What Are the Laws in Starting a Towing Company in Minnesota?

by Heather Topham Wood; Updated September 26, 2017

A towing company is a good startup idea for individuals looking to launch their own company. Startup costs range from $10,000 to $50,000 and can be done from home or signing up to be part of a franchise. Minnesota laws must be reviewed before starting a towing company in the state. Speak to a representative from the Minnesota Small Business Assistance Office about any specific questions or concerns.

Types

According to Minnesota business law, you must choose a business structure before launching your towing company in the state. Options for towing companies include sole proprietorship, business corporation, limited liability companies, limited liability corporations and limited partnerships. The type of business setup depends on how many owners and operators of the business and the type of financial protection you want for your company assets.

Insurance

You need to acquire at least the minimum amounts of insurance required by Minnesota tow truck operators. Auto liability insurance for the tow trucks must cover at least $100,000 for injury or accidental death per person, $300,000 for each accident and $100,000 in property damage. A uniform license and surety bond also is required for tow truck companies operating in Minnesota. The bond protects against financial losses due to poor decisions, damage to property and failure to comply with laws. Minimum required bond amount is $10,000 for tow truck owners.

Licenses

An auto-towing license is a must for any new towing business in Minnesota. The licenses are heavily regulated, and you must ensure your business always remains compliant. Receive the license by submitting your application and fees along with truck inspection forms, proof of insurance, proof of uniform license and surety bond, a list of drivers, a listing of towing location, description of lot and security measures, and a copy of a fee schedule.

Considerations

If you are a sole proprietor and hire drivers as independent contractors, Minnesota law requires you to have an Independent Contractor Exemption Certificate. If you do not have this certificate, the independent contractor automatically becomes an employee and you must pay unemployment insurance and workers' compensation payments for the individual.

About the Author

Heather Topham Wood is a seasoned writer whose work has appeared in numerous publications, including USA Today, Gadgetell, Feel Rich and Step in Style. Heather is a published novelist with six Amazon bestsellers and a contract through Crescent Moon Press. She holds a bachelor's degree in English from TCNJ.