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.
On this page, you’ll learn about the following:
- What is a Corporation in Minnesota?
- How to Start a Corporation in Minnesota
- Step 1: Choosing a Corporate Name
- Step 2: Hire a Registered Agent
- Step 3: Appointing Directors
- Step 4: Preparing and Filing Articles of Incorporation
- Step 5: Creating Corporate Bylaws
- Step 6: Holding the Initial Board of Directors Meeting
- Step 7: Issuing Stock
- Step 8: Obtaining Required Licenses and Permits
- Step 10: Registering with State Tax Agencies
- Step 11: Annual Reporting and Ongoing Compliance
- Paying Your Taxes in Minnesota
- Cost of Forming 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 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 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.
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.– WEBINARCARE EDITORIAL TEAM
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.
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.
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How to Save Money While Forming Your Minnesota Corporation
Firstly, one of the simplest yet highly effective ways to save money is to research and choose the most suitable business structure for your corporation. Understanding the different entity types available in Minnesota, such as the Limited Liability Company (LLC) or the traditional C Corporation, enables entrepreneurs to make a well-informed decision based on factors like taxation, liability, and flexibility. By selecting the right business entity, entrepreneurs can avoid unnecessary expenses that may arise from changing the structure later on.
Furthermore, although hiring professionals can offer valuable assistance during the corporation formation process, it often comes at a considerable cost. However, by taking advantage of online resources and self-help options, entrepreneurs can substantially decrease expenses. The Minnesota Secretary of State’s website, for example, provides comprehensive step-by-step guides, forms, and resources to help streamline the formation process. Entrepreneurs can utilize these tools to complete the necessary paperwork themselves, saving a significant sum that could be otherwise spent on legal or consulting fees.
Another crucial aspect to consider when aiming to save money is keeping business expenses to a minimum. During the initial phases, focusing on essential expenses rather than splurging on extravagances can make a significant difference. Renting or leasing office space in a more affordable location rather than a prime downtown area, for instance, can significantly reduce monthly overhead costs. Embracing remote work or shared co-working spaces can also be enticing options as they often offer flexible pricing structures. Furthermore, entrepreneurs can explore options for cost-saving equipment like purchasing refurbished or used office essentials instead of brand-new items.
Additionally, fostering a culture of frugality within the corporation can have long-lasting financial benefits. Encouraging employees to adopt money-saving practices, such as turning off lights in unoccupied rooms or utilizing energy-efficient equipment, can lead to a notable decrease in utility expenses. Promoting remote work or flexible schedules can also help in minimizing office-related costs.
Lastly, when forming a Minnesota corporation, entrepreneurs should take the time to research and benefit from any available grants, incentives, or tax breaks. Minnesota offers various programs aimed at supporting small businesses, especially those targeting underserved communities or focusing on eco-friendly practices. Familiarizing oneself with these opportunities and thoroughly understanding their requirements can yield significant financial savings by securing funding or enjoying tax advantages.
Starting a corporate journey in Minnesota can undoubtedly be an exhilarating endeavor. By taking into consideration factors like choosing the right business structure, leveraging online resources, minimizing expenses, promoting a frugal corporate culture, and exploring financial incentives, entrepreneurs can lay a strong financial foundation from the very beginning. By implementing these strategies and being conscientious about financial decisions, budding business owners can not only save money during the inception stage but also set themselves up for sustainable and profitable growth in the long term.
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.