How to start a business in Minnesota in 14 steps (2025 guide)

Starting a business is an exciting journey filled with endless possibilities, and Minnesota could be the perfect location to turn your vision into reality. Known as the Land of 10,000 Lakes, Minnesota has become one of the top (and often overlooked) places to start a small business. With a low corporate income tax rate, streamlined regulations, a highly educated workforce, and a robust network of financing options, Minnesota is one of the more business-friendly places to locate. 

Why start a business in Minnesota in 2025? 

Considering starting a business in 2025? Minnesota might be the perfect place to set up shop. Ranked #1 for business survival by a recent study and #4 overall in U.S. News & World Report's "Best States," Minnesota offers a thriving environment for entrepreneurs. Home to major companies like 3M, Best Buy, and the Mayo Clinic, the state boasts a diverse economy, a skilled workforce, and a supportive business climate. Plus, with a low cost of living, excellent schools, and abundant outdoor recreation opportunities, Minnesota offers a high quality of life that's hard to beat.

Here are the topics we’ll cover in this step-by-step guide: 

• 14 steps to starting a business in Minnesota
• Step 1: Decide what type of industry is best for your business
• Step 2: Conduct industry research
• Step 3: Create a business plan
• Step 4: Choose your business entity: Types of business entities in Minnesota
• Step 5: Secure funds: Minnesota small business funding, loans, and grants
• Step 6: Choose your Minnesota business name and Minnesota DBA
• Step 7: Pick a business location in Minnesota
• Step 8: Find a Minnesota registered agent 
• Step 9: Get a Minnesota EIN and file your tax and employer identification documents 
• Step 10: Register as a small business in Minnesota
• Step 11: Register for your business license and permits in Minnesota
• Step 12: Secure insurance for your Minnesota small business 
• Step 13: Prepare to pay taxes on your business in Minnesota
• Step 14: Set up your business bank account
• Additional resources to get your business started
• Frequently asked questions

14 steps to starting a business in Minnesota

Whether you're dreaming of launching a tech startup in the Twin Cities or opening a cozy café in Duluth, the state offers a supportive environment for entrepreneurs to get their businesses off the ground. Follow the steps below for tailored insights and small business resources to help launch your venture in Minnesota.

Step 1: Decide what type of industry is best for your business 

Choose the best industry for your Minnesota business, and consider how your skills and interests align with local industries and market demand. Minnesota’s thriving sectors include healthcare, manufacturing, retail, professional services, and agriculture. Opportunities are wide-ranging and often locality-dependent, so keep in mind the business landscape of the Twin Cities may be very different from smaller cities like Rochester. Take the time to identify any gaps that your business could fill.

Need help? Explore small business ideas to get started.

Step 2: Conduct industry research

Research your target market, conduct a competitive analysis, and identify any regulations or licensing requirements specific to your chosen field in Minnesota. Minnesota Employment and Economic Development is a good place to start.

Step 3: Create a business plan

Your business plan is the guidebook for your Minnesota business. Use it as a strategizing tool to determine your business concept, goals, target market, and marketing plan, as well as create financial projections and help secure funding for your Minnesota enterprise. 

Here’s what you should include in your business plan:

• Executive summary: Offer a concise overview summarizing the key points of your business plan. 
• Company description: Include information about your mission, history, and long-term objectives.
• Market research and potential: Give insights into your target audience, industry trends, and market potential.
• Competitive analysis: Assess your competitors and highlight how your business differentiates itself.
• Products and services: Describe what you offer and the value it provides to customers.
• Marketing and sales: Explain your plan for attracting and retaining customers
• Business financials: Make projections of your business’s financial performance, including income statements and cash flow forecasts.
• Management and leadership: Provide an overview of your team's expertise and experience.
• Funding request: Specify your funding needs and how you’ll utilize the capital.
• Appendix: Include additional documentation, such as charts, references, or legal information.

Take your time crafting your plan, as it will serve as your guiding light throughout your entrepreneurial journey. Use a free business plan template to get started, and contact the Minnesota Small Business Development Center for further guidance.

Step 4: Choose your business entity: Types of business entities in Minnesota

Whether you’re going it alone or plan to create a more formal structure with shareholders, your business entity structure will determine how you pay taxes, the liabilities in your organization, and your business profitability and growth. Here are the main types of structures for Minnesota small businesses. 

Sole proprietorship

A business owned and operated by one person, with no legal distinction between the owner and the business.

General partnership

A business owned by two or more people who share profits, losses, and management responsibilities.

Corporation 

A legal entity separate from its owners, with shareholders who have limited liability for the company's debts and obligations.

Limited liability company (LLC)

A hybrid business structure combining the limited liability of a corporation with the tax flexibility of a partnership. Learn more about LLCs.

