Start Your Cottage Food Business — Minnesota

🏗️ Step 1 — Business Structure

Sole Proprietorship vs. LLC — Which Is Right for You?

Minnesota's 2021 cottage food amendment explicitly allows cottage food producers to organize as LLCs or other recognized business entities — a change that was a major advocacy win. You now have two clear paths. Here's how to choose.

Option 1

Sole Proprietorship

The default — no formal business entity required, just register a DBA if using a business name

✓No formation cost — you're automatically a sole proprietor when you start selling
✓Simplest taxes — report income on your personal Schedule C (Form 1040)
✓No annual report or state fees beyond MDA registration
✓File a DBA ("assumed name") if selling under a business name — $30–$50
→No liability protection — your personal assets are at risk if sued
→Best for: hobbyists, Tier 1 sellers, those just starting out
✕A slip-and-fall at your home could put personal savings at risk

File a DBA (Assumed Name) →

Option 2 — Recommended for Growing Businesses

LLC

Limited liability protection for serious cottage food businesses earning meaningful income

✓Personal asset protection — LLC liability is separated from personal finances
✓Professional credibility — farmers markets and buyers take LLCs more seriously
✓No Minnesota franchise tax for single-member LLCs — just a free annual report
✓Allowed since 2021 amendment to Stat. 28A.152
→One-time filing fee: $155 online / $135 by mail (Articles of Organization)
→Annual report due December 31 each year — free to file
→Requires a registered agent with a MN address

Form an LLC with MN SOS →

🤔 How to Choose: Key Questions

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Are you earning close to or above Tier 1 ($7,665)?

→ If yes, strongly consider an LLC. At Tier 2 income levels, the $155 formation cost is easily justified by the liability protection.

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Do customers come to your home to pick up orders?

→ If yes, an LLC is wise. A customer who slips on your steps could sue. An LLC protects your personal assets in that scenario.

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Do you plan to grow — more products, more markets, employees?

→ Start as an LLC. Restructuring later is more complicated. Minnesota's LLC formation is straightforward and same-day online.

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Are you testing whether cottage food is right for you?

→ Start as a sole proprietor with a DBA. Keep it simple. If the business takes off, convert to an LLC — conversion is straightforward in Minnesota.

📝 Step 3A — DBA (Sole Proprietors)

Filing a DBA (Assumed Name) in Minnesota

If you're operating as a sole proprietor but want to sell under a business name (like "Prairie Kitchen" instead of "Jane Smith"), you must file a Certificate of Assumed Name — commonly called a DBA — with the Minnesota Secretary of State.

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DBA Filing

Certificate of Assumed Name — Minnesota Secretary of State

Required if selling under any name other than your own full legal name

Minnesota requires any sole proprietor doing business under a name other than their full first-and-last legal name to file a Certificate of Assumed Name. Examples: "Jane's Kitchen" requires a DBA. "Jane Smith" does not. "Smith Bakes" requires a DBA.

Online / In-Person Fee

$50

By Mail Fee

$30

Processing Time (Online)

Same day

Processing Time (Mail)

4–7 business days

Renewal

Annually by December 31 — free to renew

Filing Agency

MN Secretary of State

📌 DBA Publication Requirement

What's Required

After filing, publish the Certificate of Assumed Name for 2 consecutive issues in a qualified legal newspaper in your county

Publication Cost

Typically $30–$60 per issue depending on county newspaper. Contact your local legal newspaper for a quote.

After Publication

The newspaper provides an affidavit of publication. Keep this with your business records — it proves you completed the legal requirement.

→File online at: sos.mn.gov — Assumed Name/DBA
→Your DBA name must match the business name you register on your MDA cottage food application
→DBA does not create a new legal entity — you remain personally liable as a sole proprietor
✓Your DBA name will appear on your product labels and MDA registration card

🏢 Step 3B — LLC Formation

Forming an LLC in Minnesota

If you've decided an LLC is the right structure for your cottage food business, Minnesota makes it straightforward. Online formation is same-day, and there's no ongoing franchise tax for most small LLCs.

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LLC Formation

Articles of Organization — Minnesota Secretary of State

File online for same-day processing; no ongoing franchise tax for single-member LLCs

Online Filing Fee

$155

Mail Filing Fee

$135

Processing Time (Online)

Same day — expedited by default

Processing Time (Mail)

4–7 business days

Annual Report

Free — due December 31 each year

Franchise / Business Tax

None for single-member LLCs

Registered Agent

Required — must have MN street address

Name Amendment

$55 online / $35 by mail

→File at: sos.mn.gov — Start a Business
✓Form your LLC before applying for an EIN from the IRS — the IRS recommends this order
✓Your LLC name goes on your MDA cottage food registration application and on product labels
⚠Multi-member LLCs may be subject to Minnesota's Partnership Tax — consult a tax professional
→Optional: name reservation for 12 months costs $55 online / $35 by mail if you need time to prepare

ℹ️ No publication requirement for LLCs. Unlike DBAs, Minnesota LLCs do not require newspaper publication after formation. Just file online and you're done — same-day confirmation.

🔢 Step 4 — Federal EIN

Getting Your EIN from the IRS

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Employer Identification Number (EIN)

An EIN is a 9-digit federal tax ID number issued free by the IRS. It identifies your business for tax purposes and is required to open a business bank account, hire employees, and often to work with wholesale partners.

