Minnesota S Corporation Formation

A Minnesota S corporation’s formation documents are filed with the Secretary of State’s office pursuant to Minnesota Statutes Chapter 302A. When you incorporate in Minnesota, you go through the Business Services Division. Once filed, your S corporation will become a legal entity, able to conduct legal dealings like entering into contracts and taking out loans.,

Steps to Forming an Minnesota S Corporation

There are two main steps to becoming a Minnesota S corporation. First, you will file Articles of Incorporation with the Secretary of State. After you incorporate in Minnesota, the second step is to file your S Corporation Election Form with the IRS. This second filing enables you to take advantage of the “s” corporation tax classification.

The Articles of Incorporation should include, at minimum, the following:

  • The name of your S Corp: Your name must be available for use within the state, and it must include the appropriate designator for a corporation: Corporation, Incorporated, or an accepted abbreviation. It’s also a good idea to do a business name search before sending in your paperwork for filing to determine whether your name is available or not.
  • Registered office address: This address will be public record and must not be a PO Box. If you wish, you may include the name of an agent at this address.
  • Shares: Your corporation must authorize at least one share that can be issued; keep in mind that a Minnesota S Corporation may have no more than 100 shareholders.
  • Incorporator: The person who drafted the articles should provide their name, address, and signature.

You must amend your Articles with the state if any of the information contained in them changes.

Further Responsibilities of an Minnesota S Corporation

A Minnesota S corporation must file an Annual Renewal with the state; failure to do so will result in the dissolution of the entity.

After your Articles of Incorporation have been filed, you have 75 days to file an S Corp Election Form (form 2553) with the IRS. This form will give you S Corporation status and allow you to be taxed accordingly.

More Information about an Minnesota S Corporation

Your S corporation:

  • Can have up to 100 owners/shareholders, but no more
  • May deduct the cost of benefits provided to employers (such as parking permits, health insurance, and so on)
  • Has a board of directors, which oversees the policies of the corporation
  • Cannot have more than one class of shares
  • Issues limited liability for owners
  • Must be owned by US citizens or resident aliens
  • Is taxed as owners’ income, not as a separate entity
  • Allows business losses to be deducted on the owners’ individual tax returns
  • Must pay payroll tax

For S corporations, only the salary paid to the owner-employee is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. Therefore, an owner of an S corporation stands to realize substantial employment tax savings. However, the salary you give yourself must not be artificially low; if the IRS finds your salary unreasonable, they may reclassify some of the distribution funds as salary and require you to pay taxes on it.

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Other Types of Businesses in Minnesota

For information on other types of businesses in Minnesota, please explore the links below: