How to Start a Bed and Breakfast in Minnesota: MDH Hotel/Motel License and Food Rules

If you are looking into how to start a bed and breakfast business in Minnesota, begin with a fact that surprises most first-time owners: the state does not issue a general business license. You form or register the business with the Minnesota Secretary of State, register for taxes with the Minnesota Department of Revenue, and confirm zoning with your city, county or township. The license that matters most for a bed and breakfast is the hotel/motel license issued by the Minnesota Department of Health (MDH). Under Minnesota Statutes chapter 157, MDH treats a bed and breakfast as lodging, and if you serve breakfast, a food category applies on top of that.

This guide covers the order to do things in, the fees on the current MDH schedule, and the mistakes that cost owners money. It assumes you are buying or converting a house and have not opened yet. If you already own the building, the zoning and plan review steps still come first.

What you need before you start

Gather these documents before you file anything. Several steps depend on the same information, and a missing item usually means a second trip to a city office or a delayed plan review.

• A business name checked against existing records in the Secretary of State business search.
• A Minnesota street address for the registered office. A PO box by itself is not accepted.
• A written zoning answer from your city, county or township about operating a bed and breakfast at the property.
• A floor plan showing guest rooms, bathrooms, exits, the kitchen and the breakfast area.
• Water and sewage records: the municipal connection, or the well and septic records if the property is not on city service.
• A written breakfast menu listing every food you will serve, so MDH can assign the correct food category.
• A budget that covers filing fees, plan review, the annual license, renovation, furnishings, insurance and several months of operating cash.
• An insurance quote for commercial liability coverage, since paying guests will be on the property.
• Tax identifiers: a Minnesota Tax ID and a sales and use tax account, which you get from Revenue before you take taxable payments.

Step-by-step: how to start a bed and breakfast business in Minnesota

Step 1: Confirm zoning before you buy or sign anything

Zoning is the step most likely to stop a project outright, so do it first. Minnesota has 87 counties, about 853 cities and about 1,780 townships, and the answer depends on which one the property sits in. A house inside city limits follows city zoning. A house in an unincorporated township may follow county rules, and township rules can apply as well.

Ask four specific questions in writing: whether a bed and breakfast with your planned number of guest rooms is a permitted use in that zone, whether a conditional use permit or variance is required, how parking is handled, and whether the septic system or well can support guest traffic. A verbal "should be fine" from a clerk is not enough to rely on when you are committing money.

Step 2: Choose a business structure and file it

A sole proprietorship needs no formation filing with the Secretary of State, but most owners of a guest house choose an LLC for liability separation. Under Minnesota Statutes chapter 322C, the Articles of Organization cost $155 filed online or in person and $135 by mail. Mail filings are not expedited. LLCs and corporations do not publish a notice when they form.

After formation, the LLC files an Annual Renewal, which costs $0 and is due December 31 every year. Miss it and the LLC is terminated without further notice. Reinstatement costs $65 by mail or $85 online or in person under the current Secretary of State fee schedule.

Tax treatment depends on how the entity is classified. An LLC taxed as a partnership or disregarded entity passes income to the owners, who pay Minnesota individual income tax at 5.35, 6.80, 7.85 or 9.85 percent. An LLC that files federally as a C corporation pays the 9.8 percent corporation franchise tax. A minimum fee under Minnesota Statutes 290.0922 applies to C corporations, S corporations and partnerships, and single member LLCs that report only on the owner's individual return are exempt. Have a CPA confirm which applies to you before you pick a structure.

Step 3: Handle the business name

If you will operate under a name other than your legal name or your LLC's name, you need a Certificate of Assumed Name, which is the DBA. It is filed only with the Secretary of State, Business Services, and costs $50 online or in person or $30 by mail. Filing is not the end of the job. The certificate must be published for two consecutive issues in the legal notices section of a qualified legal newspaper in the county where your principal place of business is located. Failure to publish may make the certificate invalid. The certificate must be renewed each year at no charge.

