How to Start a Residential Contracting Business in Minnesota: Building Contractor vs Remodeler License

If you searched for a general contractor license Minnesota, the answer is more specific than the search suggests. Minnesota has no general statewide business license, and the state's residential license is not called a general contractor license. For work on homes, the license comes from the Minnesota Department of Labor and Industry (DLI), and the first decision is whether you will build new homes or only remodel existing ones. Choose the wrong category and you either pay for a license you do not need or take jobs your license does not cover.

This guide walks through the steps in the order most new contractors should take them, the fees to budget for, and the mistakes that cost people time and money. It is informational content, not legal or tax advice. Talk to a qualified attorney and a CPA before you sign contracts or pick an entity type, especially if your projects are large or unusual.

Builder or remodeler: the decision that sets your license

DLI licenses two residential categories. Both apply when you contract with the owner of residential property with 1 to 4 units, and detached garages count as part of that property.

Category	What it covers	Typical work
Residential building contractor	New homes and existing homes	Building a new house from the foundation up, plus remodels and repairs on existing homes
Residential remodeler	Existing structures only	Kitchen and bath remodels, basement finishing, and other work on a house that already stands

The remodeler license is the narrower one. It does not reach new construction. If you plan to frame new houses, a remodeler license will not cover that work, so decide early which side of the line your business sits on.

A license is required when you contract for more than one of eight special skills under Minn. Stat. 326B.802. Doing a single skill on its own does not trigger the general license, but residential roofers are licensed separately even for one skill. DLI publishes the current list of special skills on its residential contractor pages. Check that list against every trade you plan to sell before you assume your work is covered.

If your gross annual residential receipts are under $15,000, you can hold a $10 Certificate of Exemption instead of the license. Confirm with DLI what the exemption covers and how it is renewed. Track your receipts from the start, because growing past the threshold changes what you need.

What you need before you start

Gather these items before you file anything. Several of them take weeks to arrange.

• A business name that meets Minnesota rules, and a decision on whether you will form an LLC or corporation
• A federal Employer Identification Number (EIN) from the IRS
• A Minnesota Tax ID and a sales and use tax account from the Department of Revenue
• Proof of liability insurance from an insurer or agent
• Documentation of workers' compensation compliance, including your plan for any employees
• Money for the $50 exam fee and the license and Recovery Fund fees
• A list of the special skills you will perform, and a plan to track 14 hours of continuing education every two years
• A list of cities and counties where you will work, so you can check local permit and license rules for each one

The steps, in order

Step 1: Pick your category and list your special skills

Write down every trade you will perform for a homeowner and mark the ones that fall under the special skills list. Then decide whether you are a builder or a remodeler. If any part of your plan involves new houses, the builder license is the one to target. Remember that a remodeler license only covers existing structures, so a business plan that starts with new builds will need the broader license from day one.

Step 2: Form your entity with the Secretary of State

Most contractors form an LLC or a corporation to separate business debts from personal assets. Minnesota charges $155 to file Articles of Organization online or in person, and $135 by mail. The name must include the words "limited liability company" or the abbreviation "LLC," and it may not include "corporation" or "incorporated" or their abbreviations. The name must also be distinguishable from every entity already on file in Minnesota. Search the records and file through the Business Filings Online portal at mblsportal.sos.mn.gov/Business/Search.

LLC and corporation formation does not require a newspaper publication. Filing with the Secretary of State is a filing, not a license. Your contractor license is a separate step with DLI.

Step 3: File an assumed name certificate if you trade under another name

If your business will operate under a name other than the exact name on your entity filing, you need a Certificate of Assumed Name. It costs $50 online or in person, or $30 by mail. After filing, the certificate must be published for two consecutive issues in the legal notices section of a qualified legal newspaper in the county of your principal place of business. Failure to publish may make the certificate invalid. The certificate must be renewed each year at no charge. Details are at the Secretary of State's assumed name page.

Step 4: Register for taxes and check your entity's tax treatment

Register with the Minnesota Department of Revenue for a Minnesota Tax ID and a sales and use tax account before you make taxable sales. The state sales tax rate is 6.875 percent, and local taxes are added on top. How sales tax applies to your contracts and materials is a question for your CPA.

Your entity choice also drives state tax. An LLC taxed as a partnership or disregarded entity passes income through to its owners, who pay Minnesota individual income tax at graduated rates from 5.35 to 9.85 percent. An LLC that files federally as a C corporation pays the 9.8 percent corporation franchise tax. A minimum fee under Minn. Stat. 290.0922 applies to C corporations, S corporations, and partnerships, while a single-member LLC that reports only on the member's individual return is exempt. Confirm which applies to you with a CPA. The Department of Revenue is at revenue.state.mn.us.

Step 5: Have the qualifying person pass the DLI exam

The license depends on a qualifying person who passes the DLI exam. The exam has 110 multiple-choice questions, and you need 70 percent to pass, which means at least 77 correct answers. The exam fee is $50. Minnesota sets no experience or education prerequisite, so you can sit for it without prior construction training. That lack of a prerequisite does not make the test easy. It covers code, contracts, and business practice, so study the material instead of relying on field experience alone.