Step 5: Secure funds: Minnesota small business funding, loans and grants 

Your Minnesota small business needs money to get up and running. Costs to start a business in Minnesota vary significantly depending on the type of business, industry, required permits and licenses, and other factors. The basic filing fee for an LLC is $155 for online or in-person filing ($135 by mail). Additional costs may include business licenses, permits, professional fees, insurance, and optional services. To determine the full startup costs, you'll need to consider your specific business needs and requirements. Here are a few ways to secure funding: 

The following are some Minnesota-specific resources for funding assistance and information:

Minnesota Department of Employment and Economic Development (DEED)

The Minnesota Department of Employment and Economic Development (DEED) offers access to an array of small business financing opportunities and training grants. 

Community Development Financial Institutions (CDFIs)

If you plan to locate your small business in an underserved community or region, you may be able to access funding from a Minnesota Community Development Financial Institution (CDFI). 

Rural Loan Programs

If you’re engaged in agricultural operations or another ag-based business like a meat processing facility, you may be able to access funding from Minnesota’s Rural Finance Authority. 

Launch Minnesota Innovation Grants

Launching a Minnesota small business in the technology sector? You may want to investigate Launch Minnesota Innovation Grants for tech startups. 

Minnesota Initiative Foundations

You may also be able to access small business grant funding by exploring opportunities available in your region through the Minnesota Initiative Foundations.

Step 6: Choosing your Minnesota business name and Minnesota DBA

Select a business name that will help you stand out from current and future competitors. When choosing your Minnesota business name, select something that reflects your brand identity. Remember you’ll need to do an entity search on the Office of the Minnesota Secretary of State website.

Reserve your business name

Reserve the name with the Secretary of State once you’ve settled on your business name. The filing fee is $55 for expedited service in-person and online filings, and $35 if by mail.

Filing an assumed business name

Apply for a Certificate of Assumed Name if you plan to operate your business under a name different from the legal name you registered with the Secretary of State. This is also called a “doing business as” (DBA) or fictitious name. You must renew it annually.

Step 7: Pick a business location in Minnesota

Planning on launching your freelance LLC from your home office to save on overhead costs? Or maybe you're eyeing a retail space in Minneapolis to attract downtown foot traffic. Regardless of your industry, choosing the right location for your business impacts everything from operational costs and tax incentives to customer access and employee commutes. Before you settle on a space, check with your local municipality and county to determine any necessary licenses, permits, and tax considerations. If you're looking to set up shop in a metropolitan area, here are a few to keep in mind:

Minneapolis

With a prospering startup culture, Minneapolis offers numerous incubators, co-working spaces, and accelerator programs. The city also offers an array of opportunities in a wide range of industries, including healthcare, manufacturing, technology, retail, and professional services. Minneapolis has a highly educated and skilled workforce with access to newly graduated talent from the Twin Cities colleges and universities, including the University of Minnesota. With its many parks, walking and biking trails, restaurants, museums, nightlife, and excellent school system, Minneapolis also offers a good quality of life for families. For more information, check out the business assistance offerings from the City of Minneapolis. 

St. Paul

Known for its entrepreneurial culture, St. Paul is a startup-friendly location with opportunities in the healthcare, insurance, and education sectors. The city is known for its efficient permitting and licensing processes, and the city government offers many financial resources, incentives, and support for small businesses. While directly adjacent to its sister city of Minneapolis and its customer base, St. Paul offers lower startup costs (and cost of living) than its larger neighbor for many industries.

Duluth 

Situated on the scenic shore of Lake Superior, Duluth has a thriving tourism industry with many opportunities for small businesses in outdoor recreation and hospitality businesses that support tourism. The city generally has a lower cost of doing business than the Twin Cities to the south. It also offers small businesses an array of tax breaks and incentive programs to foster economic growth. With its scenic beauty, thriving arts scene, and sense of community, Duluth is a great place for families and entrepreneurs. 

Rochester 

Home to the world-renowned Mayo Clinic, Rochester is a global medical hub, offering small business opportunities that support healthcare and health sciences like medical technology and supplies or research support. Rochester offers an excellent quality of life. With a strong school system, solid community safety record, and a smaller city atmosphere. For small business and startup support, contact the Rochester Area Chamber of Commerce. 

Step 8: Find a Minnesota registered agent

The state of Minnesota requires you to have a registered agent if you operate a business. Your registered agent acts as a point of contact for your business’ important state and legal mail. 

Requirements of a registered agent include that they have a physical mailing address (not a P.O. Box or remote location) in the state. They’ll also need to keep standard business hours. You can also choose to be your own registered agent, or you can appoint a trusted friend or family member to do so, as long as they meet the above requirements. If you use a service for a Minnesota registered agent, you’ll pay a fee likely ranging from $50 to $300 per year. 

Step 9: Get a Minnesota EIN and file your tax & employer identification documents

An EIN (Employer Identification Number) is a nine-digit number the IRS uses to identify your business for tax purposes. Although Minnesota doesn't require a state EIN, you'll need one to file payroll taxes and federal tax returns, open a business bank account, and apply for loans. You can apply for a free EIN through the IRS website.

Step 10: Register as a small business in Minnesota

Register your small business with the Minnesota Secretary of State. Here are the requirements for registering your partnerships, corporations, and two-person companies. 

Step 11: Register for your business license and permits in Minnesota

Depending on your industry, you may need business licenses and permits to operate in Minnesota. Some localities also require permits, so perform your due diligence when starting a business.

