Starting a Corporation in Minnesota | What You Need to Know

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Start a Corporation in Minnesota

In Minnesota, starting a corporation can benefit entrepreneurs looking to establish a separate legal entity for their business. Incorporating your business provides liability protection for its owners and offers potential tax benefits and a professional image. This comprehensive guide will walk you through Starting a Corporation in Minnesota, from choosing a corporate name to fulfilling ongoing compliance requirements. Some people consider starting a corporation since it has advantages and benefits rather than Starting an LLC in Minnesota.

Webinarcare Editorial Team will help you gain knowledge in starting a corporation with thorough research and market study. It would be best to cross-check all the factors in this article before forming a corporation.

How to Start a Corporation in Minnesota

What is a Corporation in Minnesota?

A corporation in Minnesota is a business organization recognized as a separate legal entity from its owners, also known as shareholders. When a corporation is formed, shareholders invest capital by purchasing shares of stock and, in return, become partial company owners. The corporation is managed by a board of directors elected by the shareholders to oversee the company’s operations and make important decisions. Corporations in Minnesota are required to have at least Three directors. One of the main advantages of a corporation in Minnesota is that it provides limited liability protection to its shareholders, meaning their assets are not at risk if the corporation incurs debt or is legally sued.

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Common Types of Corporations

Before you start with a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation

C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.

S-Corporation

S-Corporation in Minnesota is set up similarly to a C-corporation but has different tax implications and owner limits. An S-Corporation has no more than 100 stockholders and is not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.

Nonprofit Corporation

Religious, educational, and charity institutions frequently use nonprofit businesses to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations.

It is recommended to Start a Corporation in Minnesota if you would like to provide limited liability protection to your shareholders rather than Minnesota LLC. However, you may want to consult to LegalZoom’s Business Attorney before starting a business.

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How to Start a Corporation in Minnesota

To start a corporation in Minnesota, you must follow the below steps that, include choosing a corporate name, hiring a Registered Agent, appointing directors, filing for Articles of Incorporation, creating corporate bylaws, holding the initial board of directors, issuing stock, obtaining required licenses and permits, registering with state tax agencies, and annual reporting and ongoing compliance. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choosing a Corporate Name

The first step in starting a corporation is choosing an available name that complies with Minnesota naming rules. Most states require that the name of a corporation be distinguishable from other registered business names and include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or an abbreviation thereof.

Here are some guidelines you must follow while naming your corporation in Minnesota-

  • Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
  • Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

To check the availability of your desired corporate name, you can search the Minnesota Secretary of State‘s business name database and Business Name Search in Minnesota. If the name is available, you may choose to reserve it for a specific period of 1 year by filing a name reservation application and paying the online name reservation fee of $35 and mail name reservation fee of $55. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.

The DBA filing can be done by three methods, online, by mail, and in person filing., which costs around $50 for online filing and $30 for offline filing. In addition, the DBA’s validity in Minnesota is one year, which you can file in Minnesota Secretary of State.

You can check out How to File a DBA in Minnesota for clearer understanding.

Step 2: Hire a Registered Agent

Hiring a Registered Agent is essential in starting a corporation. Registered Agent is a person or company responsible for receiving important legal documents, tax notices, and other correspondence on behalf of your corporation. They ensure that your corporation remains compliant with state regulations and requirements. There are Minnesota Registered Agent Services to check in forming Minnesota Corporation. We reviewed some of the best-registered agent services and provided features as an add-on with their packages.

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Step 3: Appointing Directors

Corporations in Minnesota are required to have at least Three directors, though some states may require more. Directors are responsible for overseeing the corporation’s management and making major decisions on behalf of the company. In Minnesota, directors must be at least 18 years old and do not need to be state residents.

When appointing directors, it is essential to consider individuals who are knowledgeable, trustworthy, and capable of making sound business decisions. Maintaining a record of appointed directors, including their names, addresses, and terms of service, is also a good idea.

