How to Start a Vacation Rental Business in Minnesota: MDH Lodging License Question, Taxes and City Permits

Renting a house, cabin, or condo to travelers is an accessible way to start a business in Minnesota, but the paperwork is less simple than most hosts expect. Minnesota has no general statewide business license. Instead, you assemble approvals by activity and by location: a lodging question to settle with the Minnesota Department of Health (MDH), tax registration with the Minnesota Department of Revenue, an optional business entity filed with the Secretary of State, and whatever permit or registration your city or county requires.

This guide shows you how to start a vacation rental business in Minnesota in the order that avoids the most expensive mistakes. Settle the local rules and the MDH question before you buy furniture or list the property.

Informational content, not legal or tax advice. This article explains how Minnesota rules generally work and where to confirm them. It is not legal, tax, or insurance advice. Local rules change, so confirm each item with the agency named before you act. For a complex situation, talk with a Minnesota attorney and a certified public accountant (CPA).

What You Need Before You Start

Gather these items first. Several steps ask for the same details, and missing one usually means a second trip to a government website.

• The property address and a floor plan showing every bedroom and other sleeping space. The MDH fee formula counts sleeping units, so you need an accurate count.
• Ownership or lease papers. If you rent the property rather than own it, your lease affects the lodging tax analysis, and you need the owner's written permission to host short stays.
• A legal business name and a backup name, both checked in the Secretary of State business search.
• A Minnesota street address for the registered office. A PO box by itself is not accepted.
• A federal Employer Identification Number (EIN) from the IRS. Many hosts need one for a business bank account, for hiring, or for an LLC or corporation.
• A fee budget built from the figures in this guide, plus a line for any local permit fee you confirm with your city.
• A conversation with your insurance agent. Standard homeowner's policies often exclude paid short-term guests, so ask about commercial or short-term rental coverage before you accept a booking.

Step 1: Choose Your Rental Model

How long guests stay changes which rules and taxes apply, so decide this first. Minnesota's lodging rules depend on how the stay is structured. Under Minn. Stat. 157.15, MDH defines a hotel or motel as sleeping accommodations furnished to the public for periods of less than one week, and MDH's lodging page lists vacation home rental in that category.

Lodging sales tax applies to rentals under 30 days, and also to stays of 30 days or more when there is no enforceable written lease. If you plan monthly stays under a signed lease, your tax and licensing position differs from a nightly or weekly rental. Put your model in writing before you list the property, and describe it the same way in your listing, your lease, and your tax registration.

Step 2: Check City, County, and Township Rules

Minnesota has 87 counties, about 853 cities, and about 1,780 townships. Your property's location decides which government controls zoning and short-term rental rules. In some townships, the township itself is the authority, so do not assume the county or a neighboring city governs your property.

Local rules vary widely:

• Minneapolis and St. Paul license hosts. Neither city issues a general business license, so the license is specific to short-term rentals.
• Rochester registers owner-occupied rentals.
• Other cities may require a permit, a registration, a zoning approval, or nothing at all. Do not assume that silence means no rules.

Call the city's zoning or licensing office and ask three questions: Is a short-term rental permitted in this zone? Is a license or registration required? Does the city collect a local lodging tax? Get the answers in writing or by email, and keep a copy in your records.

Step 3: Settle the MDH Lodging Question Before You List

This is the step most hosts skip. MDH licenses hotels and motels, and its lodging page lists vacation home rental in that category. Many hosts and guides, however, treat short-term rental as a local matter only. This article does not resolve that disagreement for you, and neither should you guess. Before you take a booking, ask MDH, or the county or city that holds delegated lodging inspection, whether your property needs a lodging license.

