Entrepreneurs in Minneapolis face lengthy processes when trying to get their businesses off the ground. Although city websites—including a user-friendly business portal—do a fairly good job of providing detailed information to applicants, officials must streamline the actual rules for starting a business and reduce barriers that disproportionately target low-income entrepreneurs who are most in need of access to economic opportunity.
In Minneapolis, the cost, delays, and complexity imposed by the regulatory process for small businesses make it difficult—or sometimes even impossible—for entrepreneurs to start up.
Entrepreneurs in Minneapolis often encounter high licensing and permitting fees. For example, brick-and-mortar businesses sometimes must pay a Sewer Availability Charge—absent in many other cities—that can add thousands of dollars to the cost of starting up. This means that a restaurant must pay a staggering $13,973 to get to opening day.
Verifying zoning for the ideal property can be tricky—and unforeseen restrictions in the code, like needing to apply for a conditional land-use permit, can delay the regulatory process for entrepreneurs.
An aspiring restaurateur must go through a lengthy process to complete 69 steps to get started—including completing 18 forms and interacting with 14 agencies. For a barbershop, those numbers reach 58 steps, 18 forms, and 12 agencies. Additionally, with 115 categories on the books, Minneapolis’ business licensing burdens outweigh those of most of the cities studied in this report. High numbers of license categories make it more complicated for entrepreneurs to determine which license (or licenses) they need to start their business.
Starting a Business in Minneapolis: By the Numbers
We calculated this metric by totaling the fees for all the licenses, permits, and registrations each business needs to get started.
Number of Fees
We calculated this metric by counting how many fees governments impose on each business for completing registrations and paperwork.
We calculated this metric by totaling the number of agencies entrepreneurs must work with in order to get up and running—whether in the form of submitting paperwork to an agency’s staff, or in terms of abiding by regulations that an agency has promulgated.
We calculated this metric by counting the number of compliance activities each entrepreneur needs to complete in person, rather than online or by mail.
Number of Forms
We calculated this metric by counting the various forms and applications each business needs to submit
Number of Steps
We calculated this metric by totaling the discrete tasks an entrepreneur must complete to start each of the business types.
Applicants must have “clean hands” before obtaining a license or permit—meaning that they cannot owe debt to the city. This rule deters lower-income entrepreneurs and vulnerable residents from applying for licensure.
Minneapolis charges an abnormally high fee of 20% of the original license application fee for late renewals.
First-time applicants also automatically pay a $135 surcharge to obtain a new license.
Some applications for city licenses, such as those for a restaurant or food truck license, force applicants to undergo criminal history checks, making it difficult for some vulnerable residents and returning citizens to start a business.
Of our five model business types studied, the two most accessible to entrepreneurs starting out small face unique restrictions. Home-based businesses are limited to one non-resident employee. Food trucks are unable to operate within 100 feet of a sidewalk café or restaurant on the same block face.
At the state level, barbers cannot be licensed if they have not completed the 10th grade. The barber application process also checks for delinquency on Minnesota taxes.
Accommodations for New or Small Businesses
Rather than preventing it from operating altogether, city officials may issue a special permit to a business that does not fit into existing business license categories.
When a business license is issued for less than a full year, the corresponding fees are prorated to ease the financial burden placed on the applicant.
Officials and policymakers have the opportunity to make it cheaper, faster, and simpler to start a business in Minneapolis. City officials should:
Lower fees for obtaining business licenses and permits. Introduce flexible fee schedules that allow smaller-scale ventures to invest startup capital in the business rather than spend it on expensive regulatory compliance. Reduce late fees.
Ensure the city’s new website integrates seamlessly with the Minneapolis Business Portal and fix broken links. Further centralize information on permitting and licensing.
Simplify processes to obtain licenses and permits by combining steps and streamlining the forms entrepreneurs must file.
Eliminate the “clean hands” requirement and limit criminal background checks to occupations where the conviction is directly related to the work to be performed.
Reduce restrictions on businesses that are most accessible to those seeking to start small. Eliminate the proximity restriction on food trucks and allow home-based businesses to have more than just one non-resident employee.
Work alongside state officials to remove state barriers that single out returning citizens and low-income residents.
When Debbie Carlson started Faces Etc of MN, a multimedia makeup school in Minneapolis, her goal was to teach aspiring artists how to turn their passion for beauty into a sustainable career. At the time, makeup schools were few and far between, and going through expensive cosmetology training meant learning skills that were irrelevant to the makeup industry. It was a trend that Debbie intended to buck by opening Faces Etc of MN, despite the many difficulties she would face dealing with state government agencies. First, she was denied a license by the Minnesota Office of Higher Education, which had never heard of a makeup school and told her it sounded like piano lessons. After pushing back and educating officials on her business model, she was issued a license that costs $1,350 annually and requires annual completion of a packet of paperwork and requirements that takes Debbie three months to address. On top of all that, in 2018 the Minnesota Board of Cosmetology began harassing practitioners in Debbie’s industry, assessing massive fines to makeup artists in an effort to force them to get licensed (which in turn required spending thousands of dollars on unnecessary cosmetology training). Debbie fought back, and with the help of the Institute for Justice, convinced legislators in 2020 to exempt makeup artistry from the Board’s onerous requirements. Her story illustrates how, even on top of local rules that entrepreneurs must navigate—like zoning, building permits, and business licensing—people like Debbie in many cases still must deal with state processes like occupational licensing that add additional regulatory burdens and complicate their desire to earn an honest living.