Starting a Business in Minnesota: A Step-by-Step Guide

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Starting a business in MN can seem completely daunting to brand-new entrepreneurs. But if you’re considering starting a business in Minnesota, you can feel comforted by the knowledge that you’ll be joining a robust network of fellow small business owners—in fact, small businesses make up 99.5% of all businesses in the state. And if that many Minnesotans have succeeded in launching their own ventures, there’s no reason why you can’t too.

In this guide, we’re breaking down the most important aspects of starting a business in MN. Along the way, we’ll offer you additional tools and resources that can get even more granular about each of these steps—that way, you’ll be armed with all the information you could ever need about starting a thriving business in the North Star State. Let’s get to it.   

How to Start a Business in MN in 7 Steps

Step 1: Write a business plan.

Starting a business without a business plan is like—well, trying to start a business without a plan. In other words: It’s not recommended.

For some business owners, writing a business plan may seem too overwhelming a task to take on, or you might simply be too excited about your launch to set aside a few hours to write down your plan of action. But we can assure you otherwise on both counts: When you’re just starting a business in MN, your plan doesn’t need to be extremely long or detailed; and whatever it is that you can get down right now will be hugely helpful for you in the long run.

Do keep in mind that every business plan is different, and it’ll all depend on your unique business. For instance, if you’re selling a product rather than a service, you’ll need to present how you’re producing or purchasing that product. If you’re running a brick-and-mortar operation rather than an ecommerce business, then you’ll need to account for the labor and costs involved in renting, outfitting, and running your physical location.

We recommend taking a look at our guide to how to write a business plan for a comprehensive primer on this crucial step. But briefly, your preliminary business plan should aim to address at least the following points, as thoroughly as you’re able:

  • A short summary of your business
  • Your business’s management structure, how many employees you need and their roles (if relevant), and any other advisors or non-management owners involved in your operation 
  • A description of the product or service you’re offering, and your pricing
  • How your offering differs from your competitors’
  • An overview of your target market, your customers, and your competitors
  • How you plan to attract and retain customers
  • How much startup money you currently have, how much funding you need now (and for what purposes), and how much funding you’ll need in the future
  • Financial projections for the first year of business, and then for the next three to five years

Keep in mind that your preliminary business plan is exactly that—it’s preliminary! At any time in your operation, you can dive back in and augment, revise, or even completely reroute your plan. Your plan should work with you, not stifle you.

Step 2: Choose a business entity and name.

Once you’ve nailed down a business plan, you can move onto the nuts and bolts involved in starting a business in MN—and choosing a business entity is crucial in laying the foundation for a solid operation. The type of business entity you choose will determine how your business’s management is structured, how you’re taxed, and the degree of legal protection you’re afforded in case a customer, vendor, or other entity brings legal claims against your business.

The most common types of business entities for small businesses are sole proprietorships, general partnerships, limited partnerships, limited liability companies (LLCs), C-corporations, and S-corporations. Forming an LLC is one of the more common options for small business owners, as registering is straightforward, you can choose how you’d like your business to be taxed, and, like a corporation, you’re given limited liability protection.

For state-specific information on business entities, take a look at the Minnesota Secretary of State’s guide on the main business structures available in MN. This guide will also point you to where you can go online to register your business, according to the business structure you’ve chosen. Also remember that you can work with an attorney or accountant to help you decide which type of business entity makes the most sense for your unique business. Your advisor can also perform a name availability search for you, and guide you through the registration process in the next step.

If you haven’t already done so, it also makes sense at this point to choose a business name, as you’ll need to have a name in order to register your business with the state. Choosing a business name isn’t necessarily an easy task (but it can be fun!), so take a look at our guide to help you unlock your creativity.

However, naming your business isn’t quite as simple as picking something you like and calling it a day. You’ll need to verify that your business name is not in use by another Minnesota firm by conducting a name availability search, and you’ll also need to ensure that your potential business name aligns with the state’s rules regarding which words are allowed (or not) to appear in specific business names. Once you’ve checked out your name with the state, check that the web domain name is available, and buy your domain name ASAP so you can launch your business website as soon as you’re ready.

Step 3: Register your business with the Office of the Minnesota Secretary of State.

With your business name and entity under your belt, you can officially register your business with the state. The Office of the Minnesota Secretary of State provides a step-by-step guide on how to register your business. You can do so either do so online or by manually completing and sending your business registration forms in the mail.

If you’re starting a business in MN and would rather register your business in person or by mail, you can view and print out the necessary forms on the Secretary of State’s General Business Filing Forms page. Simply choose your business entity from the left-hand sidebar, fill out the form, and then mail it in or deliver it to the Secretary of State’s office at 60 Empire Drive, Suite 100, Saint Paul, MN 55103. Their business hours should be located on their website. 

Step 4: Register for a Minnesota business tax ID. 

Next, you’ll need to obtain a state tax ID number through the Minnesota Department of Revenue. Note that in order to apply for an MN tax ID number, you’ll need to have an EIN number. If you haven’t already done so, you can apply for an EIN online through the IRS website. After, you can head over to the Minnesota business tax registration portal to register for your state tax ID number.

You can consult the Minnesota Tax ID requirements to check up on your particular business’s tax requirements. You can also take a look at the state’s Employment and Economic Development page to find out about your business’s tax liabilities—but here again, we’d recommend consulting a business attorney or accountant to thoroughly understand your tax requirements when you’re starting a business in MN.    

