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Starting a Business in MinnesotaYou’re about to embark on a long and exciting journey, one full of hard work and rewards: starting a new business.

With wide eyes and big dreams, you’re about to enter the world of business ownership.

But beyond the initial thrill of the startup decision, there’s a lot to consider. In fact, if you’ve never done it before, starting a business can seem like an intimidating mountain of work. Out of all your responsibilities and tasks, you might not even know where to start.

But have no fear. The good news is that once you have everything planned out and understand the process, the formation process is smooth sailing. And this is your go-to guide.

Everything you’ve been wondering about, everything you need to do, every question you have – it’s all right here. By the time you’re through these 16 steps, you’ll be a bonafide business owner who’s prepared for sustained success.

Minnesota Entrepreneur Hack

When you form a business through business formation services (Example: ZenBusiness and LegalZoom), they’ll register your business with the state and help you check off most of the startup-steps in this list. They assist you with everything from building a website to opening a business bank account.

If you’d like to cut through the clutter and compare the best LLC services, see our comparison of the top 7 deals.

1) Write a Business Plan

Jumping into this endeavor without goals, directives, or a sense of direction can lead to a scattered, unproductive business.

A business plan lays the groundwork for your future success. It helps you analyze key elements of your business and forge pathways to achieve your goals. Here are a few things you should consider including in your business plan:

  • Executive Summary (a separate document that gives a complete overview of your business’ purpose, plans, goals, competition, opportunities, etc.)
  • Company description
  • Market Analysis (opportunities, competition, etc.)
  • Managerial or organizational structure
  • Products and/or services
  • Marketing strategies
  • Funding goals
  • Financial projections

Business plans aren’t just great for internal operations, but they give your business legitimacy in front of potential investors, customers, partners, and more. Need help? Check out this guide from the U.S. Small Business Administration.

2) Decide on a Business Name

You might’ve come up with the perfect name right away. If so, consider yourself lucky.

Sometimes, deciding on a business can be difficult, requiring brainstorming meetings and late-night rap sessions. That’s because your name is your business’ identity and reputation. It should be something that’s unique and memorable but also defines your business purpose.

Your business name depends somewhat on the structure you choose. If you’re forming an LLC, for example, its name must include some form or abbreviation of the words “Limited Liability Company,” while corporation names must include the words “corporation,” “incorporated,” “limited,” “company,” or an appropriate abbreviation.

None of that necessarily matters, though, if another Minnesota business is already using your desired name. Before you start using a name on your official documents, marketing materials, or anything else, confirm its availability by searching for it on the Secretary of State website. If you don’t see any results, you’re free to claim it by reserving it or using it on your formation documents.

3) Decide on a Legal Structure

There are only a few types of business structures, but each one dictates some important parts of how your business will run.

The most popular types are the sole proprietorship, general partnership, limited liability company (LLC), S corporation, and C corporation. Most small businesses go with the LLC because of its unique blend of flexibility and personal asset protection.

However, you shouldn’t make this decision without reading up on all of your options. We’ve done plenty of research on each business type and developed side-by-side comparisons. Check out our LLC vs. Corporation and LLC vs. Sole Proprietorship comparison guides for a closer look.

4) Choose a Registered Agent

The Secretary of State needs a point of contact for your business, someone who will be available at your registered office address during typical business hours – 9am to 5pm.

This person is called a registered agent, and they serve as an intermediary with the state, receiving all of your company’s important legal communications and relaying them on to you. The Minnesota registered agent ensures that no important state documents, deadlines, or payments fall through the cracks, so you’ll want to choose a person or company you trust.

You can choose either an individual or a business entity as your registered agent in Minnesota, but they must:

  • Be an individual Minnesota resident or a business entity authorized to do business in Minnesota.
  • Have a physical address in Minnesota.
  • Have a mailing address in Minnesota (P.O. boxes not allowed).

These restrictions are broad, so you have a wide range of registered agent options in Minnesota. But keep in mind that this person or corporation will be responsible for keeping your business compliant and taking care of your business maintenance requirements. If you’re appointing an individual, you’ll likely want someone that understands the intricacies of running a business, like a manger, co-owner, attorney, or other professional. That said, family members and friends can also be viable options.

Or, you can choose a registered agent service instead. These companies take care of all your registered agent responsibilities, and some will even handle your business formation and annual renewal as well.

Important: You must continuously maintain a registered agent on file with the Secretary of State. If your agent resigns or you appoint a new one, you’ll need to notify them by filing the appropriate documents.

