By Jake Lawson, LLC Formation Strategist & Tax Advisor
Thinking about launching a sole proprietorship in Minnesota? Before you commit to that path, let me share some hard-earned insights from 15 years of helping entrepreneurs navigate this decision in the Land of 10,000 Lakes.
Minnesota presents some unique challenges for sole proprietors—LLC formation costs $155, but more importantly, the state requires newspaper publication for Assumed Name registrations, adding both cost and complexity to what should be a simple DBA process.
After guiding over 1,200 business launches, I’ve noticed Minnesota entrepreneurs often underestimate these hidden complications. They hear “no state business license required” and think sole proprietorship will be simple, only to discover that operating under any business name triggers publication requirements that can cost $100-300+ depending on your county.
Let me break down what you’re really getting into.
What Is a Minnesota Sole Proprietorship?
A sole proprietorship in Minnesota is operating a business without any formal legal structure—you’re doing business under your personal name with zero separation between your business activities and personal financial life.
The moment you start any revenue-generating activity in Minnesota—whether that’s consulting from your Minneapolis condo, e-commerce from your Duluth home office, or providing services in Rochester—you’re automatically operating as a sole proprietor. No state filings, no formation documents, no waiting periods.
It’s the default business structure, which makes it both the most common choice and often the most expensive mistake when you factor in Minnesota’s unique requirements.
The Sole Proprietorship Advantages (The Short Story)
Immediate Business Launch
You can start earning money today. No state approval process, no formation documents to file, no bureaucratic delays. Have a business idea? You’re already legally operating.
Basic Tax Simplicity
Business income flows directly to your personal tax return via Schedule C. Minnesota’s individual tax structure is straightforward, so this keeps things relatively simple initially.
No Formation Fees
A basic sole proprietorship costs nothing to establish upfront. However, this advantage evaporates quickly once you need to operate under a business name.
The Sole Proprietorship Disadvantages (The Long, Expensive List)
Complete Personal Asset Exposure
This is the deal-breaker issue, especially in Minnesota’s high-value real estate markets around the Twin Cities.
If your business faces a lawsuit—client injury, contract dispute, professional errors, employment issues—your personal assets are completely exposed. That includes your house (whether it’s a $200K home in Mankato or a $500K property in Edina), your vehicle, savings, retirement accounts, everything.
I’ve seen Minnesota entrepreneurs lose family lake cabins over business disputes that proper LLC structure would have contained to business assets only.
Minnesota’s Expensive DBA Requirements
Here’s where Minnesota gets costly for sole proprietors. If you want to operate under any business name other than your exact legal name, you must:
- File an Assumed Name Certificate ($30 with the Secretary of State)
- Publish in a legal newspaper (costs vary dramatically by county: $50-300+)
- File annual renewals (free if timely, but another administrative burden)
Compare this to LLC formation at $155 with no publication requirements, and the “savings” argument starts falling apart.
Professional Credibility Challenges
Try pitching services to companies like Target, 3M, or Best Buy as “Jennifer Smith Consulting” versus “North Star Strategic Solutions LLC.” The credibility difference directly impacts your ability to land quality contracts and command premium pricing.
The Conversion Complexity
Converting from sole proprietorship to LLC later isn’t a simple upgrade—it’s essentially closing one business and starting another. In Minnesota, this involves:
- Filing new LLC Articles of Organization with the Secretary of State
- Obtaining a new federal EIN
- Canceling your Assumed Name registration and republishing under the LLC
- Updating all contracts, banking, and vendor relationships
- Transferring business licenses and permits
- Revising insurance policies and coverage
I’ve had Minnesota clients spend months and significant money navigating this conversion process.
Minnesota’s Hidden Costs for Sole Proprietors
Let’s look at real numbers for operating a branded sole proprietorship in Minnesota:
Assumed Name Registration: $30 (state filing) Newspaper Publication: $50-300+ (varies dramatically by county) Annual Renewal: Free if timely (administrative burden) Total First Year: $80-330+
Compare to LLC Formation: $155 total, no publication requirements, no annual renewals
When you factor in Minnesota’s publication requirements, sole proprietorships often cost more than LLCs in the first year while providing zero protection or credibility benefits.
