How to Form a Professional Corporation in Minnesota (2024 Guide)

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
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Forming a Professional Corporation in Minnesota

If you would like to start and learn how to form a corporation in Minnesota, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in Minnesota are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in Minnesota or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

What is a Professional Corporation in Minnesota?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the Minnesota. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in Minnesota, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Minnesota

To form a Professional Corporation in Minnesota for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an Annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Minnesota, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in Minnesota

After you have decided to form a professional corporation in Minnesota, you must choose a name for your corporation. Here are some pointers to consider when naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • Limit of restricted words that need a license.
  • A unique name is needed with no match
  • No confusion with a government entity name.

In Minnesota, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 1 year. You must file a name reservation application in the Minnesota Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for Minnesota DBA (doing business as). This way, you can run a clinic or law firm under your name.

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Step 3: Choose the Minnesota Registered Agent

The next step in forming a professional corporation is hiring a Registered Agent, who accepts legal paperwork for your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Minnesota. Forming a professional corporation for your service will be easier if you have Registered Agent in Minnesota.

Alternatively, you can serve as your own Registered Agent if you have the time. Usually, in Minnesota, a Registered Agent costs is ranging from $50 – $150. To make it easier, you can hire Minnesota Registered Agent Services for your professional corporation.

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Step 4: File the Articles of Incorporation in Minnesota

After you hire a Registered Agent to form a professional corporation, the next step is to file the Minnesota Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information, should be written. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

Filing the Articles of Incorporation in Minnesota may be done with three ways, online, by mail and in-person. The Articles of Incorporation fee may vary from different state. However, in Minnesota, it costs $155 for filing online and in-person, and $135 for filing by mail. 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. . For 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: Write an Operating Agreement in Minnesota

An operating agreement in Minnesota is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

Step 6: Designate the PC Board of Directors in Minnesota

The next step is to form the first board of directors for your PC in Minnesota. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the Minnesota Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In Minnesota, you must have Three directors in forming your Professional Corporation.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with Minnesota Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

  • Name and Purpose of the Corporation
  • Registered Office and Agent
  • Shareholders
  • Board of Directors
  • Officers
  • Committees
  • Indemnification and Insurance
  • Conflict of Interest
  • Records and Reports
  • Amendments
  • Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in Minnesota.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in Minnesota. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

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 the 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.

After you have your EIN number, you can benefit in several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in Minnesota for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in Minnesota easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in Minnesota

Before your professional corporation operates in Minnesota, you must have Minnesota Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in Minnesota ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in Minnesota

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the Minnesota tax classification for the taxes that an LLC in Minnesota must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in Minnesota.

  • Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
  • Minnesota Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
  • Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
  • Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
  • Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
  • Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in Minnesota

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in Minnesota

In Minnesota, you must submit a report. The owners’ and Registered Agent’s names and contact details are listed in the Annual Report. Also, it should include all of your yearly financial activity. You must submit the report every 1 year (31st December) in the Minnesota Secretary of State.