5) Register Your Business

This is the big one, the step that officially creates your business. No matter which business type you choose, you’ll need to register it with the Secretary of State.

LLCs: You’ll need to submit the Articles of Organization to officially put your new limited liability company on the map. Mailing a paper form and submitting one online are both effective ways to file. Because it’s such a crucial step in the process, this Minnesota LLC filing isn’t free. Filing by mail costs $135 and online costs $155.

Corporations: The filing procedures for corporations are pretty much the same, but the form is different. Instead of an Articles of Organization, you’ll file the corporation-specific Articles of Incorporation.

Sole Proprietorship/General Partnership: There are no official forms or fees to register as a sole proprietor or general partnership. Simply start doing business and that’s it! While this is obviously faster and easier, we recommend incorporating your business because of the personal asset protection LLCs and corporations provide.

Foreign Entities: Any business that expands to Minnesota from another state is considered a foreign entity and must register as such. This is a process called foreign qualification and it doesn’t involve either of the forms listed above. Instead, you must file a “Certificate of Authority to Transact Business” for your LLC or corporation.

6) Get an EIN

The Employer Identification Number (EIN) is your ticket to doing state and federal taxes. It’s a nine-digit number, much like a Social Security Number, that identifies your business on tax documents.

If you’re forming an LLC, it will be considered a “pass-through” entity, so the business itself won’t pay federal income taxes. Instead, you and the other members will report income and losses on your personal tax returns.

But this doesn’t mean you can go without an EIN. If your LLC pays any type of business taxes – like Sales, Use, or Unemployment Taxes – or hires employees, you’ll need to get one.

Unsure if you need one? The IRS provides a useful “Do I need an EIN?” link on this page, where you can also apply for an EIN. If you go through the online application process, you’ll receive your number immediately.

Otherwise, you can submit a Form SS-4 by fax to (855) 641-6935 or by mail to :

Internal Revenue Service Operation

Attn: EIN Operation

Cincinnati, OH 45999

7) Open a Business Bank Account

LLC and corporation owners are required to keep their personal and business finances completely separate, or they risk losing their personal asset protection. To do so, you’ll need a business bank account.

The good news is that opening a business bank account is pretty simple. Just pay a visit to your bank’s local branch and sit down with one of the bankers there. You will need to present your formation documents, an EIN number, and some personal information. Then, you can direct all of your business income and expenses to that account instead of a personal one.

It doesn’t really matter which bank you choose, whether it’s a national giant like Chase or Bank of America or a small, local bank. However, it’s usually easiest to go with the one where you have existing accounts.

Quick Tip: If you’re considering to use an LLC formation or incorporation service, IncFile is the best when talking about business banking offers. They have a special partnership with Bank of America that gives you a $450 sign-up bonus if you bank with them.

8) Handle Any Tax Obligations

Ah, taxes. They’re always part of the picture, especially when you run a business.

Familiarizing yourself with your business’ tax requirements will help you establish a solid financial plan going forward. LLCs don’t need to file a corporate tax return and pay federal income taxes, so you’ll handle these taxes as part of your personal return.

Corporations, on the other hand, will need to file a Corporate Income Tax Return, while sole proprietorships/general partnerships will need to pay self-employment taxes.

Minnesota doesn’t require its businesses to pay a franchise tax for the privilege of doing business there, but there are a few other taxes your business may owe, depending on its activities and purpose:

Sales and Use Taxes: Businesses that sell retail goods and some services in Minnesota will need to pay Sales and Use Tax. The rate of these taxes vary depending on your county, city, or municipality, but the Department of Revenue provides a helpful Sales Tax Rate Calculator. Just enter your business address it will give you the appropriate rate.

Withholding and Unemployment Insurance Taxes: If your business hires any employees, it will be responsible for a Withholding Tax through the Department of Revenue and Unemployment Insurance Taxes through the Department of Employment and Economic Development.

Other Taxes: Minnesota has a variety of other business taxes that each apply to specific circumstances, like the Alcoholic Beverage Tax, Estate Tax, Petroleum Tax, Energy Production Taxes, and more. Check this list on the Department of Revenue website to see if any of these taxes apply to your business.

9) Find an Accountant

Sometimes it’s easier to hand off your financial responsibilities to a professional. Not only will an accountant ensures that your taxes are filed and paid correctly, but they might also find a few ways to save your business money.

Bookkeeping and tax procedures are time-consuming and require some specialized knowledge. Balance sheets, financial reports, cash flow, audits, and much more – an accountant can ensure that your company operates smoothly and streamlines its expenses.

