Minnesota LLC Taxes

With a low cost of living and an increase in job opportunities, Minnesota has become a popular place to move to and start businesses in. Yet, as more business owners choose to start their ventures in the state, many may find it challenging to understand the business taxes involved. 

Regardless of the size of your business, if you operate a limited liability company (LLC) in Minnesota, you will need to ensure you stay up to date on your finances and pay federal, state, and local taxes. Our guide will help you understand which taxes you will need to pay for your Minnesota LLC.

Recommended: Schedule a free consultation with an accountant to stay on top of your taxes. 

Minnesota Partnership Tax

If you operate a multi-member LLC in Minnesota and have over $97,000 in combined property, payroll, and annual sales, you must pay a Partnership Tax to the Minnesota Department of Revenue. 

The necessary forms and more information on this tax are available on the Minnesota Department of Revenue website.

Minnesota LLC Taxes Owed

LLCs benefit from pass-through taxation, meaning the business’s profits pass through to the members’ individual tax returns. This means that the LLC as an entity will not pay the taxes owed. Rather, LLC owners must pay taxes on their portion of the income made from the LLC. 

These are the taxes that Minnesota LLC owners can expect to pay:

Federal Taxes

Regardless of where your business is located, if you have an LLC within the United States, you will have to pay federal income taxes and federal self-employment taxes. These taxes are reported on your Form 1040.

Federal Self-Employment Taxes

It doesn’t matter if your LLC is a single-member LLC or a multi-member LLC; all LLC members must pay self-employment taxes on their share of the LLC’s profits. The self-employment tax rate is 15.3%. 

Federal Income Taxes

Your 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. 

Minnesota State Taxes

Each state has its own laws dictating how individuals and businesses are taxed. Minnesota does not have an income tax, which is often seen as an advantage to business owners in the state. Many business owners will need to register for sales and use tax as well as reemployment tax.

Minnesota Income Taxes

Minnesota has quite a high state income tax rate of 9.85%. That rate puts it among the top ten highest state income tax rates in the country.

Minnesota Sales and Use Tax

The state sales tax rate is 6.875%. In addition, Minnesota’s counties and cities may impose their own local sales tax in addition to the state sales tax. The average local sales tax rate is 0.61%, which, combined with the state rate, makes a combined rate of 7.49%.

Register for a Minnesota Sales and Use Tax Account

In order to file your Sales and Use Tax Return, you will first need to register for a Minnesota Tax ID. You can also sign up for your Sales and Use Tax account at the same time. You will need to know your expected filing schedule, your accounting method, and any local sales tax you qualify for prior to registering.

Visit the Minnesota Department of Revenue for more information.

Additional State Taxes

Minnesota’s Department of Revenue oversees the collection of various taxes that businesses may have to pay depending on their location, industry, and number of employees. 

These are a few taxes that business owners in Minnesota may be responsible for paying:

  • Transient Room Tax
  • Utility Gross Receipts Tax
  • Telecommunications Tax
  • Tobacco Tax
  • Motor Vehicle Tax

The Minnesota Department of Revenue’s website has more information on these and other taxes.

Minnesota Local Taxes

The local laws and ordinances of one city or county in Minnesota are likely to vary in another city or county. Regardless of where you live in Minnesota, we recommend you check with your local jurisdiction and ensure that your business obtains the proper local permits and follows any local regulations that may impact your business’s operation.

Minnesota LLC Compliance

You must obey Minnesota’s state and local laws to maintain your business's compliance and good standing. While LLCs technically do not file taxes with the state, LLCs will still need to file an Annual Renewal with the state each year.

Minnesota LLC Annual Renewal

Any LLC in Minnesota is required to file an annual renewal with the Minnesota Secretary of State. This is the equivalent of an “annual report” in other states. 

Annual renewals are due by December 31 of each year. The only exception to this is your first year of business, which will be due on December 31 of the following year. For example, if your LLC is approved on February 21, 2024, your first annual renewal will be due by December 31, 2025.

These can be filed online, by mail, or in person. As long as you file on time, there will be no fee. If you miss the deadline, your LLC will be shut down by the State of Minnesota. Reinstating your LLC will require you to pay a fee of $25 by mail or $45 online.

More information on this is available in our Minnesota LLC Annual Renewal guide.

LLC taxes are complex. While our guide can provide you with important information, we recommend you schedule a free consultation with an accountant to ensure that you handle your business taxes correctly.