Step 6: Arrange insurance and workers' compensation compliance

DLI requires proof of liability insurance and compliance with workers' compensation rules. Minnesota uses the Contractor Recovery Fund in place of a surety bond, so you do not post a bond as part of the license. Ask DLI which minimum coverage levels apply to your application, and get quotes from an agent who writes contractor policies before you apply. Do not guess at coverage amounts.

Step 7: Apply to DLI and pay the license and fund fees

The residential license fee is $180. You also pay a Contractor Recovery Fund fee based on your annual receipts: $320 for receipts under $1 million, $420 for $1 million to $5 million, and $520 for over $5 million. For a business under $1 million, the license and fund fees total $500 before the $50 exam fee. Confirm the current figures on DLI's fee schedule, because the fee tiers can change.

Note that the license number must appear on your contracts and in your advertising. Treat that as a compliance step, not a formality. Add it to your contract templates, website, vehicle signs, and online listings before you start taking work.

Step 8: Check local permits and city or county licensing

A state license does not replace local rules. Minnesota has 87 counties, about 853 cities, and about 1,780 townships. Many local governments require building permits, and some license contractors or trades on their own. Minneapolis and Saint Paul each license by category, and neither issues a general business license. Check the rules for every jurisdiction where you plan to work, and confirm fees with each city, county, or township before you bid. Do not assume that one city's rules apply in the next town over.

Step 9: Keep the deductible rule and the marketing rule in view

Minn. Stat. 325E.66 bars paying or rebating an insurance deductible. Do not advertise that you will cover a homeowner's deductible, and do not offer a rebate to win an insurance-claim job. Explain the deductible openly and let the homeowner handle it with their insurer.

Step 10: Schedule continuing education and keep records

Licensed contractors complete 14 hours of approved continuing education every two years. The hours must include 1 hour on the Energy Code and 1 hour on business management. Save every certificate, and calendar the renewal date when you receive your license.

Costs at a glance

Item	Cost	Where it is paid
LLC Articles of Organization	$155 online or in person, $135 by mail	Secretary of State
Certificate of Assumed Name	$50 online or in person, $30 by mail, plus newspaper publication	Secretary of State and a qualified newspaper
LLC Annual Renewal	$0, due December 31 each year	Secretary of State
LLC reinstatement, if you miss the renewal	$65 by mail, $85 online or in person	Secretary of State
DLI exam	$50	DLI
Residential license	$180	DLI
Contractor Recovery Fund fee	$320, $420, or $520 by receipts	DLI
Certificate of Exemption	$10	DLI
Liability insurance and workers' compensation	Varies by policy and payroll	Insurer. Get quotes.
Local permits and city or county licenses	Varies by jurisdiction	Check with each local government
Continuing education	Varies by provider	Course provider

Common mistakes to avoid

• Treating the LLC as your license. Filing Articles of Organization does not authorize residential contracting. The DLI license is a separate step.
• Choosing remodeler when you plan to build new homes. The remodeler license does not reach new construction.
• Missing the roofing license. Residential roofers are licensed separately, even for a single skill.
• Leaving the license number off contracts and ads. The number must appear on both.
• Relying on the $15,000 exemption after growth. Once your gross annual residential receipts pass the threshold, the exemption no longer fits your business. Track receipts monthly.
• Forgetting the December 31 renewal. The LLC Annual Renewal costs $0, but failing to file by December 31 leads to termination or revocation of the LLC without further notice. Reinstatement then costs $65 by mail or $85 online or in person.
• Using a trade name without publishing it. An assumed name certificate that is not published may be invalid.
• Putting "Corporation" or "Incorporated" in an LLC name. The Secretary of State will not accept that name for an LLC.
• Skipping local checks. A state license does not cover city permits or local licensing rules.

What to expect after you file

Schedule time to study before you pay for the exam. Once licensed, you may be able to bid on residential jobs that fall within your license categories, although the exact scope depends on your special skills and your receipts. The Secretary of State does not publish a guaranteed turnaround in business days, and this guide does not state DLI processing times, so confirm current timing on each agency's site before you plan a start date. Plan to take on your first paid job only after your license is issued and your insurance is in force.

Where to get help

The Minnesota Small Business Development Center Network, administered by the Department of Employment and Economic Development, offers business advising for new owners. Find your nearest center at mn.gov/deed/business/help/sbdc/. For license questions, go directly to DLI. For entity and tax questions, use the Secretary of State and the Department of Revenue, and bring the complex questions to a qualified attorney and a CPA.

Disclaimer

This article is informational only. It is not legal, tax, or licensing advice, and it does not create an attorney-client or accountant-client relationship. Fees, thresholds, and rules change. Confirm each figure with the agency named before you file, and consult a qualified attorney and a CPA about your entity choice, contracts, insurance, and tax obligations.