Do you need one? If you form an LLC, yes — always get an EIN. If you're a sole proprietor with no employees, you can legally use your Social Security Number instead, but an EIN is strongly recommended for privacy and professionalism.

Apply online at the IRS website — it's free, takes about 10 minutes, and your EIN is issued immediately at the end of the session. Apply for EIN at IRS.gov →

Important: If forming an LLC, complete the LLC formation with the Minnesota Secretary of State first, then apply for your EIN. The IRS recommends this order to avoid delays.

Cost

Free — IRS does not charge

Processing Time

Immediate — issued online instantly

Who Should Get One

All LLCs; sole proprietors who want privacy or have employees

Online Application

irs.gov/businesses (EIN assistant)

💰 Step 5 — Taxes

Taxes for Minnesota Cottage Food Sellers

Running a cottage food business means dealing with two types of taxes: income tax (always applies) and sales tax (depends on what you sell). Here's a clear breakdown of both.

Income Tax

Always applies — federal and state

All cottage food sales are taxable income — report on Schedule C (Form 1040) at the federal level and Minnesota Form M1 at the state level
Minnesota has a graduated state income tax — rates range from 5.35% to 9.85% depending on income level
Self-employment tax (federal) applies — 15.3% on net self-employment income up to the SS wage base
Track deductible expenses: ingredients, packaging, market fees, mileage, equipment, labeling — these reduce your taxable income
Consider quarterly estimated tax payments to avoid underpayment penalties if you expect to owe more than $500 to Minnesota or $1,000 to the IRS
Contact MN Department of Revenue: 651-296-3781 or revenue.state.mn.us

Sales Tax

Depends on your specific products

Most cottage food products are exempt from MN sales tax as "food and food ingredients" — this covers most shelf-stable baked goods, dry mixes, granola, candy, pickles, and jams
Bakery items are specifically not "prepared food" unless sold with eating utensils — so standard packaged baked goods are exempt
Some "prepared foods" may be taxable — contact MN Revenue if unsure about your specific products
If you sell any taxable products, register for a sales tax permit at revenue.state.mn.us — it's free to register
MN base sales tax rate is 6.875%; local rates may add up to 1.5% depending on city/county
MN Revenue Food Tax Guide: revenue.state.mn.us/guide/food-and-food-ingredients

⚠️ Keep records from day one. Open a separate business bank account (even a basic one), track every sale, and save all receipts for business expenses. Mixing business and personal finances makes tax time harder and complicates things if you're ever audited — or if you need to prove your annual sales are under $78,000.

✅ Master Checklist

Your Complete Minnesota Cottage Food Launch Checklist

🚀 From Kitchen to First Sale — All Required Steps

📋 Before You Register

✓Confirm all products are NPH (pH ≤ 4.6 or aw ≤ 0.85)
✓Check local zoning — no home food sale prohibitions
✓Choose business structure (sole prop or LLC)
✓File DBA if using a business name (sole prop)
✓OR file LLC Articles of Organization ($155 online)
✓Complete Tier 1 or Tier 2 food safety training
✓Get EIN from IRS (free, instant online)

📝 Registration & Setup

✓Submit MDA registration at mn.gov/elicense
✓Pay $50 registration fee (Tier 2 only)
✓Receive MDA registration card (3–4 weeks)
✓Open a dedicated business bank account
✓Register for sales tax permit if needed (free)
✓Check if local business license required
✓Get general liability insurance (recommended)

🏷️ Ready to Sell

✓Design compliant labels (5 required elements)
✓Print point-of-sale sign (required statement)
✓Display registration card at your point of sale
✓Post required statement on your website (if selling online)
✓Set up sales tracking / bookkeeping system
✓List products on SellFood marketplace
✓Apply to local farmers markets

📈 Growth Path

Your Minnesota Food Business Growth Journey

Cottage food is often just the beginning. Minnesota offers a clear progression path from home kitchen to full food business. Here's what that journey typically looks like.

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Stage 1 — Starting Out

Tier 1 Cottage Food Seller

Up to $7,665 in annual sales. Free MDA registration. Sell at home, markets, and events. Perfect for testing your products and building a customer base without financial risk.

Free registration Free training No sales cap risk

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Stage 2 — Growing Business

Tier 2 Cottage Food Seller + LLC

$7,666–$78,000 in annual sales. $50 registration. UMN Extension food safety course. Form an LLC for liability protection. Build your brand, your farmers market presence, and your online ordering system.

$50/year registration LLC formation Dedicated bank account Quarterly taxes

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Stage 3 — Scaling Up

Licensed Food Business

When you hit or anticipate exceeding $78,000, or when you want to sell prepared meals, wholesale to retailers, or ship freely — it's time for a food establishment license. Many cottage food producers rent shared-use commercial kitchens to make the leap. The MDA offers a Licensing Liaison service to guide the transition.

MDA food license Commercial kitchen Wholesale allowed No sales cap

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Stage 4 — Full Food Business

Brick-and-Mortar or Regional Brand

A storefront, a production facility, or a regional wholesale brand. Minnesota has strong institutional support for food entrepreneurs through organizations like the Agricultural Utilization Research Institute (AURI) and the University of Minnesota Extension's food business development programs.

AURI support UMN Extension DEED small business loans

📚 Resources