FAQs

What is a professional corporation?
A professional corporation is a legal entity that allows professionals, such as doctors, lawyers, and accountants, to operate their businesses as a corporation.
How is a professional corporation formed in Minnesota?
In Minnesota, a professional corporation is formed by filing Articles of Incorporation with the Secretary of State and obtaining a Certificate of Authority from the Minnesota Board of Accountancy.
Can a professional corporation provide non-professional services?
No, a professional corporation can only provide professional services in Minnesota.
Do I need to have a license to form a professional corporation in Minnesota?
Yes, all owners and shareholders of the professional corporation must hold a valid Minnesota professional license.
What types of professionals can form a professional corporation in Minnesota?
In Minnesota, several professions can form a professional corporation, including medical doctors, accountants, architects, engineers, and attorneys.
Can a professional corporation be taxed like an LLC?
No, a professional corporation is treated as a C corporation for tax purposes in Minnesota.
Is there a limit to how many professionals can open a professional corporation in Minnesota?
No, there are no limits to the number of professionals who can open a professional corporation in Minnesota.
Can I form a professional corporation in Minnesota if I’m not a resident of the state?
Yes, you can form a professional corporation in Minnesota even if you are not a resident of the state.
What is the process for converting an existing business to a professional corporation in Minnesota?
To convert an existing business to a professional corporation in Minnesota, you must file Articles of Amendment with the Secretary of State.
Is there a minimum age requirement to form a professional corporation in Minnesota?
No, there is no minimum age requirement to form a professional corporation in Minnesota.
Do I need to have a separate office space to form a professional corporation in Minnesota?
No, there is no requirement to have a separate office space to form a professional corporation in Minnesota.
Can a professional corporation in Minnesota have a similar name to an existing business?
No, you cannot use a name that is too similar to an existing business in Minnesota.
What filing fees are associated with forming a professional corporation in Minnesota?
The filing fee for Articles of Incorporation is $135, and the filing fee for a Certificate of Authority is $200 in Minnesota.
How long does it take to form a professional corporation in Minnesota?
It takes about 2 weeks to form a professional corporation in Minnesota.
Do I need a lawyer to form a professional corporation in Minnesota?
No, you don’t need a lawyer to form a professional corporation in Minnesota, but it is recommended.
Can a professional corporation in Minnesota be publicly traded?
No, a professional corporation in Minnesota cannot be publicly traded.
Can I sell my shares in a professional corporation in Minnesota to someone who is not licensed in my profession?
No, you can only sell your shares in a professional corporation to someone who is licensed in your profession.
How are decisions made in a professional corporation in Minnesota?
In Minnesota, decisions are made by the board of directors in a professional corporation.
Can I operate a professional corporation out of my home in Minnesota?
Yes, you can operate a professional corporation out of your home in Minnesota.
Are there any annual or ongoing filing requirements for a professional corporation in Minnesota?
Yes, a professional corporation in Minnesota must file an Annual Renewal each year with the Secretary of State.
Can a professional corporation in Minnesota offer services in multiple states?
Yes, a professional corporation in Minnesota can offer services in multiple states, but each state will require its own Certificate of Authority.
What is the liability protection offered by a professional corporation in Minnesota?
A professional corporation in Minnesota can protect against personal liability for the debts and obligations of the corporation.
Is there a specific type of insurance required for a professional corporation in Minnesota?
No, there is no specific type of insurance required for a professional corporation in Minnesota, but it is always recommended.
Can a professional corporation in Minnesota have employees who are not licensed professionals?
Yes, a professional corporation in Minnesota can have non-licensed employees.
How can I dissolve a professional corporation in Minnesota?
To dissolve a professional corporation in Minnesota, you must file Articles of Dissolution with the Secretary of State.
Are there different tax rates for professional corporations in Minnesota?
No, all professional corporations in Minnesota are subject to the same tax rates.
Are there any disadvantages to forming a professional corporation in Minnesota?
One disadvantage of forming a professional corporation in Minnesota is the higher filing fees and ongoing costs.
Can a foreign professional corporation operate in Minnesota without a Certificate of Authority?
No, a foreign professional corporation must obtain a Certificate of Authority to operate in Minnesota.
What is a professional corporation in Minnesota?
A professional corporation in Minnesota is a type of corporate structure designed for licensed professionals, such as attorneys, doctors, dentists, and accountants.
What are the benefits of forming a professional corporation in Minnesota?
The benefits of forming a professional corporation in Minnesota include limited liability, tax benefits, and the ability to share profits and assets with other professionals.
How do I form a professional corporation in Minnesota?
To form a professional corporation in Minnesota, you need to file Articles of Incorporation with the Minnesota Secretary of State and obtain any necessary professional licenses.
Can I form a professional corporation if I am not a licensed professional?
No, you cannot form a professional corporation in Minnesota if you are not a licensed professional.
What is a registered agent, and do I need one for my professional corporation in Minnesota?
A registered agent is a third-party individual or company that acts as the official point of contact for your corporation and receives legal documents on its behalf. Yes, you must have a registered agent for your professional corporation in Minnesota.
Can I be my own registered agent for my professional corporation in Minnesota?
Yes, you can be your own registered agent for your professional corporation in Minnesota.
What are the annual filing requirements for a professional corporation in Minnesota?
A professional corporation in Minnesota must file an Annual Renewal of registration with the Minnesota Secretary of State and pay the required filing fee each year before December 31.
What is a shareholder agreement, and do I need one for my professional corporation in Minnesota?
A shareholder agreement is a legal document that outlines the rights and responsibilities of each shareholder in the corporation. Yes, you should have a shareholder agreement for your professional corporation in Minnesota.
Are professional corporations subject to corporate income tax in Minnesota?
Yes, professional corporations in Minnesota are subject to state and federal corporate income tax.
Can a professional corporation in Minnesota have more than one class of stock?
No, a professional corporation in Minnesota cannot have more than one class of stock.
What is a board of directors, and do I need one for my professional corporation in Minnesota?
A board of directors is a group of individuals who oversees the management and direction of the corporation. Yes, you need a board of directors for your professional corporation in Minnesota.
How many directors are required for a professional corporation in Minnesota?
A professional corporation in Minnesota must have at least one director.
Can the shareholders of a professional corporation in Minnesota also serve as directors?
Yes, the shareholders of a professional corporation in Minnesota can also serve as directors.
How is ownership of a professional corporation in Minnesota transferred?
Ownership of a professional corporation in Minnesota can be transferred through the sale or transfer of shares in the corporation.
What is the minimum number of shareholders required for a professional corporation in Minnesota?
A professional corporation in Minnesota must have at least one shareholder.
Can a professional corporation in Minnesota operate under a different name than the name of its owners?
Yes, a professional corporation in Minnesota can operate under a different business name than the name of its owners, but it must register the DBA with the Minnesota Secretary of State.
What is a DBA, and how do I register one for my professional corporation in Minnesota?
A DBA, or “doing business as,” is a registered trade name for a corporation. To register a DBA in Minnesota, you need to file a Certificate of Assumed Name with the Minnesota Secretary of State.
What is required to form a professional corporation in Minnesota?
To form a professional corporation in Minnesota, you need to file Articles of Incorporation with the Minnesota Secretary of State, obtain any necessary professional licenses, and pay the required filing fees.
Can a professional corporation in Minnesota issue dividends to its shareholders?
Yes, a professional corporation in Minnesota can issue dividends to its shareholders as long as it meets the state’s statutory requirements.
Can a professional corporation in Minnesota convert to another type of business entity, such as an LLC?
Yes, a professional corporation in Minnesota can convert to another type of business entity if it meets the legal requirements and follows the proper procedures for conversion.
Can I form a professional corporation in Minnesota as a sole proprietor?
No, you cannot form a professional corporation in Minnesota as a sole proprietor.
Can a professional corporation in Minnesota have non-professional employees?
Yes, a professional corporation in Minnesota can have non-professional employees.
What is the difference between a C corporation and an S corporation in Minnesota?
The primary difference between a C corporation and an S corporation in Minnesota is the way they are taxed. C corporations are subject to double taxation, which means that the corporation must pay corporate income tax on its profits, and shareholders must pay personal income tax on any dividends they receive. S corporations are not subject to corporate income tax and are instead taxed at the individual level.
Can a professional corporation in Minnesota purchase or own property?
Yes, a professional corporation in Minnesota can purchase or own property in its own name.
Can a professional corporation in Minnesota be held liable for the actions of its owners or employees?
Yes, a professional corporation in Minnesota can be held liable for the actions of its owners or employees when those actions are performed within the scope of their employment.

