How to File as a Subchapter S Corporation in Minnesota

by Terry Masters

Changing a standard corporation, or "C" corporation, to an "S" corporation is a process authorized under the federal tax code and technically only affects the way the corporation files its federal income tax returns. For state tax purposes, a state can choose to recognize the federal S corporation election and allow the corporation to enjoy the same tax treatment at the state level as it enjoys at the federal level. Minnesota recognizes the federal S corporation election and requires these types of corporations to file special state income tax returns to distinguish S corporations from C corporations. Unlike a C corporation, an S corporation can only have up to 100 shareholders and one class of stock.

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Automatic State Recognition

Once you have formed a regular C corporation and made an S corporation election that has been approved by the Internal Revenue Service, Minnesota will automatically treat your corporation as an S corporation for state income tax purposes. Unlike certain other states, you do not have to file a separate state election form to be treated as an S corporation. Your federal election, which is made on IRS form 2553, is the only election you have to make. The letter from the IRS, confirming the effective date of the election, is valid for filing state income taxes for your business.

State Registration

Minnesota does require S corporations to obtain a state tax identification number from the department of revenue. You can apply for this number online at the department's website. Many states will allow a corporation to use its federal employer identification number as its state tax ID, but Minnesota requires a corporation to apply for a separate state number.

State Income Taxes

To be treated as an S corporation in Minnesota, the corporation must file its state income taxes on the Minnesota S corporation tax return form M8. This state form is specifically designed for S corporations and provides this type of entity with the same tax treatment as the federal tax return form 1120S for S corporations.

Annual Business Renewal

Minnesota S corporations must also file an annual business renewal form with the secretary of state's office. There is an annual fee associated with this filing. In all other regards, a Minnesota S corporation is treated like a C corporation by the state and has no other special filing requirements to maintain its tax election.