Step 5: Obtain the proper permits, licenses, and understand your employer responsibilities.

Depending on the type of business you’re starting in Minnesota, you may need to obtain certain business, occupational, and/or environmental licenses or permits. To find out whether your business is among the state’s regulated fields and requires a state-level permit in order to operate, check out the Minnesota eLicensing portal, which allows you to browse for licenses by topic, agency, or alphabetically.

In addition to state-level permits and licenses, you may be responsible for permits and licenses at a local level. Check with your city’s licensing department or your town clerk’s office to find out whether your business needs an additional license. At the same time, you should make sure that your business operations are aligned with zoning restrictions, environmental permits, bonding requirements, and other regulations at both a state and local level. Also keep in mind that certain industries, such as agriculture and commercial fishing firms, are required to hold federal licenses or permits. Either your attorney, county clerk’s office, local SBA office, or a Small Business Development Center can help you understand and navigate those regulations.

And if you’re hiring employees, or if you plan to in the future, then you have a few more logistical steps to cover. Before you formally take on your first employees, you need to understand your state-regulated employer responsibilities. To do so, take a look at the Minnesota Department of Employment and Economic Development’s (DEED) page on Minnesota employer basics. This guide covers crucial information for current or future employers, like how to determine if a staff member is an employee, a statutory employee, or an independent contractor; federal and state requirements for wages and overtime pay; and a handy checklist of required tasks to perform and paperwork to file whenever you hire an employee.

Step 6: Get insured.

You’re starting your business with the full faith that it’s going to thrive. We have that faith in you, too! But a smart business owner is both optimistic and cautious. So for the vast majority of business owners, we recommend getting business insurance to protect you against the legal claims, accidents, and other risks and liabilities that aren’t necessarily inevitable, but which are entirely possible.

That said, the type of coverage your business needs are entirely dependent upon the nature of your industry. For example, business owners with physical locations will need property insurance to protect their storefronts from damage, while ecommerce entrepreneurs can consider buying e-insurance to protect their digital assets from IP theft and other potential liabilities unique to doing business online. And if you have employees, then the state requires that you obtain Minnesota workers’ compensation insurance and register with the Minnesota Unemployment Insurance Program.

Consult our guide on small business insurance, which will help you navigate through common coverage for small business owners, and which types of businesses are best suited to each type of insurance. It’s also a good idea to review DEED’s business insurance guide for state-specific information about recommended or required coverage for Minnesota-based businesses.             

Step 7: Organize your business finances.

Now that your business is legally operable, you’ll need to evaluate whether you’re financially solvent enough to get yourself off the ground—and in most cases, new business owners need help in that department.

Most often, entrepreneurs use some combination of personal savings, friends and family loans, personal loans for business, and bootstrapping to launch their new ventures, but you can take a look at any of our several guides on startup funding for a complete rundown on your financing options. We’d also recommend that you consult DEED’s guide to financing a business in Minnesota, which will provide you with information about state-sponsored funding programs, tax credits, and grant programs. And remember that entrepreneurs often use a combination of financing methods, so you’re hardly limited to one track.

A business credit card is an attainable supplement to whichever larger-scale financing methods you choose. Plus, using a business credit card responsibly serves so many positive purposes: You can easily pay for your business’s smaller, daily expenses; build and boost your credit score, which can help you qualify for a business loan down the line; help separate your business and personal finances; and, depending on the type of credit card you’re using, you can earn points, rewards, or cash as you spend.

At the same time, you should think seriously about opening a business bank account. This is crucial for maintaining that all-important separation between your personal and business finances, and it’ll also ensure that your business finances have a safe but easily accessible home. If you’re happy with the bank you’re using for your personal finances, we’d recommend finding out about their business bank account options. Not only is it logistically easier to use the same institution for all of your bank accounts, but as banks typically encourage loyalty, they may be more inclined to approve of your future business loan application (granted that you’re a responsible customer, and that you have other loan credentials covered). Otherwise, take a look at our guide to the best business bank accounts for even more options.

You’ll need a system to manage and organize your finances, too. For that, we’d recommend looking at our guide to this year’s best business accounting software, all of which will streamline and automate this tricky, time-consuming task.    

Starting a Business in MN: The Final Step 

Completing all the steps in this list ensures that you’re starting your North Star State business with the strongest possible foundation.

Now, you can start marketing yourself to let the world (or your town) know about your new business. If you’re on a tight budget, we’d recommend starting out by building a business website, creating social media accounts for your business—Instagram, Facebook, and Twitter are non-negotiables—and engaging in some good, old-fashioned networking to keep your contacts in the loop about your business. On top of that, try out any number of accessible, creative, and totally free marketing strategies. Once your budget increases, you can move onto implementing a more comprehensive small business marketing strategy.

We understand that, from the outset, starting a business in MN can seem incredibly overwhelming, so we hope that this guide has eased your concerns about the logistics involved in launching your business. And if you’re still feeling overwhelmed along the way (which, realistically, is bound to happen), know that we have so many more guides, tools, and resources to offer about your specific concerns—and if we don’t have it, your local SBA office will. Don’t be afraid to ask for help when you need it!

Caroline Goldstein

Caroline Goldstein is a contributing writer for JustBusiness.

Caroline is a freelance writer and editor, specializing in small business and finance. She has covered topics such as lending, credit cards, marketing, and starting a business. Her work has appeared in JPMorgan Chase, Prevention, Refinery29, Bustle, Men’s Health, and more.

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