Minnesota Economy Overview

Currency

US Dollar (USD)

Working hours

40 hours/week

Public/bank holidays

11 public holidays

Capital

Saint Paul

Languages

English 

Population

Approx. 5.7 million

Minimum hourly salary

$11.59 (USD)

Tax year

1st Jan – 31st Dec

Date format

MM/DD/YYYY

Misclassification penalties

Employers in Minnesota who misclassify workers as independent contractors may be subject to penalties, back pay, and owed benefits under state and federal law. The Minnesota Department of Labor and Industry enforces compliance and may also impose legal consequences.

Fun fact

Minnesota is known as the “Land of 10,000 Lakes,” but it actually has over 11,800 lakes. It’s also the birthplace of iconic brands like Target and General Mills and the home state of music legend Prince.

Tourist attractions, including scenic lakes and forests, along with economic growth and an active job market, are only a few reasons to do business in Minnesota. 

Minnesota is a vibrant state with economic strengths in the manufacturing, agricultural, and technology sectors. Favored for its stability and innovation, the North Star state is ranked as the top region for healthcare and accessing attractive economic opportunities. 

The state’s diverse economy, in addition to its central location, provides businesses with the best possible start for successful expansion. Interestingly, Minnesota is the home of 17 popular Fortune 500 companies, including Target and General Mills. 

Minnesota has an active workforce that is highly skilled. To hire the local top talent, you’ll need to follow the local labor laws as per the Minnesota Department of Labor and Industry. 

Whether hiring a workforce or incorporating a business, discover how to effectively expand your international business in the State of Minnesota. This includes understanding local business regulations, reasons to expand locally, and how working with third-party services such as an Employer of Record and recruitment agency can connect you to the best talent.

Overview of Minnesota's Economy

Minnesota is backed by a diverse economy with industries including finance, manufacturing, and healthcare contributing to GDP growth. The largest sector is manufacturing, having generated $57.7 billion in 2023 with exports amounting to $22.5 billion for the same year. Minnesota’s 2023 GDP reached $390.9 billion, with growth expected to continue across key sectors.  

The state’s economic development is further attributed to its foreign investment. There are 1200 international companies that are based in Minnesota with investments totaling $40 billion across property and manufacturing sectors.

Sector
Contribution to Minnesota’s Economy
GDP Growth
Minnesota’s GDP reached $390.9 billion in 2023, supported by diversified sectors such as healthcare, finance, and advanced manufacturing. Continued growth is projected.
Manufacturing Sector
Manufacturing is Minnesota’s largest economic driver, generating $57.7 billion in 2023. Exports from the sector totaled $22.5 billion, highlighting strong global demand.
Foreign Investment
Over 1,200 international companies have invested nearly $40 billion in property and manufacturing projects, fueling long-term growth.
Skilled Workforce
Minnesota boasts a highly educated workforce, with 90% high school completion and 38.8% holding a degree. The state leads in employment for healthcare, machinery, electronics, and food production.

Minnesota’s skilled workforce is a contributor to its economic resilience, with over 90% of the population having completed high school and approximately 38.8% of the population possessing a degree. The state has the highest employment rates with specialized skills in the medical, electronics, machinery, and food production industries.

Taxes

Employer Tax: 7% - 14%

Social Security (FICA)

6.2% 

Medical Insurance (FICA)

1.45% 

Federal Unemployment Tax (FUTA)

6.00% (first $7,000)

Paid Family & Medical Leave (PFML)

~0.7% total (shared)

State Unemployment Insurance (SUI)

~0.1% – 9.1%

Employee Tax: 7.65

Social Security (FICA)

6.2% 

Medical Insurance (FICA)

1.45% 

Income Tax

Minnesota has a progressive state income tax system, meaning tax rates increase with higher income levels. Unlike some states, Minnesota taxes most types of income, including wages, business income, and certain retirement benefits.

Gross Income

Up to $32,570

$32,570 – $106,990

$106,990 – $198,630

More than $198,630

Tax Rate

5.35%

6.80%

7.85%

9.85%

Business Regulation in Minnesota

In Minnesota, businesses must adhere to several regulations when expanding in the state. This includes adherence to registration procedures when incorporating and paying the relevant taxes as follows:

Business Registration Procedures

Businesses incorporating in Minnesota must register with the Minnesota Secretary of State. You can set up a corporation or an LLC, but remember that each type of organization has its own set of tax laws and regulations.

Carefully assessing these requirements will help you determine which entity is best for your professional needs. Every new company requires an EIN from the IRS, and lastly, one must obtain the relevant business license depending on one’s location and professional activities.

Investment Incentives

The state offers a series of tax credits and financial incentives to encourage investment. New businesses can access the Minnesota Job Creation Fund, which provides qualifying companies up to $1 million based on the business location, total jobs created, and wages paid.

A tax exemption program of up to seven years for certified businesses is the Greater Minnesota Job Expansion Program. Companies must prove increases in employment by 10% and satisfy specific wage requirements. 

Other types of incentives in the state include tax credits such as the Border Cities Enterprise Zone Program and direct financial assistance through the Minnesota Investment Fund (MIF). Furthermore, the state provides training grants and tax exemptions for eligible businesses.

Tax Policies

Corporate income tax rates in Minnesota are considered fairly high at 9.8% with a combined state and domestic sales tax of 8.04%. The state offers a flat tax rate, simplifying tax calculations and reporting. In Minnesota, businesses must file both federal and state income tax returns with the Department of Revenue.

