Minnesota LLC Taxes: The Complete Filing Guide (2025)
Running an LLC in Minnesota means dealing with taxes at federal, state, and sometimes local levels. This guide simplifies everything you need to know to stay compliant and avoid surprises, from income tax and sales tax to city-specific requirements.
Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.
Minnesota LLC Tax Basics
Navigating your Minnesota LLC tax obligations doesn’t have to be complicated. We’ll walk you through the essentials of pass-through taxation, explain Minnesota’s specific requirements, and highlight strategies to stay compliant and organized. This guide covers everything from federal income taxes to city-specific requirements and filing deadlines.
Use the links below to jump directly to the section you need:
- Minnesota LLC Taxes at a Glance
- Understanding LLC Taxation Basics
- Federal Tax Obligations
- Minnesota State Taxes
- Local Tax Considerations
- Tax Calendar and Filing Tips
- Tax Strategies for Minnesota LLCs
- Forms and Resources
Minnesota LLC Taxes at a Glance
| Tax Type | Rate | Filing Deadline | Forms Required |
|---|---|---|---|
| Federal Income Tax | 10-37% (personal brackets) | April 15, 2025 | Form 1040 + Schedule C or Schedule E/K-1 |
| Self-Employment Tax | 15.3% | April 15, 2025 | Schedule SE |
| Minnesota Income Tax | 5.35%-9.85% | April 15, 2025 | Form M1 |
| Minnesota Corporate Franchise Tax | 9.8% | April 15, 2025 | Form M4 |
| Federal Payroll Taxes (If Employees) | 7.65% employer + 7.65% employee (FICA) | Quarterly (April 30, July 31, October 31, January 31) | Form 941 |
| Minnesota Unemployment Tax (If Employees) | 0.40%-8.9% | Quarterly (April 30, July 31, October 31, January 31) | Filed online |
| Federal Unemployment (FUTA) | 6% on first $7,000 per employee (0.6% after credits) | January 31, 2026 (annual) | Form 940 |
| Sales & Use Tax | 6.875% | Monthly, quarterly, or annually based on sales volume | Filed online |
| Local Option Sales Tax | 0.15%-1.5% (varies by city) | Monthly, quarterly, or annually based on sales volume | Filed online |
| Annual Renewal | $0 fee | December 31, 2025 | Annual renewal form |
Understanding LLC Taxation Basics
How Minnesota LLCs Are Taxed By Default
Your Minnesota LLC doesn’t pay taxes itself. Instead, profits flow through to you and your members, who report them on personal tax returns. This is called pass-through taxation.
Here’s how it works:
- Your LLC earns income from business activities
- The LLC itself files no tax return (unless you elect otherwise)
- Profits “pass through” to members based on ownership percentage
- Each member reports their share on their personal tax return
- Members pay tax at their individual income tax rates
What this means for you: Unlike corporations, your business profits are only taxed once, which typically saves money.
Time-Saving Tip: If you’re uncertain about your LLC’s tax classification, a tax professional can review your LLC’s tax setup in 30 minutes and help you choose the most tax-efficient option.
Tax Classification Options
While pass-through taxation is the default, your Minnesota LLC can choose alternative tax treatments:
Default LLC Tax Status:
- Single-member LLC: Taxed as a sole proprietorship
- Multi-member LLC: Taxed as a partnership
Optional Tax Classifications:
- S Corporation: Can reduce self-employment taxes by paying “reasonable salaries”
- C Corporation: LLC pays corporate tax on profits, members pay personal tax on distributions (creates double taxation)
Not sure which tax classification is right for your business? Schedule a free consultation with 1-800Accountant.
Federal Tax Obligations
Income Tax
As a Minnesota LLC owner, you’ll report your share of business profits on your personal tax return using:
- Form 1040 + Schedule C (single-member LLCs)
- Form 1040 + Schedule E + Schedule K-1 (multi-member LLCs)
Federal income tax rates range from 10% to 37% based on your tax bracket (actual brackets will depend on inflation adjustments and any tax law changes).
Simply Put: Whatever money your business makes (after expenses) gets added to your personal tax return, just like income from a job.
