Minnesota LLC Taxes

LLC Pass-Through Taxation

By default, LLCs don't pay taxes directly. Instead, the LLC members report the income (or losses) on their personal Form 1040 tax return. This is called pass-through taxation — tax responsibility "passes through" the LLC to its owners.

How Are LLCs Taxed in Minnesota?

By default, a Minnesota LLC is taxed by the IRS based on the number of members:

• An LLC with 1 owner (Single-Member LLC) is taxed like a Sole Proprietorship
• An LLC with 2+ owners (Multi-Member LLC) is taxed like a Partnership

These are the "default" statuses — automatically applied based on member count. You can also elect to have your LLC taxed as a Corporation (S-Corp or C-Corp) by filing extra paperwork with the IRS.

Single-Member LLC (default)

The IRS treats Single-Member LLCs as Disregarded Entities — the LLC doesn't file its own federal return. Instead, the owner reports LLC income on their personal Form 1040 (Schedule C if owned by an individual).

Multi-Member LLC (default)

Multi-Member LLCs file a Form 1065 Partnership Return and issue a Schedule K-1 to each member. Each member then reports their share of profits on their personal Form 1040.

Electing Corporate Taxation

• S-Corporation: File Form 2553 with the IRS. Can reduce self-employment taxes once the LLC has consistent profits (generally $70,000+ net income per member). Speak with an accountant first.
• C-Corporation: File Form 8832 with the IRS. Uncommon for small LLCs. Primarily useful for large employers offering healthcare fringe benefits.

Minnesota State Income Tax

Minnesota has a state income tax at rates of 5.35%–9.85% (graduated — among the highest top rates in the US). LLC members report their share of LLC profits on their Minnesota state tax return.

Single-Member LLC owners file Minnesota Form M1 (Individual Income Tax Return) and include LLC income. Multi-Member LLCs file Minnesota Form M3 (Partnership Return) and issue Minnesota Schedule KPI/KS to members.

Contact the Minnesota Department of Revenue at 651-296-3781 for more information.

Local Income Tax

You and/or your LLC may also need to file and pay income taxes with your local municipality (city, county, etc.). Contact your local government or hire an accountant to confirm local requirements.

Minnesota Sales Tax

If your LLC sells taxable products (and sometimes services) in Minnesota, you may need to collect sales tax and register for a Seller's Permit (also called a resale license or sales tax permit).

Minnesota's state sales tax rate is 6.875%. Local rates add up to 2% more in many areas.

Register for Minnesota Seller's Permit →

Contact the Minnesota Department of Revenue at 651-296-6181 with questions.

Minnesota LLC Payroll Taxes

If your Minnesota LLC has employees, you must handle payroll taxes, which include:

• Federal income tax withholding
• Minnesota state income tax withholding
• Social Security and Medicare taxes (FICA)
• Federal unemployment tax (FUTA)
• Minnesota state unemployment tax (SUTA)

Payroll calculations are complex — most LLC owners hire a payroll service or accountant.

Minnesota Tax Agency Contact

Minnesota LLC Taxes — FAQs