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Swyft Filings is committed to providing accurate, reliable information to help you make informed decisions for your business. That's why our content is written and edited by professional editors, writers, and subject matter experts. Learn more about how Swyft Filings works, our editorial team and standards, what our customers think of us, and more on our trust page.
Starting a small business is one of the most fulfilling challenges you can take on, and Minnesota is a great place to turn your exciting idea into a reality. With its business-friendly climate and high quality of life, the North Star State is full of opportunities. Follow this guide to successfully navigate starting a business in Minnesota, from idea to incorporation.
Start Operating in Minnesota: Key Points
Thanks to the state’s pro-business policies, small businesses in Minnesota account for 99.5% of all companies.[1]
You can incorporate your Minnesota business as a limited liability company, a corporation, or a nonprofit organization.
To start a business in Minnesota, you must file formation documents with the Secretary of State.
Easily start your business and remain compliant with our all-in-one tools, guiding you well past the initial setup with the right support and documents.
Ready to Start a Minnesota Business?
Setting up a business in Minnesota may seem complex initially, but it doesn’t have to be. With the correct information, even a completely new entrepreneur can go through the incorporation process and become a small business owner in Minnesota.
Yet, it can be easy to make costly mistakes, especially if you’ve never formed a business before. It’s essential to take the time to research different state regulations instead of jumping in blindly. We created a comprehensive step-by-step guide to help you start operating in Minnesota quickly.
1. Choose a Business Idea
A clever business idea is the foundation of your success. You may already know what you want to do, so you can move to the next step on this list. But if you don’t have a solid business idea yet, consider doing the following:
Think about your passions and skills. Your Minnesota business should light you up, so brainstorm business ideas related to your passions or things you’re good at. Maybe you love pets and want to break into the booming pet industry. Or perhaps you’ve always dreamed of owning a coffee shop. The opportunities are almost endless.
Reflect on the impact you want to make. Your new business doesn’t have to change the world but it can still make a difference in other people’s lives. Think about the problems you want to solve, and if you’re short on inspiration, check out these nine green business ideas that can help the environment.
Brainstorm how you can improve an existing business. Think of a company you admire and how you can do what they do, but better. You don’t have to invent a new product or service to start a business; you could improve an existing one.
Your business idea is the beating heart of your business. How you bring that idea to life will evolve, but your core intention will always stay the same.
Most importantly, don’t be afraid of having big dreams. Whether you’re thinking about quitting your 9-5 to build a more fulfilling life or want to start a business as a recent college grad, remember that starting a business in Minnesota is something that you can be successful at.
→ Short on business ideas? Here are thirteen places for entrepreneurs to find inspiration.
2. Draft a Minnesota Business Plan
Every new business needs a thought-through business plan. A business plan is a detailed document that breaks down your organization’s goals and how you plan to achieve them. It helps you make better business decisions and can also be used to secure funding for your business entity.
You can decide to write a lengthier traditional business plan or go with a shorter startup business plan. There’s no set format that you must follow, but your business plan should be customized to your business vision and goals. A successful business plan typically includes the following:
Business mission statement
Overview of your target audience and customer profiles
Market research and competitor analysis
Products or services
A financial plan, revenue projections, and budget
Marketing strategy
Logistics and operations
The organizational structure of your business
The Small Business Administration website, sba.gov, has business plan templates you can download.
You’re not legally required to create a business plan to start operating in Minnesota, but running your small business without one comes with high risks. It exposes you to costly mistakes, missed opportunities, and inability to cover expenses because you didn’t expect them. Spend enough time on this step before moving further into the business formation process.
3. Select a Business Name
Choosing a name for your business is a big step. It’s likely the first thing that your prospective customers will encounter when they come across your brand and you want it to capture their attention. Get creative to make your business name stand out, but remember to keep it short and easy to read.
You’ll also need to adhere to important state naming conventions, including:
Using an available name. Your business name must differ from other business names in the state “by at least one letter or numeral.”[2] The Minnesota Secretary of State website has a detailed process you can follow to check your business name availability. Alternatively, use the Swyft Filings Free Business Name Search tool.
Excluding certain words. Some words are regulated at the state level and you can only use them in your business under certain circumstances. For example, if your business name includes the word “insurance,” it must also contain the words “agency,” “broker,” “brokerage,” or “services.”[3]
Filing for an assumed name. Suppose you want to conduct business under a name different from your legal business name. In that case, you need to file for an assumed name. For example, Walmart’s legal business name is Wal-Mart Inc, but they conduct business as Walmart.
