Starting a Business in Minnesota: Licenses, Permits & Requirements (2026)

Last updated: February 25, 2026

Minnesota consistently ranks among the top states for quality of life, workforce education, and economic diversity. The state’s economy is powered by healthcare, manufacturing, food processing, financial services, and technology – with 16 Fortune 500 companies headquartered here. LLC formation costs just $155 online through the Secretary of State, and annual renewals are free. However, Minnesota has one of the highest income tax rates in the country at 9.85% on top earners, and the combined state and local sales tax averages around 8.13% (6.875% state rate plus local additions).

A major change for 2026: Minnesota’s new Paid Family and Medical Leave (PFML) program took effect January 1, 2026, requiring employer and employee contributions of 0.88% of wages. Combined with Earned Sick and Safe Time (in effect since 2024), Minnesota now has some of the most comprehensive employee benefit requirements in the nation. This guide walks you through every step of starting a business in Minnesota using official state sources.

How to Start a Business in Minnesota (Step by Step)

Step 1: Choose Your Business Structure

Your business structure determines personal liability, tax treatment, and paperwork. The most common options in Minnesota:

• Sole Proprietorship – Simplest to start, but you’re personally liable for all debts. No state formation filing required (file a Certificate of Assumed Name if using a business name).
• LLC (Limited Liability Company) – Most popular choice for small businesses. Protects personal assets, flexible tax treatment. Filed through the Secretary of State.
• Corporation (S-Corp or C-Corp) – More formal structure with shareholders and directors. Subject to the corporate franchise tax (9.05% in 2026).
• Partnership – For businesses with two or more owners. Options include general partnership (GP), limited partnership (LP), or limited liability partnership (LLP).

For most small businesses, an LLC is the right choice. Minnesota’s LLC formation fee is reasonable at $155, and annual renewals are free – making it one of the most affordable states for ongoing LLC maintenance.

Step 2: Register Your Business with the State

LLC Formation via the Secretary of State

Minnesota business entities are registered through the Office of the Minnesota Secretary of State at sos.mn.gov.

Item	Cost
Articles of Organization (mail)	$135
Articles of Organization (online)	$155
Name Reservation (optional, 12 months)	$35 (mail) / $55 (online)
Annual Renewal	$0 (free)
Reinstatement (if lapsed)	$25 (mail) / $45 (online)

How to file:

1. Search name availability through the Business Entity Search
2. Choose a name that includes “LLC,” “L.L.C.,” or “Limited Liability Company”
3. Designate a registered agent (an individual residing in Minnesota or a business authorized to operate in MN) with a physical Minnesota address
4. File Articles of Organization online ($155) or by mail ($135) – online filings process in 3-5 business days
5. Draft an operating agreement (not filed with the state, but legally recommended)

Annual Renewal

Minnesota LLCs must file an Annual Renewal by December 31 each year. The renewal is free – Minnesota is one of the most affordable states for annual LLC maintenance. However, failure to file results in administrative termination without further notice. Reinstatement costs $25-$45.

Assumed Name (DBA)

If your LLC operates under a name different from its legal name, you must file a Certificate of Assumed Name with the Secretary of State ($30 mail / $50 online). Minnesota also requires you to publish the assumed name in a qualified legal newspaper for two consecutive issues in the county of your principal place of business within 60 days of filing. The legal newspaper list is available from the Secretary of State. Annual renewal of the assumed name is free.

Federal EIN (Employer Identification Number)

After forming your LLC, apply for a free EIN from the IRS at IRS.gov. You’ll receive it immediately when applying online. You need an EIN to open a business bank account, hire employees, and file taxes.

Step 3: Get Required Licenses & Permits

State Business Licenses

Minnesota does not have a single general business license. Instead, licensing depends on your industry and location. The DEED Business Licenses & Permits page is the best starting point to determine what your business needs.

Industry-Specific Licenses

Many industries require state-level licenses from specific agencies. The Board of Cosmetologist Examiners handles cosmetology and salon licensing. The Department of Children, Youth, and Families (DCYF) licenses childcare providers. The Department of Labor and Industry (DLI) handles mechanical contractor bonds and building codes. The Department of Agriculture (MDA) handles pesticide applicator licensing. See our industry-specific guides below for detailed requirements.

Local Permits

Most Minnesota cities require some form of local business registration or license depending on your industry. Zoning compliance, building permits, fire inspections, and health department approvals may also be needed. Contact your city or county clerk’s office for specific requirements.

Step 4: Register for State Taxes

State Income Tax

Minnesota has a graduated income tax with four brackets (2026 rates):

Rate	Single Filers	Married Filing Jointly
5.35%	$0 – $33,310	$0 – $48,700
6.80%	$33,311 – $109,430	$48,701 – $193,480
7.85%	$109,431 – $203,150	$193,481 – $337,930
9.85%	$203,151+	$337,931+

The top rate of 9.85% is among the highest state income tax rates in the nation. This applies to pass-through income from LLCs.

Sales Tax

Minnesota has a 6.875% state sales tax on most tangible goods and many services. Local jurisdictions add up to 1.5%, bringing typical combined rates to:

• Minneapolis: ~8.025%
• St. Paul: ~7.875%
• Duluth: ~7.875%

Register for a Sales and Use Tax ID through the Minnesota Department of Revenue.

Corporate Franchise Tax

C-corporations pay a franchise tax of 9.05% on net income (2026 rate, being phased down to 8.8% by 2027). The minimum fee ranges from $0 to $12,830 based on total Minnesota property, payroll, and sales. Most small business LLCs avoid this by using default pass-through taxation.