What Are the Benefits of Doing Business in Minnesota?

Minnesota has become a popular choice for workforce expansion owing to its economic strength, strategic location, and high quality of life. Discover the benefits of doing business in the state:

  • Business incentives: To encourage local and international investment, Minnesota’s government offers several incentives for businesses, including tax credits and exemptions, in addition to accessing grants and loans based on business activity, location, and eligibility.
  • Central location: The state’s central location provides easier access to international and domestic markets. The state’s sound infrastructure makes traveling to major cities by car, train, or plane easier and faster.
  • Good infrastructure: Minnesota has excellent infrastructure and is ranked as having the safest roads nationally. In addition to road safety, the state has eight airports and four major ports. The Infrastructure Investment and Jobs Act has dedicated over $4 billion worth of federal funding for further infrastructure development and improvement.

What Are the Downsides of Doing Business in Minnesota?

Understanding possible challenges of doing business in Minnesota can help businesses mitigate potential risks for successful expansion:

  • Government reforms: Recent government reforms may affect both small and large enterprises with increases in hourly minimum wage rates and the introduction of mandates such as the Paid Family and Medical Leave (PFML), which comes into effect in 2026. 
  • Stringent environmental regulations: Minnesota has fairly strict federal environmental regulations, which can impact small businesses in terms of compliance costs and challenging laws. Partnering with a service provider, such as an EOR, can assist all-sized companies with adherence to various business regulations. 

International Expansion into Minnesota

When you’re prepared for business expansion into Minnesota, you can establish a subsidiary or branch, or you can hire the services of a recruitment agency, Professional Employer Organization (PEO), or an EOR to support hiring a workforce.

Minnesota Employer of Record (EOR)

A professional EOR in Minnesota provides payroll and employee benefits administration along with onboarding, the termination of employment contracts, and hiring job candidates. You can partner with an EOR without a legal entity, making expansion easier, more efficient, and more cost-effective. Minnesota’s Employer of Record services will help all businesses with compliance.

Recruitment Agency

Looking for the right job candidates to establish a workforce in Utah can be time-consuming and challenging without connections to the necessary networks and knowledge of labor laws. Fortunately, in Utah, a recruitment agency simplifies hiring by posting job ads, doing background checks, and connecting employers to large pools of candidates suited to the position.

Minnesota Professional Employer Organization (PEO)

A Minnesota PEO is also known as an HR service provider, and they act as the co-employer of the workforce. PEOs can assist with employee management, including the administration of benefits and payroll. A PEO provides compliance, and they aid in hiring suitable employees. In Minnesota, you must have a legal entity to hire a PEO.

Subsidiary Incorporation

To incorporate a subsidiary in Minnesota, businesses must follow these steps:

  • Choose your business structure and file Articles of Incorporation with the Minnesota Secretary of State if you are a corporation. Articles of Organization are filed for LLCs.
  • Assign a registered agent residing in Minnesota and pay the requested filing fees.
  • A tax identification number is required by all sized businesses, and a business bank account must be opened.
  • When incorporating an LLC, an operating agreement must be issued, whereas a corporation requires an outline of the bylaws.
  • Obtain an EIN from the IRS and a tax ID from the Minnesota Department of Revenue.

From January 2024, all businesses must deliver beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). Businesses formed on or after January 2024 must deliver the information within 30 days of formation as per the Corporate Transparency Act.

Branch Registration

A branch can be opened in Minnesota, but you will have to register with the Minnesota Secretary of State. A Nationwide Multistate Licensing System (NMLS) processing fee costs around $20, but there is no branch registration fee. It is important to note that Minnesota does not require a special license for establishing a branch.

Staffing Agency

The role of a staffing agency is to match potential employees to the job requirements for temporary, contract, and permanent positions. Staffing agencies make the hiring process easier and more cost-effective.

Business Opportunities in Minnesota

Minnesota is an attractive state for expansion in the United States because of its economic strength and diversity. The central location facilitates domestic and international trade while tax credits and incentives encourage investment from local and global businesses. 

The state’s positive GDP growth is attributed to its development in manufacturing, agriculture, and technology. These sectors offer valuable business investment opportunities by keeping up with international standards and consumer demands. 

Business Opportunity
Reason
Medical Technology and Devices
Home to global leaders such as Medtronic, supported by a strong innovation and research ecosystem.
Food Processing and Agribusiness
Major producer of corn, soybeans, and processed foods with strong domestic and export potential.
Clean Energy and Sustainability
State incentives and growing demand for solar, wind, and environmentally focused solutions.
Software and IT Services
Rapidly expanding technology sector supported by universities and a strong talent pipeline.
Logistics and Supply Chain
Central US location with extensive rail, highway, and river transportation access.

With its business-friendly resources, access to major markets, and deep industry expertise, Minnesota offers an ideal platform for entrepreneurs ready to innovate. Whether you’re launching in healthcare, sustainability, or tech, the state provides the infrastructure and talent to help your business thrive.

For successful workforce expansion in Minnesota, you can partner with a professional EOR or rely on the services of a recruitment agency. While an EOR assists with compliance and outsourcing services such as payroll, recruiters will save time and costs in hiring and placing driven and skilled employees.

Expand into Minnesota with Remote People

To expand your workforce while taking advantage of seamless market entry solutions, Remote People is here to help. Remote People can connect you to local top talent and ensure that your business benefits from a high-performance and qualified labor force.

To learn more about expansion into Minnesota, get in touch with Remote People’s local business expansion experts.