How to start a business in Minnesota in 8 easy steps

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Minnesota consistently ranks among the best states in the nation to live and run a business. The North Star State's exceptionally favorable economic environment allows business owners to benefit from competitive tax rates, relatively low operating costs, and a streamlined administrative start-up process. More than half of the state's businesses have been in existence for more than five years, the highest percentage in the nation. Here's how to start a business in Minnesota.

1. Choose a business idea

The first thing an entrepreneur must do is come up with a viable business idea. You may already have a product or service concept, or a combination of both. Either way, there are two important questions to ask yourself before starting a business in Minnesota.

• Who is your customer? Without customers, there is no business. Can you provide us with something that is missing from your current product? Do you sell direct-to-consumer (B2C) or business-to-business (B2B)? Online or in-store? Do you want to? To make these decisions, you can research prospects, analyze the market, and study industry trends.
• What is the expected profitability? In the long run, companies need to earn more than they spend. There are several variables to consider, including pricing, distribution, and the cost of building your business and developing your product. At what point do you reach your break-even point? Make sure you know how much you need to sell to cover your costs and make a profit.

2. Name your business

Once you've decided on your Minnesota business idea, you'll need to make another important decision: choosing a name. Make it short, memorable, and communicate what you have to offer. You must also follow certain state-level regulations. Here are some things to consider when choosing a business name in Minnesota.

• Original. Business names must be unique. Not only to make you stand out, but because Minnesota law requires it. Your name must differ by at least one letter or number from any other name registered in the state. You can see if your desired business name is available by performing a search on her website for the Minnesota Secretary of State.
• Include specific words. The trade name should indicate the type of business entity (such as “limited liability company,” “stock company,” “stock company,” “limited liability company,” or, depending on the type of business, “LLC” or “stock company,” etc.) abbreviations). You choose to form.
• Exclude specific words. Business names cannot contain certain words. For example, words that could be confused with legitimate government agencies (such as the Treasury Department or the FBI) ​​or words that designate a particular specialty, such as law or accounting, unless the business owner is licensed. is.
• Please reserve your name. You can reserve your Minnesota business name in advance for up to 12 months. There is a $55 fee to apply online and $35 to apply by mail.
• Adopt a pseudonym/DBA. You may want to operate under a name that does not match the legal name of your business. In Minnesota, you do this by registering a false name, or “Doing Business as a DBA.” Pseudonym registration can be done by mail for $30 or online for $50 and must be renewed annually.
• Secure your domain name and social media handles. Much of today's business and marketing is done online. Purchase a domain name (URL) and choose a social media username that matches your real or pseudonym to help your customers find you.

3. Write a business plan

To run a successful Minnesota business, you need a business plan. A successful business plan includes a detailed strategy for business functions, thorough market research, business organizational structure, products or services, target customer profiles, marketing, logistics, and finance.

You can create a business plan from scratch or use a customizable template. Your business plan should align with your goals. You can choose a traditional plan, a lean plan (simple and agile, containing only the information you need to manage), or a specific plan tailored to your specific business type, such as a nonprofit organization.

4. Choosing a business structure

Your business structure determines things like how your company is taxed and how easily you can secure investments. There are four main business structures to choose from.

• Sole proprietorship. Sole proprietorship is the default designation for a sole proprietorship and is taxed at the business owner's personal income tax rate. This is a corporate business without a partnership agreement. However, a sole proprietor's personal assets are not protected from creditors or legal damages.
• partnership. Partnerships have two or more owners and are taxed at the partners' personal income tax rates. Similar to a sole proprietorship, a partner's personal assets are not protected from creditors or legal damages.
• LLC. Limited liability companies are popular in Minnesota because they offer many of the benefits of a sole proprietorship or partnership, but with the legal isolation afforded to corporations. For example, an LLC is a pass-through entity in that business income is taxed at the personal income level of the business owners and the owners have personal liability protection.
• Corporation. Corporations provide owners with protection of personal assets, but are generally more cumbersome to incorporate and maintain. These can be formed as his C or S corporations and enjoy the same pass-through tax status as an LLC, although there are more restrictions on issuing stock and raising capital.

Apply for a Federal Employer Identification Number (EIN)

Once you choose a formal business structure, register for a federal Employer Identification Number (EIN). EINs are issued by the Internal Revenue Service (IRS), but both federal and state tax authorities use your EIN to identify your business for tax purposes. He can apply for an EIN for free through the IRS.

Incorporation

With an EIN, you can officially establish a new business in Minnesota. Access and file the necessary business documents online, by mail, or in person, including articles of organization (information about the identity and location of the business, and contact details for the business owner). Here are the fees for forming different types of businesses in Minnesota:

• Limited Liability Partnership. $100 by mail, $120 in person (not available for purchase online). Limited partnerships differ from general partnerships in that they limit each partner's liability depending on the size of their investment in the business.
• LLC $135 by mail, $155 in person and online.
• Co., Ltd. $135 by mail, $155 in person and online.
• Non-profit corporation. $70 by mail, $90 in person (not available for purchase online).

There are no fees for forming or renewing general partnerships and sole proprietorships in Minnesota.

5. Obtain business licenses and permits

Although Minnesota law does not require all businesses to obtain a business license, certain businesses require licenses or permits to legally conduct certain transactions. These include professional services such as lawyers, doctors, and accountants, as well as businesses that make or sell dangerous products such as alcohol, tobacco, and firearms, and manufacturing industries that use large amounts of wood, water, and other natural resources. Includes companies that and extraction operation.

6. Consider your Minnesota business insurance options

Purchasing insurance for small businesses in Minnesota is essential to managing risk. It also gives you peace of mind as an entrepreneur. The types of business insurance available to businesses in Minnesota include:

• Workers' compensation insurance. Known as workers' compensation, this insurance covers injuries and illnesses that may befall employees while on the job. Workers' compensation is required for all Minnesota businesses with employees, regardless of the number of employees.
• General professional liability insurance. This policy protects businesses from lawsuits, financial losses due to property damage, and injuries to third parties on the job (such as a customer slip and fall). Minnesota law does not require you to carry general liability insurance, but you may be required to do so if you want to rent an office or storefront.
• Business Interruption Insurance. Business interruption insurance covers loss of revenue due to property damage that interrupts your business.

7. Understand financial considerations

In addition to purchasing insurance, you may need to make other important investments to get your Minnesota business off the ground, such as hiring certain professionals or contractors, such as attorneys, accountants, or web designers. there is. You can also pay for web hosting services and professional social media management. If you sell your products directly, you will need to pay rent for your store or warehouse space. If this feels overwhelming, business resources are available to help you identify funding opportunities.

8. Marketing your business

Once your Minnesota business is fully funded and operational, you will need to create a marketing strategy for your products or services. Word of mouth is a great starting point when it comes to marketing, but to grow your business you need a solid marketing plan that details how you'll tackle this big challenge. A marketing plan includes the strategies you use to attract customers, such as:

• Paid advertising and promotions. Paid advertising is a proven way to market your company or product. You can do this yourself or hire an agency to manage it for you.
• Social media. Use social channels like Instagram, Facebook, YouTube, and TikTok to promote your products and services.
• public relations. Identify and reach out to local and even national media outlets to develop relationships with publications and journalists that can help expand your reach and increase your company's visibility.
• New business and customer retention. Build relationships with your customers to keep them coming back, then spread the word to your friends, family, and colleagues.

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