Dissolve yeast in warm water with a pinch of sugar. Let sit 5-10 minutes until foamy.
In large bowl, whisk flour, remaining sugar, and salt. Combine yeast mixture, milk, egg, and melted butter.
Mix wet and dry ingredients until soft dough forms. Knead 5-8 minutes until smooth.
Place in greased bowl, cover, rise 1-2 hours until doubled.
Roll dough to ¼-inch thickness. Cut into 3-inch squares.
Place on floured sheet, cover, rise 30-45 minutes until puffy.
Heat oil to 350°F. Fry beignets 2-3 at a time, 1-2 minutes per side until golden.
Drain on paper towels. Dust generously with powdered sugar while warm.