Do you need a business license in Minnesota?

Unlike some states, Minnesota doesn't mandate a general business license for all businesses to operate within the state. But your locality may have specific occupational licensing requirements, so check with local municipalities. 

Step 12: Secure insurance for your Minnesota small business

To protect your Minnesota business assets and tangible property, you’ll likely need business insurance to help mitigate costs from accidents, property damage, or liability. Extreme weather, from tornadoes to whiteout blizzards, is common in Minnesota, so make sure you’re adequately protected if you have a brick-and-mortar store, warehouse, or industrial facility.

Types of small business insurance in Minnesota

The following are common types of business insurance in Minnesota:

Step 13: Prepare to pay taxes on your business in Minnesota 

Understanding your tax obligations as a small business owner is crucial for long-term success. Fortunately, Minnesota boasts a relatively low corporate income tax rate compared to the national average. However, the state collects revenue through various other means, including sales taxes and various industry-specific taxes.

Here are the frequent types of Minnesota business taxes:

Corporate franchise tax

Minnesota’s corporate income tax is a flat rate tax of 9.8%. 

Personal income tax

Minnesota has a graduated rate income tax system, with the percentage increasing based on income thresholds. Minnesota's income tax falls into four brackets: 5.35%, 6.80%, 7.85% and 9.85%. 

Sales and use tax

You must pay sales tax in Minnesota if you sell products or tangible property. Some services are also subject to sales tax. You can check the sales tax rate in your Minnesota locality using a calculator provided by the Department of Revenue. 

Tax credits & incentives for Minnesota employers

• The Research and Development (R&D) Tax Credit provides a 10% credit (up to the first $2 million in eligible expenses) and 4% thereafter for companies engaged in qualified research and development activities conducted in Minnesota.
• The Greater Minnesota Job Expansion Program offers sales tax refunds to businesses located in Greater Minnesota (areas outside the Twin Cities metropolitan area) that increase employment opportunities.
• The Job Creation Fund (JCF) provides grants of up to $2 million to new and expanding businesses that create jobs.

Federal taxes

In addition to state and local taxes, all businesses must pay applicable federal taxes, including:

• Federal income tax
• Self-employment tax (for sole proprietors and partners)
• Employment taxes (if you have employees), including the Federal Unemployment Tax Act (FUTA tax)
• Excise taxes (for certain industries)

To ensure you understand your federal tax obligations, check out these IRS resources: Publication 334, Tax Guide for Small Business and Publication 583, Taxpayers Starting a Business and Keeping Records.

Step 14: Set up your business bank account

One of the first things you need to do when starting a small business in Minnesota is to set up a business bank account to manage your finances. Here’s how: 

1. Get your paperwork in order, from registrations and permits to licenses and your EIN, to open your small business bank account. 
2. Look for a bank that provides the loan products and services you need. 
3. Apply for a credit card either through your bank or a third-party company so you can begin establishing business credit and charging business-related expenses. 
4. Choose an accounting software and tie it to your business bank account to manage everything from payroll to invoicing. 
5. Find a professional accountant who understands your industry and Louisiana tax laws to help you navigate finances and other bookkeeping items.

Additional resources to get your business started 

There are several state and federal resources that can support your business with guidance, training, potential funding and more. 

State resources

• Minnesota Employment and Economic Development: Supports the growth of businesses and communities through grants and loans, consultations, education sessions, employment and economic information, and other programs and services.
• Explore Minnesota: A comprehensive online resource for individuals and businesses interested in discovering the state's diverse offerings, from tourism and recreation to economic development and business opportunities. The state also has a dedicated Business Development team to assist aspiring entrepreneurs in identifying the right opportunities at a state level, as well as connecting businesses with relevant local city and county level tax credits and incentives.
• Office of the Minnesota Secretary of State: The Office of the Minnesota Secretary of State provides essential services to businesses, including registering business entities, maintaining business records, and ensuring compliance with state regulations.
• Minnesota.gov: Minnesota.gov serves as a central hub for businesses in the state, providing resources and information on registering your business, obtaining necessary permits and licenses, understanding tax obligations, and accessing various programs and services to support business growth and development.

Federal resources 

• Small Business Administration (SBA): The SBA supports small businesses through various loan programs, including the 7(a) loan, provides resources for government contracting, and offers counseling and training programs to help entrepreneurs start and grow their businesses.
• Grants.gov: This centralized platform simplifies the process of searching for and applying for federal grants across various sectors. It also provides grant writing tips and has a Grants Learning Center featuring the basics of grants, eligibility, and more. 
• Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR): SBIR and STTR programs provide research and development funding to innovative tech companies. 
• SCORE: SCORE is a national nonprofit organization that partners with the U.S. Small Business Administration (SBA) to provide free mentoring and educational resources to entrepreneurs and small business owners. While not a direct federal agency, SCORE is an independent organization with a network of volunteer business mentors across the United States.
• U.S. Department of Agriculture (USDA): The USDA website lists grants, loans, and other programs and resources for farmers and other businesses serving rural America. 

Disclaimer: 

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