Step 4: Preparing and Filing Articles of Incorporation

After you appoint the initial board of directors in your Minnesota corporation, the next step is to write and file a Articles of Incorporation. In writing, the Minnesota Articles of Incorporation, the corporation name, principal place of business, the purpose of business, Registered Agent contact information, and the names and addresses of incorporators and initial board members, should be written.

To officially form your Minnesota corporation, you must prepare and file Articles of Incorporation with the Minnesota Secretary of State. The Articles of Incorporation is a legal document that outlines essential information about your corporation, such as its name, address, purpose, and details about its stock.

The specific requirements for Articles of Incorporation vary by state, but generally, the document must include the following:

  • The corporate name
  • The purpose of the corporation
  • The name and address of the registered agent
  • The names and addresses of the initial directors
  • The number of authorized shares and their par value
  • The name and address of the incorporator(s)

Once the Articles of Incorporation are complete, please submit them to the Minnesota Secretary of State’s office, along with the required filing fee. Fees vary by state, but in Minnesota, the Articles of Incorporation filing fee costs around $155 for filing online and in-person, and $135 for filing by mail. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything.
  • Offline filing: Send the form by mail or drop it off in person to Minnesota Secretary of State — Business Services, Retirement Systems of Minnesota Building, 60 Empire Drive, Suite 100, St Paul, MN 55103.

Step 5: Creating Corporate Bylaws

Now you are done filing Articles of Incorporation in Minnesota, the next step is to draft corporate bylaws. While not always required by law, creating corporate bylaws is essential in establishing Minnesota corporation. Bylaws are the internal rules and regulations that govern the corporation’s operations and management. They outline the rights and responsibilities of directors, officers, and shareholders and provide guidelines for holding meetings and making decisions.

Key provisions to include in your corporate bylaws may include:

  • The corporation’s purpose and principal place of business
  • The roles and responsibilities of directors, officers, and shareholders
  • The process for appointing and removing directors and officers
  • The procedures for holding annual and special meetings
  • The methods for amending the bylaws and Articles of Incorporation
  • The procedures for issuing stock and maintaining shareholder records

Once the bylaws are drafted, they must be adopted by the corporation’s board of directors. Keeping a copy of the bylaws with your corporate records and updating them to reflect changes in the corporation or applicable laws is essential.

Step 6: Holding the Initial Board of Directors Meeting

The initial board of directors meeting is a crucial milestone for your Minnesota corporation. During this meeting, the directors will adopt the corporate bylaws, elect officers, and make other key decisions to set the foundation for the corporation’s operations.

The agenda for the initial board meeting may include the following:

  • Adopting the corporate bylaws
  • Ratifying any pre-incorporation actions taken by the incorporator(s)
  • Electing corporate officers (e.g., president, vice president, secretary, treasurer)
  • Designating a corporate bank account
  • Authorizing the issuance of stock
  • Approving necessary licenses, permits, and tax registrations

It is essential to keep detailed minutes of the initial board meeting, documenting the decisions made and actions taken. These minutes should be stored with your corporate records.

Step 7: Issuing Stock

Corporations in Minnesota are required to issue stock to their owners, also known as shareholders. When preparing to issue stock, you must determine the number of authorized shares and their par value, as outlined in your Articles of Incorporation. You may choose to issue different classes of stock, each with its rights and privileges, such as voting rights and dividend preferences.

The process for issuing stock typically involves the board of directors approving a stock issuance resolution, determining the price per share, and recording the issuance in the corporation’s stock ledger. Maintaining accurate and up-to-date records of all stock transactions, including transfers and cancellations, is crucial to ensure proper ownership tracking and compliance with securities laws.

Step 8: Obtaining Required Licenses and Permits

Depending on the nature of your corporation’s activities and location, you may need to obtain various licenses and permits to operate legally. These may include federal, state, and local requirements, such as:

  • A Federal Employer Identification Number (EIN) for tax reporting and employee withholding purposes.
  • State sales and use tax registration, if your corporation sells taxable goods or services
  • Professional or occupational licenses for specific industries (e.g., healthcare, construction, food service)
  • Minnesota Business Licenses, zoning permits, and health department approvals

Researching and obtaining all required Minnesota licenses and permits before commencing operations and maintaining compliance with any ongoing renewal or reporting requirements is essential.