An LLC name must contain "limited liability company" or "LLC" and may not contain "corporation" or "incorporated" or their abbreviations. It must also be distinguishable from every domestic LLC, LLP, corporation and limited partnership on file in Minnesota. If you want to hold a name while you finish zoning and plan review, a name reservation is $55 for 12 months and can be renewed in 12-month periods. Use the Secretary of State name reservation form to request it.

Step 4: Set up a registered office and tax accounts

Minnesota requires a registered office, not a registered agent. For a domestic LLC or corporation, naming an agent is optional. The registered office must be a Minnesota street address, and it does not have to match your guest house address. It is a good idea to use the property address if the house is in Minnesota, but confirm with the Secretary of State that your choice is valid for your situation.

Register with the Department of Revenue for a Minnesota Tax ID and a sales and use tax account. You must have these before you make taxable sales. Use the Revenue new business registration page to apply. The state sales tax rate is 6.875 percent, and local taxes are added on top. Room charges and related taxable sales at a bed and breakfast are generally subject to sales tax, but confirm with Revenue how your room rates and breakfast charges are treated, and ask your city whether a local lodging tax applies, before you publish your first rate.

Step 5: Submit plans for MDH plan review before you open

Plan review is required before the lodging license can be issued for new or remodeled lodging, and the fee depends on the project type. For new lodging under 25 rooms, the plan review fee is $450. For a remodel, it is $300. Extensive remodels of existing lodging pay the remodel fee. Cabins follow a separate schedule: $400 for new cabins under five, or $300 for remodels.

Whether your project counts as "new" or "remodel" changes the fee, and the answer depends on what you are changing and how much. Call MDH with your floor plan and scope of work before you pay anything, and get the classification in writing.

Step 6: Apply for the hotel/motel license

Under Minnesota Statutes 157.16, the annual license for a bed and breakfast has several parts. The base fee is $300 plus $15 per sleeping unit. The schedule shows a $1,500 maximum, and you should ask MDH whether that cap applies to the total or only to the per-unit portion before you budget. A $50 statewide hospitality fee and a $5 technology fee are also charged each year.

Use License Minnesota to find the current application and the list of licenses that apply to your activity. Do not open to guests before the license is issued. Operating without a license adds a $200 penalty, and the penalty rises to $450 after 30 days.

Step 7: Confirm the water and sewage category

If the property runs on a private well or a private septic system, MDH adds $85 per category. Ask MDH which categories apply to your water and sewage setup before you finalize the budget, and get any required well or septic records in order before the plan review. Owners who buy a rural property and skip this question often find the cost after they have signed the purchase agreement.

Step 8: Pick the breakfast food category

Breakfast adds a food fee category on top of the lodging license. A continental breakfast of rolls, coffee, juice and cold cereal is Category 1 at $185. A cooked menu moves you to Category 2 at $430 or Category 3 at $670, depending on the food risk of what you serve. Describe your menu accurately in the application. Describing a cooked breakfast as continental is a common and expensive error, because the category is assigned from the menu you submit.

Decide on the menu before you draw the kitchen layout. If you want to serve eggs or hot entrees, plan the kitchen for that from the start rather than retrofitting it after plan review.

Step 9: Check city and local licenses

Minnesota has no general statewide business license, and the cities follow the same pattern. Minneapolis and St. Paul license by category, and neither issues a general business license. Minneapolis also licenses bed and breakfasts at $179 under its 2026 license fee schedule. Check the St. Paul category list and the list for your own city or county before you open, since a city license is separate from the MDH license.

Step 10: Check alcohol and any staffing requirements

If you plan to serve wine, beer or other alcohol to guests, that is a separate licensing question. Check with the Alcohol and Gambling Enforcement Division and your city before you pour anything. If you plan to hire staff, check with the Department of Labor and Industry (DLI) and Revenue about employer registration and withholding before your first hire.

