Ranked as one of the best states to start a business in 2022, Minnesota is a very business-friendly state. But if you’ve never started a business before, it can be overwhelming to figure out how to begin setting up a business in the first place. This article will teach you everything you need to know about starting a business from scratch.
By the end of this guide, you will know how to pick a name, choose a good business idea, register your business, and market it successfully. This article covers every single step of how to start a business in Minnesota.
Step 1: Choose Your Idea
The first step to starting a business is choosing an idea. At this point in the planning process, your idea doesn’t need to be overly thorough or thought-out. The idea will become much more fleshed out in the next steps.
If you’re not sure what kind of business to start, ask yourself the following questions:
- What are my passions, skills, and hobbies?
- Can I turn what I love doing into a profitable business?
- Will I be able and willing to work with this business every day?
- Is there a gap in the market for my business?
- Is there already a business out there like mine?
- Does my business solve a consumer’s problem?
The answers to these questions should help you develop a good business idea. You can also employ the help of your friends and family to help spitball ideas.
Step 2: Pick a Name
The second step to starting a business is picking a name. Your business name is the first thing potential customers and clients will encounter. Their first impressions of your business will be based on your chosen name, so choose carefully!
The State of Minnesota will not allow you to register a business with a name already registered with the state. You can search the Secretary of State’s website to check if your desired name is available.
When deciding on a name for the business, make sure that the name is easy enough for people to read and pronounce and that it is unique but still relevant to the industry in which your business is based. The business name should also give people an idea of your products or services.
If you are struggling to come up with a good name, try out some of these methods:
- Create a word dump. This is where you jot down any words that come into your mind. You don’t need to think too hard about each word.
- Ask your friends and family for help. They might come up with a name you like.
- Make use of free name generators online.
Step 3: Write Your Business Plan
Your business plan is the next thing to be completed when starting a business. A good business plan can be a great way to market your business to investors. It also serves as a guideline for your business. The business plan will include all of your planning and research.
There are no set rules on what needs to be included in a business plan, but you should at least aim to answer the following burning questions regarding your business:
- How does your business solve a gap in the market?
- How will it differ from your competitors?
- Who is your target market in Minnesota, and how do you plan on turning them into paying customers?
- What are your marketing strategies?
- What roles will you need to be filled in the business? How will you hire new people?
- What is your financial target?
- How do you plan on making a profit?
- How much do you need to make to break even?
You can also find ready-made business plan templates available online.
Step 4: Get Funding
Starting a business requires money for startup costs, and if you cannot fund the business using your personal funds and current income, you can apply for funding in other ways. There are three different ways to get funding: a grant, loan, or investors.
Grant
While Minnesota does not explicitly have a grant program for new businesses, its Small Business Assitance Office does offer consultation services for small businesses about queries, including assistance with funding. You can find their contact details on the Employment and Economic Development website.
Loan
Minnesota offers a loan guarantee program launched in October 2022 that you may want to check out and see if your business qualifies for a loan. You can also go the private route and apply for a loan with your local bank.
Investor
Your third option to get funding is through an investor. Your business plan comes in handy here as potential investors will want to know what they are investing in before they risk their money. Ask your friends, family, and acquaintances to see if anyone is interested in investing in your business. Make sure to get any agreement in writing to avoid any potential future conflict.
Step 5: Choose a Business Structure
Choosing the right business structure doesn’t have to be difficult. Below, you will learn about the different structures and their benefits.
Sole Proprietorship
This type of business structure is informal. This means the business itself is not a separate entity. A sole proprietorship has only one owner, and there is no separation between personal and business assets. This business structure is commonly used for businesses with very low risk and usually started as a hobby, like photographers or freelancers.
Partnership
A partnership is very similar to a sole proprietorship except that it is owned by two or more business owners with equal shares in the business. Like the other informal business structure, there is no separation of personal and business assets. The owners are all liable for the business.
Limited Liability Company
A limited liability company, or LLC, is one of the most commonly used business structures for small to medium-sized businesses. The LLC business structure is a popular choice because it has the flexibility and ease of a sole proprietorship or partnership with the liability protection of a corporation.
C or S Corporation
A corporation is a completely separate legal entity from the owners. A corporation is owned by multiple shareholders and is a popular choice for large companies due to the attractive tax benefits.
