Minnesota Business Tax Requirements for LLCs
Bizee explains the business tax requirements for LLCs in Minnesota — state income tax, sales tax, franchise tax, federal pass-through taxes, and payroll obligations. Know what you owe and when.
Bizee Editorial Staff
Editorial Team
Minnesota LLC tax facts at a glance
Filing fee: $135 (online) / $155 (paper)
Processing time: 5–7 business days (online)
State agency: Minnesota Secretary of State
Annual report due: December 31 each year
State tax rate: State income tax rates range from 5.35% to 9.85%; state sales tax rate is 6.875%
How Minnesota LLCs are taxed
A Minnesota LLC doesn't pay income tax at the business level. Instead, profits pass through to the members, who report them on their personal tax returns. This pass-through structure is the default for both single-member and multi-member LLCs, though an LLC can elect to be taxed as a C Corporation or S Corporation if that makes more sense for the business.
Most Minnesota LLC owners end up responsible for 4 categories of tax: Minnesota state taxes (income, sales, and potentially franchise), federal income tax, self-employment tax, and — if they have employees — payroll taxes. The mix depends on how the LLC is structured and what it sells.
- Pass-through taxation: LLC profits are reported on members' personal returns, not a separate business return
- Single-member LLCs file on Schedule C of Form 1040
- Multi-member LLCs file a partnership return (Form 1065) and issue Schedule K-1 to each member
- LLCs taxed as S Corporations file Form 1120-S and pay owner-members a reasonable salary
- LLCs taxed as C Corporations file Form 1120 and pay corporate income tax at the entity level
Minnesota state taxes for LLCs
Minnesota LLCs are subject to 3 main state-level taxes administered by the Minnesota Department of Revenue: state income tax, sales and use tax, and — in some cases — a franchise tax. Which ones apply to your LLC depends on how it's taxed and what it sells.
State income tax
Minnesota has a graduated state income tax with 4 brackets ranging from 5.35% to 9.85%. For pass-through LLCs, members pay this tax on their share of LLC income at their individual rate. If your LLC elected C Corporation status, the business itself pays Minnesota's corporate franchise tax instead — currently a flat 9.8% on net income.
Minnesota also requires most LLC owners to pay estimated taxes quarterly if they expect to owe $500 or more for the year. Missing estimated payments can mean an underpayment penalty at year-end — worth checking with a tax professional if your income is irregular.
Sales and use tax
If your LLC sells tangible personal property or certain taxable services in Minnesota, you need to register for a sales tax permit with the Minnesota Department of Revenue before you start selling. Minnesota's state sales tax rate is 6.875%. Local jurisdictions can add their own rates on top of that, so the total rate varies by city and county.
Once registered, you collect sales tax from customers on taxable transactions and remit it to the state — monthly or quarterly, depending on your sales volume. You're also required to keep records of all sales transactions and tax collected. Use tax applies when you buy taxable items without paying sales tax and use them in your business.
Franchise tax
Minnesota's franchise tax applies to LLCs that have elected to be taxed as C Corporations. It's assessed on net income at a flat rate of 9.8% and is filed with the Minnesota Department of Revenue. Standard pass-through LLCs — those taxed as sole proprietorships or partnerships — are not subject to the franchise tax.
Federal taxes for Minnesota LLCs
Minnesota LLC owners pay federal income tax and self-employment tax on their share of business profits. Both are pass-through obligations — the LLC itself doesn't file a federal income tax return unless it has elected corporate status. The federal tax picture for your LLC depends on how many members it has and whether you've made a tax classification election.
Self-employment tax
If you're an active member of a pass-through LLC, you owe self-employment tax on your share of net profits. The current rate is 15.3% — covering Social Security (12.4%) and Medicare (2.9%) — on the first $168,600 of net earnings (2024 threshold). Above that, the 2.9% Medicare portion still applies. You can deduct half of the self-employment tax you pay when calculating your adjusted gross income.
Federal income tax
Single-member LLC owners report business income and expenses on Schedule C, attached to their personal Form 1040. Multi-member LLCs file Form 1065 with the IRS and issue a Schedule K-1 to each member showing their share of income, deductions, and credits. Each member then reports their K-1 figures on their personal return. If your LLC elected S Corporation status, you file Form 1120-S and pay yourself a reasonable W-2 salary.
Getting an Employer Identification Number (EIN) from the IRS is required if your LLC has more than 1 member, has employees, or has elected corporate tax status. You can apply for an EIN at no cost at irs.gov.
Employee and employer taxes
If your Minnesota LLC has employees, you take on a separate set of tax obligations at both the state and federal level. Payroll taxes are one of the areas where getting it wrong can mean back taxes, penalties, and months of paperwork — so it's worth getting clear on the requirements before you hire.
- Register with the Minnesota Department of Revenue to withhold Minnesota state income tax from employee wages
- Withhold and remit federal income tax, Social Security, and Medicare (FICA) taxes using IRS Form 941 each quarter
- Pay federal unemployment tax (FUTA) using IRS Form 940 annually
- Register with the Minnesota Unemployment Insurance (UI) program and pay state unemployment insurance tax
- Issue W-2 forms to employees by January 31 each year
FAQ
Yes. Minnesota has a state sales tax rate of 6.875% on most retail sales of tangible personal property and certain services. Local jurisdictions can add their own rates on top of the state rate, so the total you collect varies by city and county. If your LLC sells taxable goods or services, you need to register for a sales tax permit with the Minnesota Department of Revenue before you start selling.
Yes. Minnesota has a graduated state income tax with 4 brackets ranging from 5.35% to 9.85%. For pass-through LLCs, members pay state income tax on their share of LLC profits at their individual rate. There's no separate state income tax return for the LLC itself — the tax flows through to each member's personal Minnesota return.
Yes, but it doesn't apply to all LLCs. Minnesota's franchise tax is assessed on LLCs that have elected to be taxed as C Corporations. The rate is a flat 9.8% on net income. Standard pass-through LLCs — taxed as sole proprietorships or partnerships — are not subject to the franchise tax. If you're unsure whether your LLC's tax election triggers this obligation, a tax professional can help you figure it out.
Yes, in most cases. If you expect to owe $500 or more in Minnesota income tax for the year, you need to make quarterly estimated tax payments to the Minnesota Department of Revenue. At the federal level, the threshold is $1,000. Missing estimated payments can result in an underpayment penalty when you file your annual return. Quarterly due dates generally fall in April, June, September, and January.
It depends on how your LLC is taxed. Pass-through LLCs don't pay a flat business tax — members pay Minnesota state income tax at individual rates of 5.35% to 9.85% on their share of profits, plus federal income tax and self-employment tax (15.3% on net earnings). LLCs taxed as C Corporations pay Minnesota's franchise tax at a flat 9.8% on net income. Sales tax obligations are separate and depend on what your LLC sells.
By default, LLC profits pass through to you personally. You report your share of income on your personal tax return and pay federal income tax, self-employment tax, and Minnesota state income tax on it. The LLC itself doesn't pay income tax unless it has elected C Corporation status. If you're the only member, you file on Schedule C. If there are multiple members, the LLC files Form 1065 and issues each member a Schedule K-1.
