Minnesota LLC Taxes: Individual Rates of 5.35% to 9.85%, Sales Tax and No LLC Franchise Tax
Minnesota LLC Taxes: Individual Rates of 5.35% to 9.85%, Sales Tax and No LLC Franchise Tax
If you are forming a limited liability company in Minnesota, the first tax question is the one people most often get wrong. A standard LLC does not pay a Minnesota income tax at the entity level. Its profit passes through to the owners, who pay Minnesota individual income tax at graduated rates of 5.35% to 9.85%. Minnesota also has no separate LLC franchise tax. The taxes that can reach your business are the state sales tax, which applies once you make taxable sales, and the 9.8% corporation franchise tax, which applies only if your LLC is taxed as a C corporation.
This guide covers how an LLC is taxed in Minnesota, the current individual income tax brackets, the minimum fee, sales tax registration, and the annual filing that keeps your LLC in good standing. It also lists the figures you should confirm with the agency before you rely on them.
Disclaimer: This guide is informational only. It is not legal, tax, or accounting advice. Tax treatment depends on your facts, how your LLC is classified for federal tax purposes, and your other income. Talk with a qualified CPA or tax attorney before you make a tax election or file a return.
How a Minnesota LLC Is Taxed
Minnesota follows the federal classification of your LLC. That classification decides who pays the tax on the profit.
- Single-member LLC (disregarded entity). The profit reports on the owner's individual Minnesota return. The LLC itself has no separate income tax.
- Multi-member LLC (partnership). The business files as a partnership. Profit passes to the members according to their shares, and each member pays individual income tax on their share.
- LLC taxed as a C corporation. If the LLC elects corporate treatment for federal purposes, it pays the 9.8% corporation franchise tax on its Minnesota taxable income.
For most small LLCs with one or two owners, the business itself owes no Minnesota income tax, and the owners report the profit on their own returns. Your classification is set through a federal election, so confirm it with your CPA before you prepare the Minnesota return.
Minnesota Income Tax Rate for LLC Owners
The Minnesota income tax rate for individuals is graduated across four brackets: 5.35%, 6.80%, 7.85% and 9.85%. The rates are set in Minnesota Statutes, section 290.06, subdivision 2c. The 2026 session law, chapter 128, amended that subdivision, but the four rates did not change. The dollar thresholds are indexed each year, so the table below shows the 2026 figures from the Department of Revenue.
| Rate | Single filers | Married filing jointly |
|---|---|---|
| 5.35% | Up to $33,310 | Up to $48,700 |
| 6.80% | $33,310 to $109,430 | $48,700 to $193,480 |
| 7.85% | $109,430 to $203,150 | $193,480 to $337,930 |
| 9.85% | Over $203,150 | Over $337,930 |
Because the brackets are progressive, only the income inside each band is taxed at that band's rate. A single filer with $150,000 of taxable income does not pay 7.85% on the whole amount. Profit from your LLC adds to your other taxable income, so it can move you into a higher bracket.
Minnesota has no local income taxes, so no city or county adds a second income tax to your return. The state table is the full income tax picture for individual owners. Confirm the current thresholds on the Department of Revenue site before you estimate your bill, because they change with indexing.
The Minimum Fee
Separate from the income tax, Minnesota charges a minimum fee under Minnesota Statutes, section 290.0922. It applies to C corporations, S corporations and partnerships. A single-member LLC that reports only on the member's individual return is exempt.
The fee is based on your Minnesota property, payroll and sales. For 2026, it is $0 if the total is below $1,280,000, and it rises in brackets to $12,830 at $51,280,000 and above. This guide does not list the brackets in between, so find the one that matches your numbers on the Department of Revenue site.
If your LLC has several members, the partnership minimum fee may apply even though Minnesota has no LLC franchise tax. Check your numbers with a CPA before you assume the fee is zero.
The Corporation Franchise Tax
An LLC taxed as a C corporation pays the corporation franchise tax at a flat 9.8% on its Minnesota taxable income, plus the minimum fee described above. This tax falls on the entity, not the owners. Profit taxed at the entity level can be taxed again when it is paid out to owners, so model both outcomes before you choose a C corporation classification.