This can be expensive depending on the complexity of your finances, but the benefits an accountant offers can be well worth it.

10) Create an Operating Agreement

An operating agreement constructs a framework of procedures and standards for your business. This is where you can lay out processes for member conduct, asset allocation, compensation policies, voting procedures, dissolution, and much more.

While operating agreements aren’t technically required in Minnesota, they are essential to your business’ stability and success. They provide a safety net in legal disputes and legitimacy in front of banks, courts, government agencies, and other businesses.

You can either draft one yourself using an online template, or you can hire an attorney or an incorporation service to take care of it for you.

Once you’ve drafted your agreement, it must be approved by each of your LLC’s members, then filed with the rest of your business documents. You do not need to submit it to the Secretary of State.

Quick Note: ZenBusiness is the only business formation that includes an operating agreement or corporate bylaws in every package. All other services will charge you extra or push you to buy a more expensive package.

11) Acquire the Necessary Licenses

After filing your formation documents, your business is legitimate, but it might still need specific licenses before opening its doors in Minnesota. There are multiple categories, and the ones your business needs depend on its activities, purpose, and location. You can find complete lists of all the licenses listed below on Minnesota’s e-licensing website.

Business Licenses: Certain business types and activities – like construction, finance, and healthcare – must acquire permits or licenses to approve their actions.

Environmental Licenses: These are to ensure that businesses don’t negatively impact the state’s land, air, and water. If your business deals with agriculture, produces hazardous waste, manages land, or affects wildlife, you’ll want to read over the environmental licensure requirements.

Professional Licenses: There are also specific occupations that need to obtain licenses before conducting business. For example, a marriage and family therapist would need a license from the Minnesota Board of Marriage and Family Therapy before starting out.

Recreation Licenses: These deal with businesses in industries like gambling, fishing, outdoor sports, and more.

Transportation Licenses: Businesses that operate vehicles, hire drivers, and otherwise work in transportation may need one of these licenses or permits.

Local Licenses: Your specific city, county, or municipality might have its own licensure requirements. Take a look at your local government’s website to find out.

12) Consider Business Insurance

Even though it’s not pleasant to consider, there’s always a chance that unforeseen events might take a toll on your assets.

While forming an LLC or corporation offers some personal asset protection, additional business insurance can also protect your business assets in cases of lawsuits, damages, etc. You can acquire insurance for your business products, vehicles, specific occupations and much more.

If you hire employees, you’ll also need to get workers’ compensation insurance. SBA.gov has a useful guide for determining which forms of insurance your new business might need.

13) Build a Website

Your company’s digital presence is just as important as its physical one. Like it or not, most potential customers will find your business online, and if you don’t exist online, you’re missing out.

But don’t worry, you don’t need to be an HTML or web design expert to build a website. Sites like WordPress and Squarespace make it easy to construct an elegant and responsive website, no coding necessary. But if you’re not comfortable or confident doing it on your own, you can always hire a professional web designer to take care of it for you.

Quick Note: As we mentioned earlier, if you’re looking to build a business website, there are a handful of good business incorporation services that will help you get started. ZenBusiness or IncFile, in our opinion, have the best business website offers.

14) Launch Social Media Accounts

Making your mark on the digital landscape doesn’t start and end with your website. Most successful businesses also have a robust social media presence on multiple platforms. Facebook, Twitter, and Instagram are all great ways to connect organically with potential customers and develop your brand voice.

Just don’t forget to publish consistent social media content, or you’ll have trouble building a base of followers.

15) Understand Ongoing Minnesota Requirements

After you’ve launched your business, things will likely be moving at 100 miles per hour as you evolve and grow. But in all of the excitement, you can’t forget your state’s ongoing compliance requirements. Every state has its own annual or biennial business requirements.

Once your business is up and running, it will need to file an Annual Renewal before December 31st every year. This filing won’t put a dent in your budget, though, because it’s free as long as your business is in good standing. Be careful not to forget a renewal, or the state might statutorily dissolve your company.

16) Check Out Minnesota Small Business Resources

You’re not on this journey alone. There are plenty of free resources available to make starting and growing your business a smoother, easier process.

When you’re growing a business, a little bit of support can go a long way. SBA.gov contains a wealth of valuable resources for new businesses in every state. In fact, their Minnesota district office webpage contains information on local business development centers, networking events, loan opportunities, and much more. You might find this resource publication especially helpful. The knowledge in this guide, combined with SBA resources and your business acumen, will have you set on the path to success before you know it.