Self-Employment Tax
LLC members actively involved in the business must pay self-employment tax of 15.3% (covering Social Security and Medicare) on their share of LLC profits.
Key points:
- Applies to net earnings of $400 or more
- Calculated on Schedule SE
- You can deduct 50% of the self-employment tax as an “above-the-line” deduction, which lowers your adjusted gross income
What happens if I miss this payment? The IRS charges penalties of 0.5% per month plus interest. However, first-time mistakes can often qualify for penalty abatement if you have a clean compliance history.
Employment Taxes
If your LLC has employees, you must:
- Withhold federal income tax
- Pay and withhold FICA taxes (7.65% each for employer and employee)
- Pay federal unemployment tax (FUTA)
- File quarterly employment tax returns (Form 941)
- Provide W-2 forms annually
Estimated completion time: 2-3 hours per quarter (significantly less with payroll software or professional help)
Estimated Tax Payments
Because no tax is withheld from your LLC profits, you’ll likely need to make quarterly estimated tax payments using Form 1040-ES. These payments cover both income and self-employment taxes on your share of the business income. Missing deadlines or underpaying can lead to IRS penalties, even if you pay in full later.
Working with an accountant can help ensure accurate calculations, on-time payments, and a smarter overall tax strategy.
Key deadlines:
- April 15
- June 16
- September 15
- January 15
Pro Tip: Set calendar reminders 15 days before each deadline. This gives you time to prepare without the last-minute rush that leads to mistakes.
Minnesota State Taxes
Minnesota Income Tax
Minnesota has a personal income tax rate of 5.35%-9.85% that applies to your LLC’s profits on your personal return.
Filing requirements:
- Use Minnesota Form M1
- Due April 15, 2025
- Applies to LLCs subject to pass-through taxation (default)
Minnesota Corporate Franchise Tax
If your LLC has elected to be taxed as a c corp, it will be subject to Minnesota’s 9.8% corporate franchise tax. This is also referred to as corporate income tax.
Filing requirements:
- Use Minnesota Form M4
- Due April 15, 2025
Other tax structures:
Sales and Use Tax
If your Minnesota LLC sells physical products or certain services:
- Collect 6.875% sales tax on taxable sales
- Register for a seller’s permit through Minnesota Department of Revenue
- File and pay collected taxes monthly, quarterly, or annually based on sales volume
- Due dates vary based on filing frequency
60-Second Check: Do I Need to Collect Sales Tax?
- Do you sell physical products in Minnesota? → Yes, collect tax
- Do you sell digital products? → Yes, collect tax
- Do you provide services? → Most services are exempt (see exceptions below)
- Do you sell online to Minnesota customers? → Yes, collect tax
Services subject to sales tax include:
- Event admissions
- Building cleaning and maintenance
- Pet care services
Products typically subject to sales tax include:
- Tangible personal property
- Candy and soft drinks
- Digital products
Payroll Taxes
If you have employees in Minnesota, you will be responsible for two types of payroll taxes.
Unemployment Insurance (UI) Tax
- Register through the Minnesota Unemployment Insurance Agency
- Rate is 1% for most new employers (0.40%-8.9% afterwards)
- Due quarterly
Withholding Tax
- Register and file through the Minnesota Department of Revenue
- Rate is 6.8%-9.85% depending on wage amount
- Due monthly, quarterly, or annually
Annual Renewal Filing
While not a tax, your Minnesota LLC must file an annual renewal (also known as an annual report):
- Due December 31 each year
- $0 filing fee
- Filed online or by mail with the Minnesota Secretary of State
Calendar Alert: Set a reminder for November 30 to ensure you don’t miss this easy but required filing.
Local Tax Considerations
Local Option Sales Taxes
Minnesota allows cities and counties to impose local options sales taxes in addition to the statewide sales tax rates.