Once you find a memorable name that expresses your business idea, consider reserving it with the Minnesota Secretary of State for up to 12 months. Name reservation is an excellent option for entrepreneurs who aren’t ready to form a business but want to ensure that the business name they want stays available.
This is also an excellent time to purchase your domain name and secure social media handles. Starting a business in Minnesota means you’ll likely need to create a website and build your social media presence to market your brand.
4. Choose a Business Structure
There are multiple types of business structures that you can incorporate into your business as. Choosing a business structure is an important decision because it influences how your business will be taxed and whether your personal assets will be protected.
There are multiple types of business structures that you can choose from, but the most popular ones are a limited liability company (LLC) and a corporation. Here’s an overview of the business structures available to you in Minnesota.
Sole Proprietorship
A sole proprietorship is the default business structure that doesn’t require incorporation. As a sole proprietor, you pay personal income tax on profits you earn from your business.
Sole proprietorships are easy to establish, but one of their major disadvantages is that they don’t provide you with liability protection. All your business liabilities apply to you personally, meaning creditors can come after your assets, such as your home or car.
Many sole proprietors do business under their name because their business is unincorporated. Still, you can file for a DBA (doing business as) to increase your credibility and become eligible to open a business bank account.
Limited Liability Company (LLC)
An LLC is one of the most popular business structures for entrepreneurs and small businesses because it combines a sole proprietorship’s flexibility with a corporation’s liability protection. Limited liability companies are pass-through entities for tax purposes, meaning you can report your business income on your tax return.
Consider using a third party service like Swyft Filings to form your Minnesota LLC accurately and swiftly.
Corporation
Corporations provide personal liability protection and allow you to issue stocks to shareholders. Still, they’re typically more challenging to operate than a limited liability company. It’s also important to note that C Corps are subject to “double taxation,” meaning you must complete business and personal tax returns.
As a small business owner, you may be eligible to claim an S Corporation tax status and pass corporate income, losses, deductions, and credits through to the shareholders to avoid double taxation.[4]
Swyft Filings can help you properly set up a corporation in Minnesota that works for your business needs.
Nonprofit
Forming a nonprofit may be the right option if your business is advancing a social cause without expecting a monetary gain. Nonprofit organizations are eligible for tax-exempt status and are funded by donations, not investments. Filing for a nonprofit involves specific nuances, but Swyft Filings can do all the legwork for you.
Choosing the proper business structure is one of the most critical parts of the business formation process, so carefully consider different incorporation options for your startup.
5. File Business Formation Documents
You must file your business formation documents with the Minnesota Secretary of State to register your new business. This is the time to put all your research into action and make official decisions about your business plan, name, and structure.
Understanding what formation documents you need to file for specific business structures is essential. Suppose you’re forming a Minnesota corporation or a nonprofit. In that case, you’ll need to file articles of incorporation (also known as a certificate of incorporation). If you’re forming a limited liability company, you’ll need to file articles of organization (also known as certificate of formation).
Establishing a sole proprietorship doesn’t require filing any business formation documents because it’s an unincorporated business type. You must file a Certificate of Assumed Name Registration to form a DBA.
To file your business formation documents, you must provide important information, such as your business name and Minnesota registered agent’s address. You may also consider creating an operating agreement or bylaws for your business, but it’s not required to form a Minnesota business.
Even the most minor errors can result in severe consequences when it comes to business formation documents. If your paperwork is filed incorrectly, it can cause you to lose personal liability protections and tax benefits or even force you to dissolve your business and start over from scratch.
At Swyft Filings, we take the complexity out of business formation. With our personalized online service, we can help you file for an LLC, a corporation, a nonprofit, or a DBA in just a few minutes.
6. Apply for Minnesota Business Licenses and Permits
Your small business may need federal, state, or local business licenses and permits to start operating in Minnesota. The state doesn’t require all companies to get a general Minnesota business license. However, you may still face licensing requirements depending on the nature of your business activities.
Federal Licenses
The federal government regulates some business industries. You must apply for a federal business license if your business falls under one of these industries. The Small Business Administration has put together a comprehensive list of regulated industries. Industries on that list include alcoholic beverages, wildlife, transportation, and more.
State Licenses
The State of Minnesota requires some industries and occupations to obtain business licenses and permits to certify their competency and ensure the safety of products or services. The Minnesota Department of Employment and Economic Development has a convenient E-Licensing portal to see which licenses are required for your startup.