Step 10: Registering with State Tax Agencies

In addition to obtaining licenses and permits, your Minnesota corporation may also need to register with various tax agencies. This may include registering for sales and use tax, obtaining an Employer Identification Number (EIN) in Minnesota for payroll tax purposes, and filing state income tax and franchise tax returns.

An EIN will serve as the tax ID for your Minnesota corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Minnesota can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Each state has tax requirements, so consult a tax professional or Minnesota Department of Revenue for guidance on your specific obligations.

Step 11: Annual Reporting and Ongoing Compliance

Once your Minnesota corporation is up and running, you must fulfill ongoing reporting and compliance requirements to maintain good standing. This may include filing Annual Report with the Minnesota Secretary of State, updating your corporate records to reflect changes in directors or officers, and staying current on any required licenses or permits.

In addition, it is essential to stay informed about changes in corporate laws and regulations that may impact your business and to seek professional advice when needed.

Paying Your Taxes in Minnesota

Even if you have established your corporation in Minnesota, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Minnesota has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Minnesota are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Minnesota

In forming a corporation in Minnesota, a filing and Annual fee must be paid. Without it, your corporation won’t operate. A corporation’s initial filing fee may vary from state to state. However, in Minnesota, it costs $155 for filing online and in-person, and $135 for filing by mail. The corporation in Minnesota also has to file an Annual Report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly.

