Here’s an overview of the key steps you’ll need to take to start your own business in Minnesota.
The most common legal structures for a small business are:
There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of liability protection you want and the best tax, financing, and financial benefits for you and your business. Check Choose Your Business Structure on Nolo’s website for more information on how to choose the best ownership structure for your business.
For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the Minnesota Secretary of State (SOS). You can check for available names by doing a search on the SOS website. You can reserve an available name for 12 months by filing a Request for Reservation of Name with the Minnesota SOS. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Company” for corporations). See How to Form an LLC in Minnesota and How to Form a Corporation in Minnesota for more information.
Sole proprietorships and partnerships in Minnesota must file a Certificate of Assumed Name with the Minnesota SOS if they use a business name that is different from the names of the business owner (for a sole proprietorship) or individual partners (for a partnership). Assumed names expire at the end of each calendar year and must be renewed annually.
If you plan on doing business online, you may want to register your business name as a domain name. See Choose and Register a Domain Name for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See How to Do a Trademark Search for more information.
Sole proprietorship. To establish a sole proprietorship in Minnesota, you don’t need to file any organizational documents with the state. For more information, see How to Establish a Sole Proprietorship in Minnesota.
Partnership. To create a general partnership in Minnesota, you don’t need to file any organizational documents with the state. Although not legally required, all partnerships should have a written partnership agreement . The partnership agreement can be very helpful if there is ever a dispute among the partners. For more information, see How to Form a Partnership in Minnesota. To form a limited liability partnership (often used by professionals), you must file a Statement of Qualification with the Minnesota SOS. For more information, see How to Form a Limited Liability Partnership in Minnesota.
LLCs. To create an LLC in Minnesota, you must file articles of organization with the Minnesota SOS. You will also need to appoint a registered agent in Minnesota for service of process. In addition, while not required by law, you also should prepare an operating agreement to establish the basic rules about how your LLC will operate. The operating agreement is not filed with the state. For more information, see How to Form an LLC in Minnesota and How to Form a Professional LLC in Minnesota (for professionals).
Corporations. To create a corporation in Minnesota, you must file articles of incorporation with the Minnesota SOS. You will also need to appoint a registered agent in Minnesota for service of process. Although not legally required, you also should prepare bylaws to establish your corporation’s internal operating rules. Bylaws are not filed with the state. S Corporations must file IRS Form 2553, Election by a Small Business Corporation, with the IRS. For more information, see How to Form a Corporation in Minnesota.
Tax Registration. If you will be selling goods in Minnesota, you must register to collect sales tax with the Minnesota Department of Revenue (DOR). If you will have employees in Minnesota, you must register with the DOT for employer withholding tax. For both types of tax, you can register online.
EIN. If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.
Regulatory licenses and permits. These cover areas such as:
For regulatory licenses and permits issued by the state, Minnesota’s Bureau of Business Licenses (BBL), also known as License Minnesota, has information about the state’s many business licenses. In addition, the BBL publishes a comprehensive State of Minnesota Directory of Licenses and Permits. You can also find more extensive information online by going to the BBL’s License Minnesota (elicense) website. For information about local licenses and permits, check the websites for any cities or counties where you will do business.
Professional and occupational licenses. These cover people who work in various fields. You can get information about the state agencies that license and regulate many professions and occupations from the State Agenciessection of the License Minnesota website.
You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking municode.com.
Minnesota taxes every kind of business. See Minnesota State Business Income Tax for more information on state business taxes in Minnesota.
Sole proprietorships. Pay state taxes on business income as part of their personal state income tax returns (Form M1).
Partnerships. Partners pay state taxes on partnership income on personal tax returns. In addition, most partnerships also must file Form M3, Partnership Return, and also may be liable for a minimum fee.
LLCs. Members pay state taxes on their share of LLC income on personal tax returns. In addition, the LLC itself must file an annual report (also known in Minnesota as an annual renewal) with the Minnesota SOS. See Minnesota LLC Annual Report and Tax Requirements for more information. LLCs with property, payroll, sales, or receipts above a certain level also must pay a separate minimum fee.
Corporations. Shareholders must pay states taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on his or her personal state tax return. Moreover, the corporation itself is subject to Minnesota corporation taxes. And corporations with property, payroll, sales, or receipts above a certain level also must pay a so-called minimum fee. Finally, corporations must file an annual report (also known in Minnesota as an annual renewal) with the Minnesota SOS.
If you have employees, you must also deal with state employer taxes.
And, apart from Minnesota taxes, there are always federal income and employer taxes. Check IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a Business, available at irs.gov.
Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check Obtaining Business Insurance for more information.