Local Licenses
Your city or county may have additional licensing requirements for your business industry or occupation. You may be required to obtain a general business license from your local government, get a zoning permit, or comply with a local ordinance. Contact your city’s licensing department, clerk, or tax office for more information.
Applying for business licenses and permits is essential before you start operating your new business. Opening your doors without proper permits can result in high fines and limit your ability to do business in the state.
Figuring out what types of business licenses you need can take a lot of time and energy. If you want to avoid the headache, Swyft Filings can research what licenses you need and file your applications.
7. File and Report Business Taxes
Understanding your tax obligations and filing tax reports on time at the federal, state, and local levels is essential. Your small business will likely have multiple tax obligations, but the specifics depend on your chosen business structure.
Most businesses have to pay a federal tax to the IRS, and the IRS website has put together a helpful guide with business resources. You’ll also be responsible for Minnesota taxes, including income and sales taxes if you sell physical products or certain business services. In addition to state taxes, you may also be required to pay taxes to your local government.
If you file an annual tax return as a C corporation, you’ll also need to pay a yearly Corporation Franchise Tax.[5]
It’s important to file and report business taxes accurately and on time. Failure to do so can result in severe consequences for your business, including fines and even possible jail time.
8. Open a Business Bank Account
Business owners should separate their personal and business finances to avoid confusion and empower themselves to make intelligent decisions. Opening a separate bank account for your business is vital for better liability protection and an easier tax season.
You’ll typically need an employer identification number (EIN) to open a business bank account and get a credit card. It’s a tax ID number similar to a social security number but for your business. You can get your federal employer identification number from the IRS or use a third-party service like Swyft Filings to make the process easier.
Take Your First Steps Toward Small Business Ownership
Minnesota is the perfect place to turn your business idea into a successful startup. But to start operating a business in Minnesota, you must go through multiple steps, such as drafting a detailed business plan and applying for appropriate licenses and permits.
Having to navigate the business formation process by yourself can quickly become overwhelming. Swyft Filings can help you handle the time-consuming paperwork your business needs to incorporate and comply with the law. Start your LLC, corporation, or nonprofit in minutes with our personalized online service.
Your Perfect Fit: Whether you're looking at a simple LLC or a dedicated nonprofit, we'll help you identify the best structure for your dream business.
Continued Support: Your entrepreneurial journey doesn’t stop at formation. Our key management services help ensure your business thrives.
Tailored Affordability: Get value-packed options suited to your business needs, starting at just $0 + state fees.
Frequently Asked Question
Is Minnesota a good place to start a business?
Minnesota is a business-friendly state with a high quality of life. Entrepreneurs can take advantage of plenty of opportunities, so don’t hold back on building the business you’ve always dreamed of.
How much does it cost to start operating in Minnesota?
Business formation costs depend on your chosen business structure and industry. At the very least, you can expect to cover a filing fee when you file your articles of incorporation or organization with the Secretary of State. However, you may also need to apply for business licenses and permits or file additional paperwork.
Can I start a business in Minnesota without a business plan?
There’s no legal requirement to draft a business plan in Minnesota, but it’s highly recommended. Having a detailed business plan will help your business start on the right foot.
What does Minnesota require to start a business?
To form a business in Minnesota, you must file the necessary paperwork with the Secretary of State and obtain any required business licenses and permits. You may also need to apply for an EIN to open a business bank account or hire employees.
What is the process for starting a business in Minnesota?
To incorporate, you must choose a business structure and file appropriate paperwork with the Secretary of State. Before starting your business, you must obtain the necessary business licenses and research your tax obligations.
Why are most LLCs in Delaware?
Delaware has numerous business-friendly laws that make it an attractive place for entrepreneurs and small business owners. Learn more about starting an LLC in Delaware.
Bibliography
Minnesota Chamber of Commerce. “Small Businesses: Backbone of Minnesota’s Economy.” Accessed June 28, 2023.
Office of the Minnesota Secretary of State Steve Simon. “Naming Your Business.” Accessed June 28, 2023.
Office of the Minnesota Secretary of State Steve Simon. “How to Register Your Business.” Accessed June 28, 2023.
Internal Revenue Service. “S Corporations.” Accessed June 28, 2023.
Minnesota Department of Revenue. “Corporation Franchise Tax.” Accessed June 28, 2023.
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