FAQs

What do I need to do to start a corporation in Minnesota?
To start a corporation in Minnesota, you must file articles of incorporation with the Secretary of State and pay a fee.
How much does it cost to form a corporation in Minnesota?
Filing fees to register a corporation in Minnesota are $155 as of 2021.
What are the tax implications of starting a corporation in Minnesota?
Minnesota imposes a corporate income tax of 9.8% on all profits earned by corporations doing business in the state.
What kind of entity should I choose for my Minnesota business?
Some popular entity types for Minnesota businesses include C corporations, S corporations, and limited liability companies (LLCs).
What documents do I need to file to register my Minnesota corporation?
You need to file articles of incorporation, a certificate of authority, and any other necessary registration documents with the Minnesota Secretary of State.
Can I incorporate my business on my own, or do I need a lawyer?
You can file articles of incorporation for your Minnesota business on your own, but it may be helpful to consult with a lawyer to ensure everything is in order.
How long does it take to form a corporation in Minnesota?
Minnesota offers online filing for articles of incorporation, which speeds up the process. Typical turnaround time for processing the application is 3-5 business days.
Will I need a registered agent in Minnesota?
Yes, a corporation must have a registered agent in Minnesota to receive official legal notices and tax information.
How do I choose a name for my corporation in Minnesota?
The name of your corporation must be unique and distinguishable from all other business names on record with the Minnesota Secretary of State.
Can I reserve a name for my corporation in Minnesota?
Yes, names can be reserved for a fee for 12 months from the date of reservation.
Can a corporation in Minnesota be founded by a single individual?
Yes, a corporation can be founded and owned by a single individual in Minnesota.
Does a Minnesota corporation require annual meetings?
Yes, Minnesota statutes require at least one meeting per year of shareholders.
Can I register my Minnesota corporation online?
Yes, you can use the Minnesota Secretary of State website to file the incorporation papers and receive digital copies of them for your records.
Do Minnesota corporations have to pay any annual fees?
Yes, corporations must complete an annual renewal each year and file an annual renewal fee to stay in good standing with the state.
Do Minnesota corporations have to publish an annual report?
No, corporations in Minnesota are not required to publish an annual report, but they should keep the related documentation on file.
What is the difference between a C corporation and an S corporation in Minnesota?
S corporations pass corporate income, deductions, and credit through to shareholders for federal tax purposes. C corporations, however, taxable entities, meaning they pay taxes on taxable income.
Can Minnesota corporations have directors who are not residents of the state?
Yes, directors of Minnesota corporations do not have to be residents of the state.
Are there any industry-specific requirements for incorporating a business in Minnesota?
Yes, certain industries such as insurance, banking, and energy require additional steps or special licensing requirements in Minnesota.
Are there localities in Minnesota that expand services to smaller businesses?
Yes, there are several resources, including SCORE MN, local Chamber of Commerce branches, and community development corporations (CDCs) that can offer guidance to small businesses at a micro level.
What is the shareholder liability for a Minnesota corporation?
Shareholders in a corporation in Minnesota have limited liability, which means they can’t be held responsible for any of the corporation’s debts or legal issues beyond the value of their investment.
Can my Minnesota corporation be taxed under both state and federal tax law?
Yes, Minnesota corporations are taxed under both state and federal tax law.
Are financial statement publicly available for Minnesota corporations?
Yes, they are available in compliance with all applicable securities laws by the Minnesota Department of Commerce or other authority.
How do I obtain an employer identification number (EIN) for my Minnesota corporation?
In the US, it’s up to the IRS to arrange social security numbers, ITINs, and EINs.
Is there a limit to the number of shareholders that a Minnesota corporation can have?
No, there are no limitations on the number of shareholders that a Minnesota corporation can have.
Can I dissolve my corporation in Minnesota if it’s not generating any profits?
Yes, you can dissolve a Minnesota corporation even if it is not generating profits.
Can I shift my shares of ownership in a Minnesota corporation to other shareholders easily?
Yes, ownership shares in Minnesota corporations can typically be transferred easily.
How can I change the name of my Minnesota corporation?
To change the name of a Minnesota corporation, you must file an amendment along with the required documents and fees with the Minnesota Secretary of State.
When does my Minnesota corporation need to file an annual report?
The state of Minnesota does not require a corporation annual report. Minnesota corporations, however, must renew their annual operating permits every year before January 1.
What is a corporation in Minnesota?
A corporation in Minnesota is a legal entity that is separate and distinct from its owners.
How do I start a corporation in Minnesota?
To start a corporation in Minnesota, you will need to file Articles of Incorporation with the Minnesota Secretary of State.
What is required to file Articles of Incorporation in Minnesota?
To file Articles of Incorporation in Minnesota, you will need to provide the name of your corporation, the purpose of your corporation, the address of your corporation, and the names and addresses of your corporation’s directors and officers.
Who can file Articles of Incorporation in Minnesota?
Anyone who is over the age of 18 and has the legal capacity to enter into a contract can file Articles of Incorporation in Minnesota.
How long does it take to file Articles of Incorporation in Minnesota?
It typically takes the Minnesota Secretary of State about 5-7 business days to process Articles of Incorporation.
What is the fee to file Articles of Incorporation in Minnesota?
The fee to file Articles of Incorporation in Minnesota is $135.
Are there any other fees I need to pay to start a corporation in Minnesota?
Yes, you may need to pay fees for permits, licenses, and other business-related activities.
Do I need a registered agent to start a corporation in Minnesota?
Yes, you need a registered agent who can receive legal documents and notices on behalf of your corporation.
Can I act as my own registered agent in Minnesota?
Yes, you can act as your own registered agent in Minnesota, but you may want to consider hiring a professional registered agent service.
Does Minnesota require a specific type of corporation formation such as a C-Corporation or S-Corporation?
No, there is no requirement that a corporation in Minnesota be formed as a C-Corporation or S-Corporation.
Can I form a corporation in Minnesota if I am not a resident of the state?
Yes, anyone can form a corporation in Minnesota regardless of where they live.
Can I form a nonprofit corporation in Minnesota?
Yes, you can form a nonprofit corporation in Minnesota.
What are the advantages of forming a corporation in Minnesota?
The advantages of forming a corporation in Minnesota include limited liability protection, a separate legal entity, and easier access to capital.
Do I need a lawyer to start a corporation in Minnesota?
No, you do not need a lawyer to start a corporation in Minnesota, but you may want to utilize legal services to ensure proper formation requirements are met.
How do I register my corporation for state taxes in Minnesota?
To register your corporation for state taxes in Minnesota, you will need to apply for a Minnesota tax identification number.
Does Minnesota have a corporate income tax?
Yes, Minnesota has a corporate income tax.
What is the rate of Minnesota’s corporate income tax?
The rate of Minnesota’s corporate income tax varies depending on income and tax bracket.
Does Minnesota have a franchise tax?
Yes, Minnesota has a franchise tax.
How do I register for federal taxes for my Minnesota corporation?
You can register for your Minnesota corporation for federal taxes by obtaining an Employer Identification Number (EIN) from the IRS.
Does Minnesota have any specific regulations for corporations in certain industries such as healthcare or finance?
Yes, there may be specific regulations for corporations in certain industries in Minnesota.
How often do I need to hold board meetings for my Minnesota corporation?
There is no specific requirement for how often to hold board meetings for your Minnesota corporation, but it is best practice to hold them at least annually.
What is the annual renewal fee for a Minnesota corporation?
The annual renewal fee for a Minnesota corporation is $40.
What happens if I don’t file my annual renewal for my Minnesota corporation?
If you don’t file your annual renewal for your Minnesota corporation, your corporation will become inactive and may be dissolved.
Can I change the name of my Minnesota Corporation?
Yes, you can change the name of your Minnesota corporation by filing Articles of Amendment with the Minnesota Secretary of State.
How do I dissolve my Minnesota corporation?
To dissolve your Minnesota corporation, you will need to file Articles of Dissolution with the Minnesota Secretary of State.
Does Minnesota have a stock transfer tax?
No, Minnesota does not have a stock transfer tax.
When is my Minnesota corporation required to file an annual report?
Annual reports for Minnesota corporations are due annually on December 31.
How do I know if a business name is available to use in Minnesota?
You can search your desired name on the Minnesota Secretary of State website to see if it is available for use.