Employer Taxes (If Hiring Employees)

If you hire employees, register through the Minnesota Department of Revenue and UIMN for:

• Unemployment Insurance (UI): New employer rate of 1.00% for most industries (plus 0.40% base tax), on the first $44,000 per employee, plus a 14% additional assessment. Rates vary by industry and claims history.
• Paid Family & Medical Leave (PFML) – NEW 2026: Total rate of 0.88% of wages (0.44% employer + 0.44% employee), on wages up to $185,000. Provides up to 12 weeks family leave + 12 weeks medical leave. Employers with 30 or fewer employees pay a reduced rate of 0.66%.
• Earned Sick and Safe Time (ESST): Employees accrue 1 hour per 30 hours worked, up to 48 hours/year. Applies to all employers regardless of size.
• State Income Tax Withholding: Withhold based on graduated rates above.

Report new hires to the Minnesota New Hire Reporting Center within 20 days of the hire date.

Step 5: Get Business Insurance

Workers’ Compensation Insurance

Minnesota requires workers’ compensation insurance for all employers with any employees. There is no minimum employee count or hours threshold. The Department of Labor and Industry (DLI) enforces these requirements.

Status	Requirement
Any employer with 1+ employees	Workers’ comp is mandatory
Part-time, seasonal, temporary workers	All count – coverage required
Sole proprietors	Not required for themselves (may opt in)
Partners	Exempt for themselves, spouse, parents, children
LLC members (10 or fewer, 25%+ ownership)	May be excluded if under 22,880 hours payroll/year
Corporate officers (25%+ ownership, closely held)	May be excluded if under 22,880 hours payroll/year

Penalties for non-compliance: Civil penalty action through the Special Compensation Fund unit. Purchase through private carriers or obtain self-insurance approval from the Minnesota Department of Commerce.

General Liability Insurance

While not always legally mandated, general liability insurance is practically essential. Many clients, landlords, and government contracts require proof of coverage. Industry standard: $1 million per occurrence / $2 million aggregate.

Minnesota Business Guides by Industry

Every industry has different licensing, permit, and insurance requirements. Choose your business type for a detailed breakdown of everything you need in Minnesota:

• How to Start a Cleaning Service in Minnesota – No state license required, sales tax on cleaning services, insurance, bonding, and cost breakdown
• How to Start a Food Truck in Minnesota – MDH/MDA licensing, commissary requirements, CFPM certification, Minneapolis/St. Paul permits
• How to Start a Daycare in Minnesota – DCYF licensing, NETStudy 2.0 background checks, staff ratios, Parent Aware ratings
• How to Start an HVAC Business in Minnesota – DLI mechanical bond, local city licensing, EPA 608 certification, permits
• How to Start a Hair Salon in Minnesota – Board of Cosmetologist Examiners licensing, 1,550-hour training, salon license, infection control
• How to Start a Landscaping Business in Minnesota – MDA pesticide licensing, fertilizer regulations, phosphorus law, nursery dealer certificate
• How to Start a Private Investigation Business in Minnesota – Board of Private Detective licensing, 6,000-hour experience, $10,000 surety bond

Minnesota Business Resources & Official Links

Resource	What It’s For
Minnesota Secretary of State	LLC/Corp formation, entity search, annual renewals, assumed names
Department of Revenue (DOR)	Tax registration, sales tax, income tax, employer withholding
Department of Labor and Industry (DLI)	Workers’ compensation, mechanical bonds, building codes, contractor registration
Unemployment Insurance Minnesota (UIMN)	Unemployment insurance, employer tax registration, wage reporting
Minnesota Paid Leave	Paid Family & Medical Leave program (new 2026)
Dept. of Employment & Economic Development (DEED)	Business resources, licenses directory, economic development
Dept. of Children, Youth, and Families (DCYF)	Childcare licensing
Department of Agriculture (MDA)	Pesticide licensing, fertilizer licensing, food licensing
IRS EIN Application	Free federal tax ID number

Frequently Asked Questions

How much does it cost to start an LLC in Minnesota?

The filing fee for Articles of Organization is $135 by mail or $155 online. Annual renewals are free (due by December 31 each year). With a free EIN from the IRS, your total first-year cost is as low as $135-$155 – making Minnesota one of the most affordable states for LLC formation and maintenance.

What is the income tax rate in Minnesota?

Minnesota has a graduated income tax with four brackets ranging from 5.35% to 9.85%. The top rate of 9.85% applies to single filers earning above $203,150 (or $337,931 for married filing jointly). This applies to pass-through income from LLCs and S-corps.

Is workers’ compensation required in Minnesota?

Yes – for all employers with any employees. There is no minimum employee count or hours threshold. Sole proprietors are exempt for themselves but must cover all employees. LLC members owning 25%+ in small LLCs (10 or fewer members) may be excluded.

What is Minnesota’s new Paid Family and Medical Leave program?

Effective January 1, 2026, Minnesota’s PFML program requires contributions of 0.88% of wages (split 50/50 between employer and employee). It provides up to 12 weeks of family leave and 12 weeks of medical leave. Small employers (30 or fewer employees) pay a reduced rate of 0.66%. First quarterly payment was due April 30, 2026.

Do Minnesota LLCs need to file annual reports?

Yes, but they’re free. Minnesota LLCs must file an Annual Renewal by December 31 each year at no cost. This is one of the most business-friendly policies in the country. However, failure to file results in automatic administrative termination.

What is the sales tax rate in Minnesota?

Minnesota has a 6.875% state sales tax, with local additions bringing the combined rate to approximately 7.875%-8.025% in major metro areas. Minneapolis has a combined rate of about 8.025%. Many services and necessities (clothing under $200, most food, prescription drugs) are exempt.