Step 11: Inspect, open and calendar your renewals

Once plan review is approved and your city and state items are in place, schedule any required inspections before opening day. Then build a renewal calendar that includes the MDH annual license, the LLC Annual Renewal due December 31, the DBA renewal and any city license renewals. Missed renewals are the most avoidable problem an operating bed and breakfast faces.

Fees on the current MDH schedule

The table below collects the figures used in this guide. Confirm each one on the agency page before you budget, because fee schedules change.

Item	Amount	Notes
Annual hotel/motel license base fee	$300	Plus $15 per sleeping unit; schedule shows a $1,500 maximum, confirm how the cap applies
Statewide hospitality fee	$50	Annual
Technology fee	$5	Annual
Breakfast Category 1	$185	Continental: rolls, coffee, juice, cold cereal
Breakfast Category 2	$430	Cooked menu, assigned by food risk
Breakfast Category 3	$670	Cooked menu, assigned by food risk
Plan review, new lodging under 25 rooms	$450	Before opening
Plan review, remodel	$300	Extensive remodels of existing lodging pay this fee
Plan review, new cabins under five	$400	Cabins only
Plan review, cabin remodel	$300	Cabins only
Operating without a license	$200	Rises to $450 after 30 days
Private well or septic	$85 per category	Confirm which categories apply with MDH
Minneapolis bed and breakfast license	$179	2026 city fee schedule; separate from MDH

As an illustration, a four-room house serving continental breakfast would owe $415 in base, hospitality and technology fees under the figures above, plus the $185 Category 1 food fee, for $600 in those items. That total excludes plan review, the entity filing, the DBA, the well or septic add-on, any city license and insurance. Confirm with MDH whether the food category fee follows the same annual cycle as the license.

Common mistakes to avoid

• Buying before zoning is confirmed. A verbal answer from a city desk is not a zoning approval. Get it in writing before you commit.
• Taking bookings before the license is issued. The $200 penalty rises to $450 after 30 days, and a booking calendar makes it hard to stop operating once guests are scheduled.
• Describing a cooked breakfast as continental. The food category follows the menu you submit, and a mismatch can mean reclassification and a higher fee.
• Skipping the well and septic question. The $85 per category add-on is easy to miss in a rural purchase budget.
• Forgetting the DBA publication. A certificate that is not published may be invalid, which can affect the name you are using on bookings and bank accounts.
• Leaving out "limited liability company" or "LLC" from an LLC name. The name must comply with Minn. Stat. 322C.0108 or the filing will not work.
• Using a PO box for the registered office. Minnesota does not accept a PO box by itself.
• Missing the December 31 Annual Renewal. An LLC that does not file is terminated without further notice, and reinstatement costs $65 by mail or $85 online or in person.
• Charging guests before sales tax registration. You need the Minnesota Tax ID and sales and use tax account before you make taxable sales.

Tips that save time

• Call MDH before you draft plans. A short call about classification can prevent a redesign and an extra plan review cycle.
• Get the zoning answer and the plan review classification in writing. Both documents will matter when a lender, insurer or inspector asks questions later.
• Use free advising. The Minnesota Small Business Development Center Network, administered by DEED, can review your plan without charge. The SBA Minnesota district office page lists local resources.
• Keep one folder for everything. Filing receipts, plan review letters, the zoning answer, the license and the renewal dates belong in one place.

What to expect after you open

A licensed, properly zoned bed and breakfast may be positioned to avoid the delays and penalties described above, and that is the realistic benefit of doing the paperwork in order. Revenue depends on location, season, pricing, marketing and how well the property is run, and this guide makes no prediction about any of those. Treat your first year as a test period: track occupancy, costs and the breakfast food category against your budget, and revisit the plan with a CPA once you have real numbers.

Important disclaimer

This article is informational content, not legal or tax advice. Entity choice, tax treatment, zoning and licensing depend on your specific facts and may change. Talk with a qualified Minnesota attorney and a CPA before you sign a purchase agreement or lease, and confirm every fee, deadline and classification with the agency that issues it before you budget or file.