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How To Start a Business in Minnesota in 8 Easy Steps

how to start a business in Minnesota

This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax, or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisers, as needed. Businesses outside of Minnesota will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies.

Minnesota consistently ranks among the best states in America to live and run a business. The North Star State’s highly favorable economic climate means business owners benefit from competitive tax rates, relatively low operating costs, and a streamlined administrative startup process. More than half of the state’s businesses survive beyond five years—the highest rate in the country. Here’s how to start a business in Minnesota.

1. Choose a business idea

The first thing any entrepreneur must do is come up with a feasible business idea. You may already have a product or service concept—or maybe a combination of both. Regardless, there are two key questions you should ask yourself before starting a business in Minnesota:

  • Who is your customer? There’s no business without customers. Can you provide something lacking in current offerings? Will you sell direct to consumer (B2C) or business to business (B2B)? Will you sell online or through a brick-and-mortar storefront? To make these decisions you could survey prospective customers, analyze marketplaces, and research industry trends.
  • What is your projected profitability? A business needs to make more than it spends in the long run. There are several variables to consider, including pricing, distribution, and the costs you’ll incur in building your business and developing your product. At what point do you break even? Ensure you know how much you need to sell to cover your costs and turn a profit.

2. Name your business

Once you have an idea for your Minnesota business, you’ll have to make another crucial decision: decide on a name. Make it short, memorable, and telling of what you have to offer. You also need to follow specific state-level rules. Here are a few considerations when choosing a business name in Minnesota:

  • Be original. Your business name must be unique—not only because it will set you apart, but because Minnesota law requires it. Your name must be different by at least one letter or numeral from any other name on file in the state. You can check if your desired business name is available by running a search through the Minnesota Secretary of State’s website.
  • Include certain words. Your business name must contain an indicator of your entity type: “Limited Liability Company,” “Corporation,” “Incorporated,” “Limited,” or an abbreviation such as “LLC” or “Corp.,” depending on the type of business you choose to form.
  • Exclude certain words. Your business name cannot contain certain words: those that might confuse it with a legitimate government agency (like the Treasury or the FBI), or, unless the business owners are licensed, words that designate specific professional fields, such as law or accounting.
  • Reserve your name. You can book your business name in Minnesota ahead of time for up to 12 months. Apply online for a $55 fee, or by mail for $35.
  • Adopt an assumed name/DBA. You may want to operate under a name that does not match your business’s official name. In Minnesota, you do this by registering an assumed name, i.e., a “DBA” (doing business as). You can register for an assumed name by mail for a $30 fee or online for $50, and you must renew your registration annually.
  • Secure a domain name and social media handles. So much of today’s business and marketing happens online. Purchase a domain name (URL) and choose social media usernames that align with your entity or assumed name to make it easy for customers to find you.

3. Write a business plan

For your Minnesota business to work, you’ll need a business plan. A successful business plan includes your business function, thorough market research, the business’s organizational structure, products or services, target customer profiles, and detailed strategies for marketing, logistics, and finance.

You can draft your business plan from scratch or use a customizable template. Your business plan should be suited to your goals. You may opt for a traditional plan, a lean plan (simple and agile—only includes information management needs to know), or a specific plan tailored to a certain business type, such as a nonprofit.

4. Choose a business structure

Business structure determines how your company is taxed and how easily you can secure investments, among other factors. There are four primary business structures to choose from:

  • Sole proprietorships. A sole proprietorship is the default designation for a one-person operation and is taxed at the business owner’s personal income rate. It’s an incorporated business with no partnership agreement. However, a sole proprietor’s personal assets are not protected from creditors or legal damages.
  • Partnerships. A partnership has two or more owners and is taxed at partners’ personal-income rates. As with sole proprietorships, partners’ personal assets are not protected from creditors or legal damages.
  • LLCs. Limited liability companies are popular in Minnesota because they offer many benefits of sole proprietorships or partnerships but still provide the legal insulations afforded to corporations. For example, LLCs are pass-through entities in that their business income is taxed at business ownership’s personal income levels, and their owners enjoy personal liability protection.
  • Corporations. Corporations provide personal asset protection for owners but are generally more cumbersome to incorporate and maintain. They can be formed as C corporations or S corporations, which have more limitations when issuing shares and raising capital but can enjoy the same pass-through taxation status as LLCs.

