary of State. The purpose of the annual renewal is to update the state government on any changes to your business’s address or contact information. The state government also uses this information to track state taxes.

Even if your business doesn’t make a profit, you must still file an annual renewal before December 31 every year. The state of Minnesota can dissolve your business if you fail to file on time. While your business may be taxed as an S corp, it’s still technically an LLC, so you should file the same annual renewal that other LLCs file.

Check out ourMinnesota Annual Renewalguide for step-by-step filing instructions.

Minnesota S Corp Taxes

S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from theirreasonable salaryanddistributions, and Minnesota S corp owners will need to pay various taxes.

Federal Self-Employment Taxes

Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.

Federal Income Taxes

你r federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.

Minnesota Income Taxes

Minnesota has a graduated state income tax, ranging from 5.35% to 9.85%. Similar to federal income taxes, Minnesota’s income tax rates change based on your individual income bracket.

Compared to other states, Minnesota’s income tax rate is fairly high. While some states have income tax rates that exceed 10%, a handful have no income tax.

Minnesota Tax ID Number & Sales Tax Registration

After you form your business, you’ll likely need to obtain atax ID numberfrom the Minnesota Department of Revenue. As you fill out the form to obtain your tax ID number, you’ll encounter a prompt to also register for state sales tax. Your Minnesota tax ID number will then serve as your sales tax permit.

Minnesota Sales and Use Tax

Minnesota has a 6.875% state sales tax rate, and many local jurisdictions levy their own sales tax in addition to this. However, Minnesota caps local sales tax rates at 2%.

In Minnesota, sales tax depends on your business’s industry. The Minnesota Department of Revenue providessales tax industry guidesto help business owners understand how sales tax impacts their particular industry.

Additional State Taxes

The Minnesota Department of Revenue lists various miscellaneous taxes businesses may need to pay based on their industry, number of employees, and location. A few examples of these miscellaneous Minnesota taxes include:

• Environmental Taxes and Fees
• Fiduciary Tax
• Gambling Taxes
• Mining and Mineral Taxes
• MinnesotaCare Taxes
• 太阳能生产税收
• Wind Energy Production Tax

Visit theMinnesota Department of Revenuewebsite for more information.

Minnesota Local Taxes

Local laws and taxes in Minneapolis differ from those in St. Peter. Regardless of your business’s location in Minnesota, you should familiarize yourself with your local jurisdiction to determine how any local laws may impact your business’s taxes and daily operations.