If MDH does license your property, the annual fee under Minn. Stat. 157.16 is built from these parts:

Fee part	Amount
Base annual fee	$300
Per sleeping unit	$15 per unit, subject to a $1,500 cap
Statewide hospitality fee	$50
Technology fee	$5
Plan review for new lodging with under 25 rooms (paid before opening)	$450

As an example, a house with four sleeping units would total $415 a year under this formula ($300 base, $60 for units, $50 hospitality fee, and $5 technology fee). Your actual figure depends on how MDH counts sleeping units in your home, so confirm that count and the current fee schedule with MDH before you budget.

Step 4: Decide Whether to Form an LLC or Corporation

You can operate under your own name without filing a formation document with the Secretary of State. Many hosts form an LLC anyway to keep the property's liabilities separate from personal assets. That separation depends on how you run the business, including separate bank accounts and written leases, so ask an attorney whether it fits your situation.

If you form an LLC, here is what to expect:

• Articles of Organization under Minn. Stat. Chapter 322C cost $155 online or in person, which is expedited service, or $135 by mail, which is not expedited.
• Name rules: the name must include “limited liability company” or “LLC.” It may not include “corporation” or “incorporated,” or their abbreviations, and it must be distinguishable from every other entity on file in Minnesota (Minn. Stat. 322C.0108).
• Name reservation holds a name for 12 months for $55, and you can renew it for additional 12-month periods. The form is at https://www.sos.mn.gov/media/1395/namereservation.pdf.
• Registered office: you need a Minnesota street address. A registered agent is optional for a domestic LLC.
• No publication is required for an LLC or corporation.
• Annual Renewal costs $0 and is due every December 31. If you miss it, the LLC is terminated or revoked without further notice under Minn. Stat. 322C.0705. Reinstatement costs $65 by mail or $85 online or in person.

A corporation is filed under Minn. Stat. Chapter 302A with Articles of Incorporation at the same $155 filing fee, and it has the same December 31 renewal. Missing that date dissolves the corporation without further notice under Minn. Stat. 302A.821.

Filing an entity with the Secretary of State is a filing, not a license. Search the name first at https://mblsportal.sos.mn.gov/Business/Search, and file through Business Filings Online (the Minnesota Business and Lien System, MBLS) from the same site.

Step 5: Register an Assumed Name if You Use a Brand

If your listing uses a brand that differs from your legal name, such as “Lakeside Cabins” for an LLC named “Smith Properties LLC,” you need a Certificate of Assumed Name under Minn. Stat. Chapter 333.

• Fee: $50 online or in person, or $30 by mail.
• Where: the Secretary of State's Business Services office. Details are at https://www.sos.mn.gov/business-liens/business-forms-fees/assumed-namedba/.
• Publication: after filing, publish the certificate 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 render the certificate invalid.
• Renewal: renew every year at no charge.

Publication is the surprise for most people. An LLC does not need it, but a DBA does, so budget time and money for the newspaper notice.

Step 6: Register With the Department of Revenue

Register for a Minnesota Tax ID and a Sales and Use Tax account before you make any taxable sale. The online registration is at https://www.mndor.state.mn.us/tp/eservices/_/?link=NewBusinessReg. This registration is a tax account, not a license.

Your main tax obligations as a host are:

• Lodging sales tax: the state rate is 6.875 percent, and local taxes are added on top. As noted in Step 1, it applies to rentals under 30 days and to stays of 30 days or more without an enforceable written lease.
• Local lodging taxes: some cities add a lodging tax that the Department of Revenue administers. Its list includes Fairmont (from January 1, 2026), Northfield (3 percent from October 1, 2026), Plymouth, Rochester, Woodbury, Richfield, Minneapolis, and St. Paul, among others. The list changes, so check the current version at https://www.revenue.state.mn.us/ before you set your rate.
• Income tax: a single-member LLC that reports only on the owner's individual return is not a separate taxpayer for this purpose. Its profit passes through to the owner, who pays Minnesota individual income tax at 5.35 to 9.85 percent. An LLC taxed as a C corporation pays the 9.8 percent corporation franchise tax instead. Minnesota has no separate LLC franchise tax.
• Minimum fee: Minn. Stat. 290.0922 sets a minimum fee for C corporations, S corporations, and partnerships. It is $0 below $1,280,000 of Minnesota property, payroll, and sales, and rises in brackets to $12,830 at $51,280,000 and above for 2026. Single-member LLCs that report only on the member's individual return are exempt.

