Starting a business in Minnesota costs as little as $155 for an LLC filing fee. The state income tax rate is up to 9.8%, with a 9.8% corporate tax rate. Below we compare LLC vs. S-Corp vs. Sole Proprietorship costs, walk through the 6 steps to form your business, and provide calculators pre-filled for Minnesota.
LLC vs. S-Corp vs. Sole Proprietorship — 2026 estimated costs
| Entity Type | Filing Fee | Annual Fee | Franchise Tax | 1st Year Total | Ongoing/Yr |
|---|---|---|---|---|---|
| LLC | $155 | -- | -- | $305 | $150/yr |
| S-Corp | $150 | $100 | -- | $400 | $250/yr |
| Sole Proprietorship | $50 | -- | -- | $50 | -- |
High corporate tax rate. Annual renewal not required but must file annual registration.
Your LLC name must be unique in Minnesota and include"LLC" or"Limited Liability Company." Search the Minnesota Secretary of State database to verify availability. Consider reserving the name (typically $10-25 for 60-120 days) while you prepare your filing.
File your Articles of Organization (or Certificate of Formation) with the Minnesota Secretary of State. The filing fee is $155. You can file online in most states for faster processing. Include your registered agent information, member names, and business purpose.
Apply for a free Employer Identification Number (EIN) from the IRS at irs.gov. You need this for opening a bank account, hiring employees, and filing taxes. The online application takes about 5 minutes and you receive your EIN immediately.
Register with the Minnesota Department of Revenue for state income tax withholding and sales tax collection (6.9% state rate). If you have employees, register for unemployment insurance and workers' compensation. The state income tax rate is up to 9.8%.
Check Minnesota and local requirements for business licenses, professional licenses, and permits. Requirements vary by industry and location. Common needs include a general business license, zoning permit, and industry-specific permits (food service, construction, healthcare, etc.).
Open a dedicated business bank account to maintain your LLC's liability protection. You may need your Articles of Organization, EIN, and operating agreement. Keep personal and business finances strictly separate — commingling funds can pierce the corporate veil and expose personal assets.
Total estimated first-year cost: $305 (filing fee + registered agent + annual fees). Ongoing annual cost is approximately $150/yr after the first year.
Minnesota's COL index of 100 is exactly the national average — Twin Cities runs ~105.
Rochester (Mayo Clinic) has a higher COL than most non-metro areas due to healthcare industry demand.
Minnesota's top income tax rate of 9.85% is among the highest nationally (applies at ~$193K single).
Minnesota taxes Social Security benefits but offers a subtraction that exempts most middle-income retirees.
Minnesota has a state estate tax with a $3M exemption.
National averages based on mean of all 50 states + DC. "pp" = percentage points.
The Minnesota LLC filing fee is $155. Including a registered agent ($150/yr), the first-year total cost is approximately $305. This is $23 above the national average filing fee.
An LLC is simpler and cheaper to maintain in Minnesota ($305 first-year cost vs. $400 for an S-Corp). An S-Corp can save self-employment taxes if you earn over ~$50K in profit by splitting income into salary and distributions. Most Minnesota businesses start as an LLC and elect S-Corp taxation later when profits justify the additional complexity and payroll costs.
Minnesota businesses face: personal income tax on pass-through income (up to 9.8%), corporate income tax at 9.8% for C-Corps, sales tax at 6.9%, payroll taxes, and property tax at 1.1% on business-owned real estate.
Requirements vary by business type and location. Most Minnesota businesses need: (1) a state business license or registration, (2) a local business license from your city/county, (3) industry-specific permits or professional licenses, and (4) a sales tax permit if selling taxable goods. Check with the Minnesota Secretary of State and your local city clerk for specific requirements.
Business formation costs are estimates based on Minnesota Secretary of State fees as of 2026. Tax rates use 2026 data. Registered agent fees based on market averages. Actual costs may vary. Consult a CPA or business attorney for personalized advice. Last updated: April 2026.