Also Read

How to Save Money While Forming Minnesota Professional Corporation

One of the most effective ways to save money when forming a professional corporation in Minnesota is by conducting thorough research and acquiring the necessary knowledge on the entire process. Understanding the legal requirements, licensing procedures, and applicable fees will provide individuals with the ability to navigate the system without relying heavily on costly legal counsel. By being well-informed, individuals can take necessary steps themselves, saving valuable financial resources that can be allocated to other critical aspects of the business.

It is also essential to carefully consider and evaluate the corporate structure that best suits the needs of the business. The choice in corporate structure can impact various aspects, including taxation, liability, and management rights. Seeking advice from professionals early on can help individuals determine the most cost-effective structure that aligns with their business goals. It is crucial to remember that each business is unique, and there is no “one size fits all” approach when it comes to corporate structure. Tailoring the legal framework to suit the specific needs of the business can prevent unexpected costs or legal complexities down the line.

While it may be tempting to cut costs by engaging in self-incorporation through online services, it is crucial to consider the potential risks involved. The process of forming a professional corporation involves numerous legal formalities and paperwork that can be easily overlooked or mishandled without the guidance of a skilled professional. Any mistakes in the incorporation process can lead to legal disputes, financial penalties, and wasted time. It is always advisable to seek the assistance of experienced professionals to ensure compliance and avoid unnecessary complications in the long run.

Another way to save money while forming a professional corporation in Minnesota is by implementing efficient bookkeeping practices. Tracking and managing finances effectively can not only save money at the time of formation but also contribute to long-term financial stability. Utilizing accounting software and technology tools can streamline the financial process, reducing the need for costly professional accounting services. Implementing simple measures such as keeping detailed records, separating business and personal expenses, and monitoring cash flow can help entrepreneurs better manage their capital and make informed decisions regarding business expenditure.

Finally, it is important to remember that cost saving should not come at the expense of long-term success. Forming a professional corporation requires sound legal advice, efficient financial management, and compliance with regulations. Cutting corners during the formation process may lead to legal or financial consequences that far outweigh the savings made initially. Therefore, it is crucial to strike a balance between cost-saving measures and securing appropriate professional support to ensure the success and sustainability of the corporation.

In summary, saving money while forming a professional corporation in Minnesota involves putting effort and thought into various aspects of the process. By conducting thorough research, seeking appropriate advice, and implementing efficient financial practices, individuals and professionals alike can cut costs without compromising the integrity or future prospects of their businesses. Ultimately, the key is finding a balance between cost-saving measures and obtaining the necessary expertise to navigate this complex legal landscape efficiently.

Conclusion

In conclusion, forming a professional corporation in Minnesota is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.

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