Ask a CPA which tax treatment fits your situation, because the choice affects how you pay yourself and how you file.

Step 7: Check Licenses for Any Added Service

Minnesota issues licenses by trade and activity, not by business type. If you add services beyond a bed, such as meals, alcohol, transportation, or instruction, each one may need its own approval. Search the License Minnesota database at https://mn.gov/elicense by topic, by agency, or through the A to Z index. Relevant agencies include the Department of Labor and Industry (DLI), MDH, the Minnesota Department of Agriculture (MDA), the Alcohol and Gambling Enforcement Division, the Office of Cannabis Management, the Minnesota Department of Children, Youth, and Families (DCYF), MnDOT, the Driver and Vehicle Services (DVS) division, and the professional boards.

Do not assume a service is exempt because it seems small. Confirm each one with the agency that governs it.

Step 8: Get Help From Public Resources

The Minnesota Small Business Development Center Network, administered by the Department of Employment and Economic Development (DEED), offers business advising at https://mn.gov/deed/business/help/sbdc/. The U.S. Small Business Administration's Minnesota district page at https://www.sba.gov/district/minnesota lists additional support. Bring your rental model, your city's answers, and your MDH question so an advisor can help you use your time well.

Tips and Common Mistakes to Avoid

• Treating a state filing as a license. An LLC, a DBA, and a Tax ID do not authorize you to rent a property. Your city and MDH questions remain open until you answer them.
• Listing before the MDH question is settled. A listing creates bookings, and bookings create obligations. Settle the question first.
• Using a PO box as the registered office. Minnesota requires a street address.
• Missing the December 31 renewal. A missed LLC renewal triggers termination or revocation without further notice, and reinstatement costs $65 by mail or $85 online or in person.
• Skipping newspaper publication for a DBA. A certificate that is not published may be invalid.
• Collecting tax before registering. Register for the Tax ID and Sales and Use Tax account before your first taxable booking.
• Confusing a monthly stay with a nightly rental. A signed written lease of 30 days or more changes the tax treatment. An unsigned or unenforceable arrangement does not.
• Forgetting the local lodging tax. Some cities add their own tax on top of the state rate, so check your city before you set prices.
• Naming an LLC without “LLC.” The name must include “limited liability company” or “LLC.”

Expected Results

If you complete these steps, you may end up with a documented rental model, a clear answer on the MDH question, a registered tax account, and a formation and naming structure that fits your plans. You may also have a written record of your city's rules that you can point to if a question comes up later. These outcomes are not guaranteed, because results depend on your property, your local rules, and the guests you attract.

The Secretary of State does not publish a guaranteed turnaround for its filings, so file early and do not schedule a launch date that depends on a specific processing time. Plan for the MDH and city steps to take longer than you expect, since they often require a human answer.

Your Annual Calendar

• December 31: file the Annual Renewal for your LLC or corporation at $0 if it is in good standing.
• Every year: renew your assumed name certificate at no charge, if you have one.
• On the Revenue schedule: file and pay sales and lodging taxes as the Department of Revenue requires for your account.
• On the MDH schedule: pay any annual lodging fee if MDH licenses your property.
• Before any change: recheck your city's rules if you add bedrooms, change your rental length, or change ownership.

Next Steps

Start with the questions that can block you: the city's answer, the MDH answer, and your insurance coverage. Then handle the filings in the order above. Confirm every fee and deadline with the named agency before you pay, since government fee schedules and local rules change.

Reminder: this article is informational content, not legal or tax advice. For a purchase, a multi-owner property, or a property with a mortgage or a landlord, speak with a qualified Minnesota attorney and a CPA before you form the business or start taking bookings.