How to Start and Register a Business in Minnesota: Legal Essentials
Starting a business in Minnesota may seem overwhelming, but with the right guidance, it doesn’t have to be. Our team at KTF Law Firm has outlined the key steps to help you launch your business confidently, stay organized, and ensure compliance with state laws from day one.
Of course, if you get stuck or need further support with your Minnesota business registration or more complex legal matters, don’t hesitate to contact us for legal assistance. Let’s get into it!
10 Steps to Starting a Business in Minnesota
Before we begin, it’s important to note that while these general tips are a helpful starting point, they’re not a substitute for personalized legal business advice. Use the steps below to help you navigate setting up and registering your business.
1. Choose Your Business Idea and Structure
Determine what type of business you’d like to run and decide on its legal structure. Common options include sole proprietorship, partnership, limited liability company (LLC), or a corporation. Your choice affects your taxes, liability, and operations.
An LLC is the most common business structure for new business owners, as it offers a combination of limited liability protection for owners, meaning their personal assets are shielded from business debts, while also providing pass-through taxation, meaning business profits are directly taxed on the owners’ tax returns, providing flexibility and simplicity for small businesses.
As a sole proprietor, the business owner is personally responsible for all business debts and legal claims against the company, putting their assets at risk.
2. Write a Business Plan
Develop a detailed business plan outlining your goals, target market and demographics, financial projections, and marketing strategies. This document is invaluable if you want to secure additional funding and will help guide future business decisions.
3. Name Your Business
Choose a unique and memorable name. Check for name availability on the Minnesota Secretary of State’s website to ensure it’s not already used. When considering branding for your business, you can also check to ensure your company’s brand name isn’t trademarked.
4. Register Your Business
Now that you have decided on the basics, it’s time for your Minnesota Business Registration. Before you make any taxable sales in Minnesota, you must register for a Minnesota Tax ID Number and a Sales and Use Tax account through the Minnesota Department of Revenue. You will also be able to apply for an Employer Identification Number (EIN) with the IRS.
- Sole Proprietorships and Partnerships: File an Assumed Name Certificate with the Secretary of State.
- LLCs and Corporations: File the appropriate articles (Articles of Organization for LLCs or Articles of Incorporation for corporations) and pay the required fee.
5. Obtain Required Licenses and Permits
Research the permits and licenses your business needs based on your industry and location. The Minnesota eLicensing Portal is a great resource to look up licenses and permits by industry. There may be additional forms to complete and filing fees associated with licenses and permits.
6. Open a Business Bank Account
Keeping your personal and business finances separate helps reinforce the legal distinction between you and your business, which is especially important for LLCs and corporations in protecting personal assets from business liabilities. This also helps simplify accounting and builds credibility. You can do this by setting up a dedicated bank account for your business.
7. Secure Insurance
If your business provides a service to the public, such as professional body care services or construction, or has employees or contractors, you may also need insurance. Types of insurance may include liability, professional liability, or workers’ compensation coverage, depending on the services you offer and who needs coverage.
8. Stay Compliant
File annual renewals with the Minnesota Secretary of State and keep up with tax filings and industry-specific regulations to avoid penalties.
If you plan to have employees, it’s important to understand the Minnesota Labor Laws and federal labor laws to ensure compliance.
FINCEN Reporting: Starting January 1, 2024, many small businesses must report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) under the Corporate Transparency Act. This report includes details about the individuals who own or control your business. Noncompliance can lead to significant fines, so ensure you’re prepared to meet this federal requirement.
9. Keep Financial and Employee Records Up-to-Date
While today’s accounting and record-keeping technology allows you to keep track of financial records online easily, we recommend that you keep hard copies of your financial earnings, business expenses, and tax records in a secure filing cabinet in the event you lose online access or your computer fails. You may also wish to back up important digital files on an external hard drive and store them in a secure location.
If you have employees on payroll or contractors, the state may have specific record retention requirements to store records before you can shred them.
10. Be Mindful of Scams and Misleading Third-Party Advertising
When starting a business, you may encounter third-party companies offering to handle registrations, filings, or compliance tasks for a fee. While some services are legitimate, others may be unnecessary or even scams. Always verify correspondence claiming to be from government agencies and rely on official resources like the Minnesota Secretary of State or the Department of Revenue and the International Revenue Service. Protect your business by staying informed and cautious when sharing sensitive information or making payments.
When registering your business online, ensure that any website where you enter sensitive information has a “.gov” domain rather than “.com” to confirm it’s an official government site.
Expert Legal Consultation Near You
Starting a business in Minnesota is an exciting journey, but it’s essential to address legal requirements from the beginning. For some, navigating the legal landscape of starting a business can be more complex. KTF Law Firm’s skilled business attornies can ensure you’re fully compliant and protected. Contact us today to set up a consultation and start your business with confidence.
