Sole Proprietorship in Minnesota: How to Start One

A sole proprietorship is the default business structure the moment you start selling a product or service under your own name in Minnesota. There's no formation document to file with the Minnesota Secretary of State and no filing fee to become one. That simplicity is the appeal, and it's also where people get tripped up: "no paperwork to form it" doesn't mean "no paperwork at all." If you plan to operate under a business name, hire anyone, or sell taxable goods, there are specific steps to handle. This guide walks through exactly what a Minnesota sole proprietor needs to do, in order, with real fees and the state resources to use.

Before you start, understand the tradeoff. In a sole proprietorship, there is no legal separation between you and the business. If the business is sued or can't pay a debt, your personal assets, your car, your savings, potentially your home, are on the line. That's the main reason people eventually convert to an LLC once revenue or risk grows. For a side gig, freelance work, or a low-liability local service business, a sole proprietorship in Minnesota is often the fastest and cheapest way to get moving.

What You'll Need

Your legal name and Social Security number (or an EIN if you'd rather not use your SSN on business paperwork)
A business name decision: your own legal name, or a separate "doing business as" (DBA) name
$50 (online or in person) or $30 (by mail) if you're filing a Certificate of Assumed Name for a DBA
Access to the Minnesota Secretary of State's Business Filings Online portal (part of the Minnesota Business and Lien System, MBLS)
A Minnesota Tax ID from the Department of Revenue, if you'll collect sales tax or hire employees
A local newspaper that publishes legal notices, if you file a DBA (publication is required)
A separate business bank account (recommended, not legally required)
Any occupation-specific license or permit your business activity requires

Step-by-Step: How to Start a Sole Proprietorship in Minnesota

Step 1: Decide whether you're operating under your own name or a DBA

If Jane Smith runs a bookkeeping business and calls it "Jane Smith," she can start working today with no name filing required. But the moment she calls it "North Star Bookkeeping," that's an assumed name, and Minnesota law requires you to register it. This is the single most common point of confusion for a Minnesota sole proprietorship: the business itself doesn't need to be registered, but a business name that isn't your own legal name does.

Step 2: File a Certificate of Assumed Name if you're using a business name

If you need a DBA, file a Certificate of Assumed Name with the Minnesota Secretary of State under Minnesota Statutes, Chapter 333. It costs $50 if filed online or in person, or $30 by mail. You can file directly through the Secretary of State's Business Filings Online system, and general information is on the Assumed Name (DBA) page.

After filing, Minnesota requires you to publish the certificate for two consecutive issues in the legal notices section of a qualified legal newspaper in the county where your business is located. Skipping this step can render the certificate invalid, so don't treat it as optional just because the Secretary of State already has your filing on record. The certificate itself doesn't expire, but it must be renewed annually at no charge, so put that date on your calendar.

Step 3: Check name availability before you file

Minnesota doesn't require a sole proprietorship's assumed name to be as strictly "distinguishable" as an LLC or corporation name, but it's still smart to search the Secretary of State's business name database before you file or start marketing under a name. Finding out six months in that another business is already using something close to your name is a bad afternoon you can avoid for free right now.

Step 4: Get an EIN from the IRS (optional, but usually worth it)

A sole proprietor without employees can legally use their Social Security number for tax purposes. Most people still get a free Employer Identification Number (EIN) from the IRS anyway, because banks generally want one to open a business account, and it keeps your SSN off invoices and vendor forms. If you plan to hire anyone, an EIN is required, not optional.

Step 5: Register with the Minnesota Department of Revenue if you'll owe sales tax

If you sell taxable goods or certain taxable services in Minnesota, you need a Minnesota Tax ID and a Sales and Use Tax account before you make your first taxable sale. Minnesota's state sales tax rate is 6.875%, and many cities and counties add local sales taxes on top of that, so check the rate for your specific location. Register through the Department of Revenue's e-Services new business registration.