Sole Proprietorship vs. LLC: The Minnesota Reality
| Factor | Sole Proprietorship | Minnesota LLC |
| State Filing Fee | $0 (basic) | $155 |
| DBA/Name Costs | $80-330+ (with publication) | $0 (included) |
| Personal Asset Protection | None | Complete protection |
| Business Credibility | Low | High |
| Annual Requirements | Assumed Name renewal | None |
| Banking/Credit Access | Limited | Easy |
| Total Year 1 Cost | $80-330+ | $155-300 |
My analysis: Minnesota’s publication requirements often make sole proprietorships more expensive than LLCs while providing none of the benefits. The math simply doesn’t work for most businesses.
How to Start Your Minnesota Sole Proprietorship (Despite My Warnings)
If you’re determined to go the sole proprietorship route, here’s how to navigate Minnesota’s requirements:
Step 1: Business Foundation Planning
Before touching any paperwork, establish these fundamentals:
Business Model Definition: Clearly define your revenue streams, target customers, and competitive advantages. Minnesota’s diverse economy—from agriculture and manufacturing to technology and healthcare—offers different opportunities and risks.
Market Analysis: Understand your local market. Minnesota’s major metropolitan areas (Twin Cities, Rochester, Duluth) each have distinct business environments and customer expectations.
Financial Planning: Map out startup costs, operating expenses, and revenue projections. Include Minnesota’s specific requirements like publication costs in your budget.
Business Address Strategy: Choose a primary address for all business correspondence. This can be your home address, but consider privacy implications—this address will appear in published Assumed Name notices.
Step 2: Business Name Decision
You have two paths in Minnesota:
Option 1: Operate Under Your Legal Name
- Default choice requiring no additional paperwork
- Zero additional cost
- Severe limitations for branding and marketing
Option 2: Register an Assumed Name
- Allows branded business name
- Requires state filing AND newspaper publication
- Significantly more expensive and complex
How to Register an Assumed Name in Minnesota
Warning: This process is more complex and expensive than most states.
Step 1: File with Secretary of State
Step 2: Publish in Legal Newspaper
- Requirement: Publish Certificate of Assumed Name in a legal newspaper in your county
- Cost: Varies dramatically ($50-300+ depending on county and newspaper)
- Timeline: Must be completed within certain timeframe after state filing
Step 3: Annual Renewal
- Due Date: Annually by December 31st
- Cost: Free if filed on time
- Penalty: Late fees and potential cancellation if missed
County Publication Cost Examples:
- Hennepin County (Minneapolis): $200-300+
- Ramsey County (St. Paul): $150-250+
- Dakota County: $100-200+
- Rural counties: $50-150+
Step 3: Obtain Your Federal EIN
While Minnesota doesn’t require an EIN for sole proprietorships, I strongly recommend getting one:
Identity Protection: Keep your Social Security Number off business documents and published notices.
Banking Requirements: Most Minnesota banks require an EIN for business accounts.
Professional Credibility: Using an EIN appears more professional than your SSN on business documents.
Future Planning: If you ever hire employees or convert to an LLC, you’ll need an EIN.
How to Apply: Go directly to the IRS website (irs.gov) and apply online. It’s completely free and takes about 10 minutes. Avoid third-party services charging fees.
Step 4: Research Business License Requirements
Good news: Minnesota doesn’t require a general business license for sole proprietorships at the state level.
However, you may need:
- Industry-specific licenses (professional services, food handling, construction)
- Local business licenses (varies by city and county)
- Federal licenses (for certain regulated industries)
Research Resources:
- Minnesota eLicensing – comprehensive licensing portal
- Minnesota DEED Business Resources – state business information
- Your local city/county business licensing office
- Professional licensing boards for regulated professions
Common Minnesota License Requirements:
- Minneapolis: Business license required for most commercial activities
- St. Paul: Various permits depending on business type and location
- Rochester: Business registration and licensing requirements
- Professional Services: State licensing for many regulated professions
Step 5: Establish Business Banking
Separating business and personal finances is crucial for legal and practical reasons.
