The rules where you work $17
A first 30 days checklist, everyday forms, licenses, workers’ comp and taxes for Minnesota, with a yearly calendar. Instant PDF download.
Buy the packet: $17Digital product, all sales final. Informational only, not legal, financial, tax or business advice.
What Minnesota expects from a new trade business
Minnesota draws its licensing line at how many skills you sell: one skill and you register instead of licensing, two or more contracting with a homeowner and you need a license. Lien law requires a printed warning in your contract, and subs can lose lien rights without a 45-day notice. Getting labeled an independent contractor is stricter here than most people expect.
The line is two special skills
The Department of Labor and Industry (DLI) licenses residential building contractors and remodelers. If you contract directly with the owner of a 1-to-4-unit home for work in two or more special skills (the statute lists eight, like carpentry, masonry and concrete, and excavation), you need a license, and your qualifying person has to pass DLI's exam. Remodelers can only touch existing structures. Roofers need their own license even though roofing is one skill.
One skill with a homeowner, all commercial work, and subs not dealing with the homeowner don't get this license. They register with DLI before working. Registration expires December 31 of odd-numbered years. Under $15,000 in gross annual receipts from this work, you can hold a Certificate of Exemption. That number is gross, before expenses. The statute exempts plumbers, electricians and mechanical contractors from this license. DLI says boiler, electrical, elevator, high-pressure piping and plumbing work needs a license, not a registration.
If you need the license, every proposal, estimate, contract and change order goes in writing with the services, materials and price, and the customer gets a signed, dated copy free. Sold at the customer's home, unasked? They can cancel until midnight of the third business day.
Doing licensed work without one can bring DLI enforcement. A city can't issue you a permit, and a knowing violation voids your lien. A construction attorney can tell you where your scope lands.
Source: Minn. Stat. 326B.805 (license requirement and exemptions) · Minn. Stat. 326B.802 (definitions, special skills) · Minnesota DLI: Residential contractor licensing · DLI, Construction Contractor Registration · Minn. Stat. 326B.701, contractor registration · Minn. Stat. 326B.809, written contracts · Minn. Stat. 326B.845, no lien for knowing violators · Minn. Stat. 326B.85, building permits · Minn. Stat. 325G.07, home solicitation cancel right
Who to call: an attorney near you
Comp for employees, and a hard test for independents
Minnesota has no employee-count threshold in its statute. Every employer liable for comp has to insure it, or get approved to self-insure.
Owners have room. Sole proprietors and business partners are excluded, though you can elect coverage in writing through your insurer. An LLC manager owning at least 25% is excluded too, if the LLC has 10 or fewer members and under 22,880 payroll hours last year. Same idea for an executive officer owning at least 25% of a closely held corporation.
Calling a crew member an independent contractor doesn't settle it, even if you're a sole proprietor. Under section 181.723, someone doing construction work for you is your employee unless they run a business meeting all 14 listed requirements, like a written contract signed within 30 days of starting and their own tools. Misclassifying someone can bring penalties up to $10,000 per person.
If a sub below you skips comp, you can owe his employee's benefits. Going uninsured can cost up to $1,000 per employee per week. An insurance agent who writes contractors can price this for you.
Source: Minn. Stat. 176.041 (excluded employments) · Minn. Stat. 176.181 (compulsory insurance, penalty) · Minn. Stat. 176.215 (subcontractors) · Minn. Stat. 181.723 (construction independent contractors)
Who to call: an insurance agent near you
Getting paid: notice in the contract, 120 days, 1 year
Minnesota makes the warning to the homeowner part of the lien itself:
- Contractors with the owner: if you'll use subs or suppliers, your written contract needs the statutory notice in at least 10-point bold type, and the owner gets a copy. No written contract? Deliver the notice by hand or certified mail within 10 days of agreeing to the work. Leave it out and you don't have the lien.
- Subs and suppliers: give the owner written notice within 45 days of first furnishing, in person or by certified mail. The statute makes this a prerequisite to a valid lien. A good-faith effort saves the lien unless someone proves damage from the failure.
- Lien statement: record it and serve a copy within 120 days of your last work. It has to be sworn and state the amount, work, dates, property and notice given.
- Suit: file a complaint or answer within 1 year of the last item shown on the recorded statement.
The owner can hold off paying the contractor for 120 days after completion, except against lien waivers from those who gave the 45-day notice. Where that notice applies, total liens can't exceed the contract price plus extras, less what the owner paid before any notice and certain other payments. So send it early. A knowingly unlicensed person has no lien.
The notices have exceptions for big jobs: wholly residential work over four family units, or nonresidential work over 5,000 square feet in some cases. A construction attorney can put the exact wording into your contract.
Source: Minn. Stat. 514.011 (pre-lien notices) · Minn. Stat. 514.08 (lien statement) · Minn. Stat. 514.12 (one-year limit) · Minn. Stat. 514.07, owner holdback · Minn. Stat. 514.03, lien amount · Minn. Stat. 326B.845, no lien for knowing violators
Who to call: an attorney near you
Pay tax on materials, never itemize it
On a construction contract, Minnesota wants tax from you, not your customer. You pay sales tax on materials, supplies and equipment when you buy them. If the supplier didn't charge Minnesota tax, you owe use tax on the price.
Then you pass it along as part of your material cost. The Revenue Department is direct: don't itemize sales tax on the invoice, and don't charge sales tax on construction contracts.
Retail is the other side. Selling items you don't install, or items that don't become part of the real property, is a taxable sale and you collect tax. If you do both, extra rules apply, based on whether you're mainly a contractor or a retailer. A CPA who works with contractors can sort that split.
Source: Minnesota Revenue: General Contractors and Subcontractors
Who to call: a CPA or tax pro near you
$135 in the statute, free renewal by December 31
Forming an LLC means filing articles with the Minnesota Secretary of State, and the statute sets the payment at $135. Filing online runs about $155. Confirm the total on the Secretary of State's site when you file. The yearly renewal is free, but it's due by December 31, and an LLC that misses it is administratively terminated. No publication and no franchise tax.
Pass-through profit gets taxed on your personal return at graduated rates: 5.35% to 9.85% for 2026. For a married couple filing jointly, the 6.8% bracket starts above $48,700 of taxable income.
An S-corp election is a numbers question. Bring what the business clears to a CPA who works with contractors.
Source: Minnesota Revenue: Income tax rates and brackets · Minn. Stat. 322C.0201, LLC formation · Minn. Stat. 322C.0208, annual renewal · Minn. Stat. 322C.0705, administrative termination
Who to call: a CPA or tax pro near you
Education, not legal or tax advice. Rules change. Confirm anything here with a licensed pro in Minnesota before you rely on it. Last updated November 2026.