A Guide To STARTING A BUSINESS IN MINNESOTA 42nd Ed 2024

If the partnership has nonresident individual partners, it may pay composite income tax on their behalf using Schedule KPI. Individual partners who are not included on the composite income tax may be required to complete Form M1, Individual Income Tax. If it has nonresident individual partners who will not be included in the composite income tax, generally the partnership is required to withhold income tax (called nonresident withholding) on behalf of such partners and remit it with Form M3, by using Schedule KPI. If the partnership is making a pass-through entity tax election, it must file Schedule PTE with its Form M3 and file it on or before the extended due date for the return.

C CORPORATION

Federal Income Tax Returns The C corporation reports its income, deductions and credits, and computes its tax on Form 1120. Supporting forms and schedules may be required. If the corporation issues dividends, it must annually send Form 1099-DIV to its shareholders who receive more than $10 in dividends, stating the amount of ordinary income and qualified dividends paid. A copy of Form 1099-DIV is filed with the IRS. Shareholders report dividends received from the corporation on their individual Form 1040. Shareholders may be required to file Schedule B (1040) to report their dividend and interest income. Minnesota Income Tax Returns The C corporation reports state tax on Form M4, Corporation Franchise Tax Return. The corporation also may have to pay a minimum fee based on property, payroll, and sales attributable to Minnesota.

S CORPORATION

Federal Income Tax Returns The S corporation generally is not separately taxed. The S corporation files Form 1120-S and supporting forms and schedules, including Schedules K (Form 1120-S) and K-1 (Form 1120-S). Individual shareholders report their share of the S corporation’s income, deductions, and credits on their individual Form 1040, using information on Schedule K-1. Minnesota Income Tax Returns S corporations file Form M8, S Corporation Return, with copies of federal Form 1120-S and supporting forms and schedules. The S corporation may have to pay a minimum fee based on property, payroll, and sales attributable to Minnesota. If the S corporation has items of income, credits or modifications that are different from the federal return it must also issue Schedule KS to its shareholders and include copies with Form M8. If the S corporation has nonresident individual shareholders, it may pay composite income tax on their behalf using Schedule KS. Individual shareholders who are not included on the composite income tax may be required to complete Form M1, Individual Income Tax Return.

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