Step 6: Look up any license or permit your specific business needs

Minnesota doesn't issue one general statewide business license. Instead, licenses and permits are handed out by individual state agencies based on your occupation or activity, everything from cosmetology to food service to contracting. Use License Minnesota to search by topic, by agency, or through an A-to-Z index to find what applies to you. Many cities and counties layer on their own local licensing requirements too, so check with your city clerk's office if you have a physical location or storefront.

Step 7: Open a separate business bank account

Nothing in Minnesota law requires a sole proprietor to keep separate bank accounts, but you should anyway. Commingling personal and business funds makes bookkeeping a nightmare at tax time and can undermine your credibility if you're ever audited or sued. Bring your EIN (or SSN), your Certificate of Assumed Name if you have one, and a government ID to open the account.

Step 8: Understand your tax obligations

A sole proprietorship isn't a separate taxpayer. All business income and loss flows through to your personal tax return on Schedule C, and you pay Minnesota's graduated individual income tax, which runs across four brackets from 5.35% to 9.85% depending on your total taxable income. You're also on the hook for federal self-employment tax on your net earnings. Because no one is withholding taxes from a paycheck, most sole proprietors need to make quarterly estimated tax payments to both the IRS and the Minnesota Department of Revenue to avoid underpayment penalties.

Step 9: Set up basic recordkeeping from day one

Track income and expenses in something, a spreadsheet, accounting software, whatever you'll actually use consistently. You'll need clean records for quarterly estimated taxes, your annual Schedule C, and any sales tax filings. Waiting until January to reconstruct a year of transactions is one of the most common and most avoidable mistakes new sole proprietors make.

Tips for Minnesota Sole Proprietors

Talk to the Small Business Development Center early. The Minnesota Small Business Development Center Network offers free, confidential consulting on everything from licensing to cash flow, and it's backed by the state's economic development agency.
Don't skip the DBA publication requirement. Filing the Certificate of Assumed Name and then forgetting to publish it in a legal newspaper is a gap that can surface later at the worst time, like during a contract dispute.
Renew your assumed name annually. It's free, but it's easy to forget since there's no fee reminder pressure.
Consider liability insurance even if you don't form an LLC. Since a sole proprietorship offers no liability shield, a general liability or professional liability policy is often the cheapest protection you can buy.
Revisit the LLC question once you have real revenue or real risk. Converting a Minnesota sole proprietorship into an LLC later costs $155 to file Articles of Organization ($135 by mail, without expedited processing), plus winding down the old assumed name if needed. It's not a big lift if you decide the liability protection is worth it.

Common Mistakes to Avoid

Assuming "no formation filing" means "no filing at all." If you use any name other than your own legal name, the Certificate of Assumed Name is not optional.
Skipping the sales tax registration before your first sale. If you sell taxable goods or services, register with the Department of Revenue before, not after, you start collecting money.
Mixing personal and business finances. This is the fastest way to lose track of deductible expenses and create headaches at tax time.
Ignoring quarterly estimated taxes. Sole proprietors who wait until April to pay what they owe often get hit with underpayment penalties from both the IRS and Minnesota.
Forgetting local licensing. A state-level check through License Minnesota doesn't always cover city or county requirements for your specific location or industry.

What You Can Expect

Compared to forming an LLC or corporation, starting a sole proprietorship in Minnesota tends to be faster and less expensive up front, since there's no Articles of Organization or Articles of Incorporation to file with the Secretary of State. Many people are able to complete the DBA filing, get an EIN, and register for a sales tax permit within the same week, though actual timing can vary depending on how quickly you gather the required information and whether your specific business activity needs additional licensing. Because a sole proprietor is personally exposed to business debts and legal claims, this structure generally suits lower-risk, lower-revenue businesses better than it suits ventures with employees, significant contracts, or higher liability exposure.

Disclaimer

This article is for general informational purposes only and does not constitute legal or tax advice. Minnesota statutes, fees, and agency procedures can change, and individual circumstances vary. Before making decisions about your business structure, licensing, or tax obligations, consult a licensed attorney and a qualified CPA in Minnesota.