Step 6: Register Your Business
Once you have chosen your business structure, you may be required to register it with the state of Minnesota.
Sole Proprietorship
Because this is an informal business structure, it does not need to be registered with the state of Minnesota. However, if you wish to operate under a different name other than your legal name, you will need to file your assumed name with the state.
Partnership
This business structure does not need to be registered with the state to operate either. However, you will be required to apply for the relevant tax certificates and assumed name filing if applicable to your business. It is also highly recommended that you write a partnership agreement before you begin trading.
Limited Liability Company
To register your LLC with the state of Minnesota, you will need to complete the Articles of Organization and submit them online through the Minnesota State Portal. You will need to create an account on the portal and pay the $135 fee.
C or S Corporation
Registering a corporation is similar to an LLC. You will need to complete the Articles of Incorporation and file them on the Minnesota State Portal. The fee to do this is $155.
Step 7: Set Up Your Finances & Accounting
Setting up your finances and accounting is crucial in getting your business up and running in Minnesota. This step involves opening a bank account for the business, applying for credit cards, and setting up a payment method for customers. You will also want to install Payroll software to manage employee taxes and salaries if you have multiple employees.
If you’re unsure how to look after the business’s books, hiring an accountant to manage your business’s taxes and finances is strongly recommended. This way, you can ensure all taxes are paid and filed correctly.
Step 8: Get Business Insurance
Investing in insurance for your business may not be required in Minnesota, but it is strongly recommended, as you can never be too prepared. You can choose from many different insurance policies, but if you had to choose just one, you should definitely get general liability insurance, at the very least. This is a broad type of insurance policy that will cover all the basics of running a business and provide protection in the case of injury or damage to the property.
Here are some other insurance policies to choose from:
- Workers Compensation Insurance
- Professional Liability Insurance
- Business Owners Insurance
- Commercial Property Insurance
- Commercial Auto Insurance
There are so many different options out there that it can be overwhelming, so consult a broker if you’re not sure what is the best fit for you and your business’s needs.
Step 9: Obtain Any Permits or Licenses Needed
The state of Minnesota does not have a state-wide general business license. But the different counties and cities may have their own requirements. Contact your local county clerk to see what licenses and permits you may need for your business.
Depending on the nature of your business, you will also need to apply for more specialized permits or licenses. You can also learn more about this on the Minnesota Employment and Economic Development website.
If you will be collecting sales tax, you will need to apply for a sales tax certificate on the Minnesota Department of Revenue website.
Step 10: Build a Website
Creating a website for your business is a definite must in this day and age. You can either build one yourself or hire a professional to design and set one up for you.
When building your website, you need to keep a few things in mind:
- Ensure that your font is neat and easy to read.
- Don’t clutter the webpage with lots of unnecessary images, videos, and GIFs, as this can drastically slow down the webpage loading times.
- Be sure to upload content that is relevant and new.
- Link your website to all your other social media accounts.
- Include your contact details.
Step 11: Hire Employees (If needed)
If you need to hire employees to help you run the business, you’ll need first to determine what roles you need to fill. Next, define and write down the responsibilities of these roles to outline all of this in a job post. Go through all applications and narrow down to a few of your top choices based on experience or other factors. Then, conduct interviews, and finally, hire an employee that is best suited for the role!
Once that’s all done, you will need to report your new hire to the Minnesota New Hire Reporting Center. This needs to be done within 20 days from the hire date.
Step 12: Market Your Business
The final step in starting a new business is to market your business. Luckily, this is easy to do and can be done successfully on any budget. When marketing your business, there is one thing that you need to remember, and that is to remain consistent. Consistent marketing builds recognition.
Here are some different ways to market your business:
- Use your business website to promote your business and engage with customers.
- Make use of social media like Facebook, Instagram, and TikTok where you can advertise or even create events for free.
- Create a Google Business Profile and use Google ads.
- Market your business by attending business expos and events.
- Advertise through your local newspaper.
- Attend local marketing events.
- Create and distribute a weekly newsletter for the business.
- Advertise on your local radio and television stations.
Alternatively, you can always hire a marketing expert to take care of this aspect of running a business.