How to Establish a Sole Proprietorship in Minnesota
To establish a sole proprietorship in Minnesota, here's everything you need to know.
In Minnesota, you can establish a sole proprietorship without filing any legal documents with the Minnesota state government. There are four simple steps you should take:
- Choose a business name.
- File a Certificate of Assumed Name with the Secretary of State.
- Obtain licenses, permits, and zoning clearance.
- Obtain an Employer Identification Number.
To find out how to establish a sole proprietorship in any other state, see Nolo’s 50-State Guide to Establishing a Sole Proprietorship.
1. Choose a Business Name
In Minnesota, a sole proprietor may use his or her own given name or may use an assumed business name or trade name. If you plan to use an assumed business name, state law requires that the name be distinguishable from the name of another company currently on record. It is also a good idea to choose a name that is not too similar to another registered business because of common and federal law trademark protections. To make sure your business name is available, run a search in the following government databases:
2. File an Assumed Business Name
If you use a business name that is different from your legal name, Minnesota requires you to file a Certificate of Assumed Name. This is a mandatory requirement in Minnesota. To file your assumed business name, you have to fill out a Certificate of Assumed Name Registration available from the Minnesota Secretary of State. The filing fee is $30. After filing the certificate with the Secretary of State, you must publish the certificate with a qualified legal newspaper for two consecutive issues in the county where the principal place of business is located.
3. Obtain Licenses, Permits, and Zoning Clearance
Your business may need to obtain business licenses or professional licenses depending on its business activities. Minnesota provides a comprehensive database of every profession that requires a license by any sole proprietorship. A business can obtain this information by going to License Minnesota provided by the State of Minnesota. In addition, local regulations, including licenses, building permits, and zoning clearances, may apply to your business. You will need to check with your city and county governments for more information.
4. Obtain an Employer Identification Number
Sole proprietors who wish to have employees need to obtain an Employer Identification Number, or EIN. This is a nine-digit number issued by the IRS to keep track of businesses. All businesses with employees are required to report wages to the IRS using their EIN. Registering for an EIN can be done online at the IRS website.
Even though sole proprietors without employees are not required to have an EIN, you may want to obtain one anyway. Some banks require one to open a bank account and it can reduce the risk of identity theft.
In Minnesota, businesses that make retail sales or perform taxable services are required to have a Minnesota Tax Identification Number provided by the Minnesota Department of Revenue. In addition, you are required to report taxes and file various employee reports. You will need to use your EIN when registering your business to report income and employment taxes through the Minnesota Business Tax Registration provided by the Minnesota Department of Revenue. If you have employees, you must also register for an Unemployment Insurance Account Number provided by the Minnesota Unemployment Insurance Program.
It is important to consider doing the following once you have established your sole proprietorship:
- Open a business bank account. Using your fictitious business name and EIN, you should set up a bank account to keep your business and personal finances separate.
- Obtain general liability insurance. Because sole proprietors are personally liable for all debts and obligations of the business, a business liability insurance policy may be the only form of financial protection against unforeseen events.
- Report and pay taxes. Depending on your specific business activities, you may be required to report such items as sales tax and use tax. You will need to register with the Minnesota Department of Revenue Business Tax Registration.