As a Minnesota entrepreneur, you should be well aware of your Minnesota business tax obligations. When you’re registering a business in Minnesota, keeping track of your tax obligations is a must. The consequences of not doing so will be damaging for your business.
Tax requirements vary according to a number of elements. The business structure you incorporate in (LLC, Corporation, DBA, etc), the kind of business you’ll be operating, its size, among other things, can all have an influence on your Minnesota business taxes. The bottom line is that you need to comply on time with these tax obligations to avoid any legal actions with the governing agency.
This guide will help you do that by providing a basic guide on the common business taxes that apply to your startup and some tools to help you accomplish it faster.
The Minnesota Business Income Tax is imposed in the state. It is also known as the Corporation Franchise Tax, and is in effect with a rate of 9.8% plus the alternative minimum tax (AMT). The AMT has a rate of 5.8% on a taxable alternative minimum income that exceeds $40,000.
The business income tax is in effect only for C-Corporations. An alternative tax called the ‘minimum fee’ applies to Partnerships, LLCs, traditional Corporations and S-Corporations. The rate for the minimum fee is flexible, computed as the collective worth of all of your business’ sales, property, and payroll. Should the total reach at least $500,000, then a minimum fee applies depending on the total collective value.
Additional information on applicable taxes for various business structures can also be accessed at the Department of Revenue of Minnesota website.
For all information regarding standard Minnesota federal tax forms and instructions on how to fill out these forms, head on over to the Minnesota Department of Revenue. Updates on business information and what you need to file are also found on the DoR website.
The Minnesota Unemployment Insurance tax is paid by employers or business owners who qualify for the criteria set by the federal and state government when it comes to the implementation of this tax. This type of tax is used as an unemployment benefit for employees or workers who have no current job through no fault of their own.
If you operate a business that has taxable retail sales within the state, then you must register for the collection of sales tax. A use tax is implemented when you use taxable items and services within the state, but no sales tax has been paid at the time that these goods are purchased or these services are paid. The rate for both Minnesota Sales and Use Tax is the same.
While there are numerous business tax requirements that must be complied with when starting a business, the lengthy process of completing this involves a wide range of tasks. There are total receipts and expenses you need to keep track of, not to mention the various business reports required to actually declare tax obligations.
With the bulk of work that is required when completing tax obligations, the practical use of resources and tools can alleviate this burden. Today, more and more startup entrepreneurs look to powerful applications to make business tasks easier and more convenient.
Small business accounting applications such as FreshBooks, QuickBooks, and Xero have grown in demand due to their efficacy in automating business transactions and processes. From accounting tasks, bookkeeping, report generation to tracking expenses, small business accounting software have become an indispensable tool that improves business efficacy.
Each of the mentioned accounting tools above are proven effective, depending on your specific business needs. Each software has a strong suite of tools that makes your tax life easier.
Please be reminded that this guide on Minnesota business taxes is for informational purposes only. It should not be taken as a legal document or advice. For questions on the legal details of Minnesota business taxes or starting a new business in Minnesota, seek the expert advice of your business lawyer.