Apply for a federal employer identification number (EIN)

Once you choose a formal business structure, register for a federal employer identification number (EIN). Although your EIN is issued by the Internal Revenue Service (IRS), both federal and state tax authorities use it to identify your business for tax purposes. You can apply for an EIN free of charge through the IRS.

Incorporation

With your EIN, you can formally establish your new business in Minnesota. Access and submit the necessary business filings online, by mail, or in person, including Articles of Organization (information about your business’s identity and location, and contact details of those who run it). Here are the fees associated with incorporating various business types in Minnesota:

  • Limited partnership. $100 by mail, $120 in person (not available online). Limited partnerships differ from general partnerships in that they limit the liability each partner has according to the size of their investment in the business.
  • LLC. $135 by mail, $155 in person and online.
  • Corporation. $135 by mail, $155 in person and online.
  • Nonprofit corporation. $70 by mail, $90 in person (not available online).

No fees are associated with starting or renewing general partnerships and sole proprietorships in Minnesota.

5. Obtain business licenses and permits

Not all businesses are required by Minnesota law to obtain a business license, but certain companies need licenses or permits to engage in certain trades lawfully. These include professional services such as lawyers, doctors, and accountants, as well as businesses that produce or sell dangerous products, like liquor, tobacco, or firearms, or that use significant amounts of lumber, water, and other natural resources, such as manufacturing and extraction operations.

6. Examine business insurance options in Minnesota

Purchasing insurance for your Minnesota small business is essential for managing risk. It can also afford you peace of mind as an entrepreneur. Types of business insurance available for Minnesota businesses include:

  • Workers’ compensation insurance. Known as workers’ comp, this insurance policy covers injuries and illnesses that might befall employees on the job. Workers’ comp is required for all Minnesota businesses with employees, regardless of how many.
  • General professional liability insurance. This policy protects businesses from lawsuits, some financial losses from property damage, and third-party injuries on the job (such as customer slip-and-falls). You’re not required to buy general liability insurance under Minnesota law, but if you want to rent an office or storefront, you may be required to purchase it.
  • Business interruption insurance. Business interruption insurance covers against earnings lost due to damage to physical property so severe they interrupt operations.

7. Understand financial considerations

Beyond buying insurance, you’ll likely need to make other significant investments in your Minnesota business as you get it off the ground, including hiring certain professionals or contractors, like a lawyer, accountant, or web designer. You might also want to pay for web hosting services and professional social media management. If you plan to sell products in person, you’ll need to pay rent on a storefront or warehouse space. If this feels overwhelming, business resources are available to identify funding opportunities.

8. Market your business

Once your Minnesota business is fully funded and running, you still have to create a marketing strategy for your products or services. When it comes to marketing, word of mouth is a great start, but to grow your business, you’ll need a solid marketing plan detailing how you’ll approach this big task. A marketing plan will cover the strategies you’ll use to attract customers, which include:

  • Paid advertising and promotion. Paid advertising is a tried-and-true method of marketing companies and products. You can do this yourself or hire an agency to manage it on your behalf.
  • Social media. Use social channels like Instagram, Facebook, YouTube, or TikTok to promote your products and services.
  • Public relations. Identify and reach out to local—or even national—media outlets to broaden your reach, cultivating relationships with publications and journalists who can help increase your company’s visibility.
  • New business and customer retention. Work to build relationships with your customers to keep them coming again and again, and spread the word to friends, family, and colleagues.

Starting a business in Minnesota FAQ

How much does it cost to start a business in Minnesota?

The fee required to incorporate your business in Minnesota ranges from $100 to $155, depending on your legal business entity and how you submit your filings. If you form a corporation in Minnesota, you’re subject to a 9.8% annual franchise tax.

Is Minnesota a good place to start a business?

Minnesota is an excellent place to start a business. Low startup costs and competitive taxes mean a 55% average likelihood of business survival beyond five years—the highest rate nationwide.

Are any statewide business licenses required to start a business in Minnesota?

There are no general statewide business licenses required in Minnesota. However, some specialized businesses must apply for certain permits, i.e., if they sell dangerous goods or engage in trades with a high bar for competence, such as law.

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