Minnesota Sales Tax
The Minnesota state sales tax rate is 6.875%. Local sales taxes are added on top in many places, so the total rate depends on where the sale happens. Confirm the rate for your location with the Department of Revenue before you quote a price.
Before you make your first taxable sale, register with the Department of Revenue for a Minnesota Tax ID and a Sales and Use Tax account. This registration is a tax requirement, not a license. You can start it online through the Department of Revenue new business registration page.
Formation Fees and the Annual Renewal
These are not taxes, but they determine whether your LLC stays in good standing.
- Articles of Organization (Minnesota Statutes, Chapter 322C): $155 online or in person, or $135 by mail. Online and in-person filings are expedited, and mail filings are not. The Secretary of State does not publish a guaranteed turnaround in business days, so plan for variable processing times.
- Annual Renewal: $0, due December 31 every year. It is required even though it costs nothing.
- Reinstatement: $65 by mail, or $85 online or in person, on the current Secretary of State fee schedule. Under Minnesota Statutes, section 322C.0705, an LLC that does not file by December 31 is terminated or revoked without further notice.
- Assumed name (DBA): $50 online or in person, or $30 by mail. A DBA is filed only with the Secretary of State and must be published for two consecutive issues in a qualified legal newspaper in the county of your principal place of business. Forming an LLC does not require publication. The DBA certificate renews annually at no charge.
Licenses Are Separate From Taxes
Minnesota does not issue a general statewide business license. Filing your LLC with the Secretary of State is a filing, not a license. Registering with the Department of Revenue is a tax registration, not a license either. Licensing happens by trade or activity, through agencies such as the Department of Labor and Industry, the Minnesota Department of Health, the Minnesota Department of Agriculture, the Alcohol and Gambling Enforcement Division, the Office of Cannabis Management, the Department of Children, Youth, and Families, MnDOT, Driver and Vehicle Services, and the professional boards. Local zoning and city licenses also apply by category.
Minneapolis and Saint Paul license by category, and neither city issues a general business license. Minnesota has 87 counties, about 853 cities and about 1,780 townships, so local rules vary. Search License Minnesota at mn.gov/elicense by topic, by agency, or through the A to Z index.
Reciprocity for Owners Who Live Out of State
Minnesota has a reciprocity arrangement with Michigan and North Dakota, but it covers only personal-service income: wages, salaries, tips, commissions, fees and bonuses. It does not cover business income, so profit from your LLC is not covered. Wisconsin is not covered at all. If you live in Wisconsin, or in another state, and own a Minnesota LLC, ask a CPA how your profit is sourced and taxed in each state.
What to Confirm Before You File
- Current-year income tax thresholds and the minimum fee bracket that matches your property, payroll and sales: confirm with the Department of Revenue.
- Local sales tax rates for every location where you sell: confirm with the Department of Revenue.
- Filing and payment deadlines for your individual and business returns: confirm with the Department of Revenue.
- Estimated tax payments during the year: confirm with the Department of Revenue or a CPA whether you need to make them.
- Your federal classification and whether it produces the Minnesota treatment you expect: confirm with a CPA.
Common Tax Mistakes
- Assuming the LLC pays the 5.35% rate itself. A standard LLC passes its profit through to the owners.
- Confusing the individual income tax with the corporation franchise tax. Only a C corporation pays the 9.8% rate.
- Making taxable sales before registering with the Department of Revenue.
- Skipping the December 31 annual renewal because it costs $0.
- Assuming the Michigan or North Dakota reciprocity arrangement covers business profit.
Next Steps
Start with your federal classification, then map your expected profit onto the individual brackets. Register with the Department of Revenue before your first taxable sale, put December 31 on your calendar for the annual renewal, and confirm each figure above on the agency pages before you file. For multi-member structures, S or C corporation elections, multi-state owners, or a business with significant payroll or property, consult a qualified CPA or tax attorney.