Also Read

How to Save Money While Forming Your Minnesota Corporation

First and foremost, it’s important to research and understand the different types of corporations available in Minnesota. Depending on the size and nature of your business, you may have several options to choose from, including a C corporation, an S corporation, or even a limited liability company (LLC). Each type of corporation has its own benefits and drawbacks, so it’s crucial to select the one that best fits your needs and goals.

Once you’ve decided on the type of corporation that’s right for you, the next step is to carefully consider the structure of your business. For example, you may be able to save money by opting for a simpler organizational structure with fewer shareholders and officers. By keeping things streamlined and efficient from the start, you can avoid unnecessary expenses and complications down the road.

Another way to save money while forming your Minnesota corporation is to take advantage of online resources and tools. Many websites offer helpful guides, templates, and services that can help you navigate the process of incorporation on your own, without the need for expensive lawyers or consultants. While it’s always a good idea to consult with a legal professional to ensure compliance with state laws and regulations, these resources can be a cost-effective way to get started.

In addition, it’s worth exploring the various fee structures and filing requirements associated with forming a corporation in Minnesota. Depending on the nature and size of your business, you may be eligible for certain exemptions or discounts when it comes to filing fees, annual reports, and other administrative costs. By familiarizing yourself with these details and planning ahead, you can ensure that you’re not overspending on unnecessary expenses.

Furthermore, it’s important to consider the long-term financial impact of your corporation’s formation. While it may be tempting to take shortcuts or make hasty decisions in order to save money up front, it’s essential to prioritize the overall sustainability and success of your business. This includes investing in essential services, such as professional accounting and legal support, to ensure that your corporation is well-equipped to thrive in the competitive marketplace.

In conclusion, forming a corporation in Minnesota doesn’t have to break the bank. By carefully considering your options, leveraging online resources, and planning ahead for potential costs, you can save money while setting your business up for success. With a strategic approach and a keen eye for practicality, you can navigate the process of incorporation with confidence and peace of mind.

Conclusion

Starting a corporation in Minnesota involves several critical steps, from choosing a corporate name to fulfilling ongoing compliance requirements. Following the steps outlined in this guide and seeking professional advice when needed, you can successfully establish your Minnesota corporation and enjoy the benefits of limited liability, potential tax savings, and a professional business image.

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