Cities and counties with local option sales taxes include:
- Becker County (0.50%)
- Golden Valley (1.25%)
- Minneapolis (0.50%)
- List of all localities
Filing requirements:
- Determine applicable rate using the state’s Sales Tax Rate Calculator
- Due alongside state sales tax payments
Property Taxes
If your LLC owns real property in Minnesota:
- Rates vary by locality
- Assessed annually
- Due May 15 and October 15
- May qualify for various exemptions based on business type
- Personal property tax may apply to business equipment
Tax Calendar and Filing Tips
Key Deadlines for Minnesota LLCs
January:
- January 15: Final estimated tax payment for previous year
- January 31: Issue W-2s/1099s to employees/contractors
- January 31: Fourth quarter payroll tax payment due (state and federal)
April:
- April 15: State personal or corporate income tax returns due
- April 15: Federal income and self-employment tax returns due
- April 15: First quarter estimated tax payment due
- April 30: First quarter payroll tax payment due (state and federal)
May:
- May 15: Property tax payment due
June:
- June 16: Second quarter estimated tax due
July:
- July 31: Second quarter payroll tax payment due (state and federal)
September:
- September 15: Third quarter estimated tax payment due
October:
- October 15: Property tax payment due
- October 31: Third quarter payroll tax payment due (state and federal)
December:
- December 31: Minnesota annual renewal due
Record-Keeping Checklist
Keep these records for at least 7 years:
- Business income records (invoices, receipts)
- Expense receipts and documentation
- Bank and credit card statements
- Asset purchase and improvement records
- Vehicle mileage logs
- Home office documentation
- Payroll records
- Previous tax returns
Tax Strategies for Minnesota LLCs
S Corporation Election Benefits
Converting your LLC to an S Corporation for tax purposes can save on self-employment taxes:
- File Form 2553 with the IRS
- Pay yourself a “reasonable salary” subject to employment taxes
- Take remaining profits as distributions exempt from self-employment tax
Example: An LLC making $100,000 in profit pays 15.3% self-employment tax on the entire amount. As an S Corp, if $60,000 is a reasonable salary and $40,000 is taken as distributions, only the $60,000 is subject to employment taxes.
Potential Savings: In this example, you’d save about $6,120 in self-employment taxes.
Business Expense Deductions
Common deductions Minnesota LLC owners often overlook:
- Home office deduction
- Business mileage (70¢ per mile for 2025)
- Health insurance premiums
- Retirement plan contributions
- Professional development expenses
- Business meals (50% deductible)
Forms and Resources
Federal Tax Forms
- Schedule C: Profit or Loss From Business (sole proprietors)
- Form 1065: U.S. Return of Partnership Income
- Schedule K-1: Partner’s Share of Income, Deductions, Credits
- Form 1120-S: U.S. Income Tax Return for an S Corporation
- Form 2553: Election by a Small Business Corporation (S Corp)
- Form 8832: Entity Classification Election
Minnesota Tax Forms
- Form M1: Minnesota Individual Income Tax Return
- Form M4: Minnesota Corporate Income Tax Return
- Form M3: Minnesota Partnership Income Tax Return
- Form M8: Minnesota S Corporation Income Tax Return
Helpful Resources
Minnesota LLC Taxes FAQs
LLCs in Minnesota encounter a diverse range of taxes based on their business activities and location. These include state-level taxes like sales tax and special taxes relevant to specific industries, as well as local taxes which vary across counties and cities.
Minnesota does not have an annual LLC fee but requires LLCs to file an annual renewal with the Secretary of State. This renewal is free for entities in good standing. However, failure to file can result in dissolution, which can be reversed by filing the current year’s renewal and paying a reinstatement fee.
Starting an LLC in Minnesota can be advantageous for entrepreneurs seeking personal asset protection and flexible tax options. However, it’s important to assess factors like Minnesota’s specific tax requirements, licensing needs, and the nature of your business to determine if an LLC is the ideal structure for your venture.
For more information, see our How to Form an LLC in Minnesota article.
Minnesota business tax rates vary based on the nature and income of the business. For LLCs taxed as C corporations, the corporate tax rate is 9.8%. For pass-through entities like default LLCs, members pay individual income taxes on their shares, with rates ranging from 5.35% to 9.85%, depending on income level and filing status.
For more information on common types of tax for your business, take a look at our LLC Taxes article.
Need Professional Help? While this guide covers the essentials, tax laws are complex and constantly changing. Schedule a free consultation with 1-800Accountant to ensure your Minnesota LLC remains fully compliant while minimizing your tax burden.