What Minnesota Banks Typically Require:
- Photo ID (driver’s license or passport)
- Social Security Number or EIN
- Assumed Name certificate and publication proof (if registered)
- Initial deposit (varies by bank, typically $25-100)
Minnesota Banking Options for Small Businesses:
- U.S. Bank: Strong Minnesota presence, comprehensive business services
- Wells Fargo: Extensive branch network and business products
- TCF Bank (now Huntington): Good local presence and small business support
- Bremer Bank: Minnesota-based community banking focus
Banking Tips:
- Compare fee structures—they vary significantly between banks
- Ask about business credit cards and future loan products
- Understand transaction limits and monthly maintenance fees
- Consider online banking capabilities for efficiency
Minnesota Tax Obligations for Sole Proprietors
Federal Tax Requirements
Schedule C: Report business income and expenses on your personal tax return (Form 1040).
Self-Employment Tax: Pay both employer and employee portions of Social Security and Medicare taxes (15.3% on net earnings over $400).
Quarterly Estimated Taxes: If you expect to owe $1,000+ in taxes, make quarterly payments to avoid penalties.
Minnesota State Tax Considerations
Minnesota Income Tax: Business profits are taxed as personal income at Minnesota rates (5.35% to 9.85% depending on income level—among the highest in the nation).
Sales Tax: Minnesota has a 6.875% state sales tax, with local taxes potentially adding more. If you sell taxable goods or services, register with the Minnesota Department of Revenue.
Property Tax: Minnesota assesses personal property taxes on business equipment and fixtures in some jurisdictions.
Local Taxes: Some Minnesota cities and counties impose additional business taxes or licensing fees.
Industry-Specific Considerations in Minnesota
Agriculture and Food Production
Minnesota’s strong agricultural sector offers opportunities, but food safety regulations, distribution challenges, and environmental compliance create liability exposure.
Healthcare and Medical Devices
With Mayo Clinic and a thriving medical device industry, healthcare offers growth potential. Professional liability exposure makes LLC protection almost essential.
Technology and Software
Minnesota’s growing tech sector, particularly in the Twin Cities, demands credibility and protection. Major clients expect formal business entities.
Manufacturing and Industrial Services
Minnesota’s manufacturing heritage continues with companies like 3M and Cargill. Product liability and workplace safety concerns require proper business structuring.
Common Minnesota Sole Proprietorship Mistakes
After helping hundreds of Minnesota entrepreneurs, I see these errors repeatedly:
Mistake #1: Underestimating Publication Costs
Many sole proprietors are shocked by newspaper publication costs, especially in Hennepin and Ramsey counties where costs can exceed $300.
Mistake #2: Missing Annual Renewal Deadlines
Assumed Name renewals are due annually by December 31st. Missing the deadline means re-filing and republishing—doubling your costs.
Mistake #3: Ignoring Local Tax Requirements
Minnesota’s complex local tax structure varies significantly by municipality. Don’t assume state compliance covers local requirements.
Mistake #4: Mixing Personal and Business Finances
This creates tax complications and weakens any protection you might get through insurance.
When to Convert from Sole Proprietorship to LLC
Several situations should trigger serious LLC consideration:
Cost Realization: Once you factor in publication costs and annual renewals, LLCs often cost less than maintaining an Assumed Name.
Revenue Growth: Once you’re generating $75,000+ annually, the liability protection becomes critical relative to the costs.
Client Requirements: Many larger Minnesota employers and government contracts prefer formal business entities.
Asset Protection: As your personal wealth grows (especially real estate in Minnesota’s appreciating markets), protection becomes more valuable.
Growth Plans: If you’re considering employees, partners, or investors, you’ll need a formal business structure.
My Honest Recommendation for Minnesota Entrepreneurs
After 15 years in this business, here’s my straight assessment of Minnesota sole proprietorships:
Consider sole proprietorship only if:
- You’re testing a very low-risk business concept (under $25K annual revenue)
- You will operate strictly under your legal name (no branding)
- You plan to convert to LLC within 3-6 months
- You absolutely cannot afford $155 for LLC formation
Choose LLC if:
- You want any form of business branding or professional name
- You’re serious about building a sustainable business
- You have any meaningful liability exposure
- You can afford the $155 investment (likely less than Assumed Name costs anyway)
Given Minnesota’s expensive publication requirements for Assumed Names, LLCs often cost less than branded sole proprietorships while providing significantly more benefits.
Step-by-Step LLC Alternative
If I’ve convinced you to consider an LLC instead, here’s Minnesota’s process:
- Choose and verify your LLC name (check availability through Minnesota Secretary of State)
- File Articles of Organization ($155 fee online through Minnesota Business Portal)
- Create an Operating Agreement (recommended for all LLCs)
- Obtain your EIN (free from IRS website)
- Open business banking (much easier with LLC documentation)
- Register for required licenses and taxes (same process as sole proprietorships)
Total time: 1-2 weeks. Total cost: $155-300 (often less than sole proprietorship with Assumed Name). Total protection gained: potentially hundreds of thousands in personal assets.
Frequently Asked Questions
Do I need to register my sole proprietorship with Minnesota?
No state registration required for the business entity itself. However, if you operate under any name other than your exact legal name, you must register an Assumed Name ($30) and publish it in a newspaper ($50-300+).
What’s Minnesota’s newspaper publication requirement?
If you register an Assumed Name, you must publish the Certificate of Assumed Name in a legal newspaper in your county. Costs vary dramatically from $50 in rural areas to $300+ in the Twin Cities.
Do I need a business license as a Minnesota sole proprietor?
Minnesota doesn’t require a general business license, but you may need industry-specific licenses or local permits depending on your business type and location.
Can I avoid the publication requirement?
No, if you operate under any business name other than your exact legal name, publication is mandatory. This is why many entrepreneurs choose LLCs instead.
How much do Assumed Name renewals cost?
The renewal itself is free if filed on time (by December 31st annually), but missing the deadline means re-filing and republishing at full cost.
Can I hire employees as a Minnesota sole proprietor?
Yes, but you’ll need an EIN, workers’ compensation insurance, and must comply with Minnesota employment laws. At this point, an LLC usually makes more sense.
What happens if I don’t renew my Assumed Name?
The registration becomes invalid, and you can no longer legally operate under that name. You’d need to re-file and republish to continue using the name.
The Bottom Line on Minnesota Sole Proprietorships
Minnesota’s expensive publication requirements for Assumed Names fundamentally change the sole proprietorship economics. When operating under a business name costs $80-330+ in the first year (plus annual renewals), compared to $155 for complete LLC protection, the choice becomes obvious.
The only scenario where Minnesota sole proprietorships make financial sense is if you’re content operating strictly under your legal name with no business branding whatsoever.
My final advice: Unless you’re truly just testing a concept under your personal name, invest in an LLC from the start. Minnesota’s publication requirements often make sole proprietorships more expensive than LLCs while providing none of the protection or credibility benefits.
Ready to make the smart choice? Check out our comprehensive Minnesota LLC formation guide or browse our honest reviews of formation services that can handle the paperwork efficiently.
Looking for more state-specific business guidance? Explore our complete library of formation guides, where we provide unbiased analysis of business formation options in all 50 states.
About Jake Lawson: With 15+ years guiding entrepreneurs through business formation decisions, Jake has helped over 1,200 founders choose the right structure for their goals. His Minnesota expertise comes from working with everyone from Twin Cities tech startups to Greater Minnesota agricultural businesses, always factoring in the state’s unique requirements and costs.