Starting a Professional Corporation in Minnesota 2024: Ultimate Guide

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How to Start a Professional Corporation in Minnesota

Licensed professional? Level up your business with Minnesota professional corporation! Enjoy unique benefits like Minnesota LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in Minnesota with your professional corporation today!

This guide will review the requirements for starting a professional corporation in Minnesota, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.

Start a Professional Corporation

What is a Professional Corporation

A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in Minnesota is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in Minnesota.

The primary purpose of Minnesota Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, Minnesota professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in Minnesota.

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Who Can File Under Professional Corporation Laws

Under Minnesota Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in Minnesota, the following professionals can typically form a professional corporation:

  • Physicians and Surgeons
  • Dentists
  • Chiropractors
  • Optometrists
  • Podiatrists
  • Certified Public Accountants
  • Architects
  • Engineers and Land Surveyors
  • Psychologists
  • Marriage and Family Therapists
  • Clinical Social Workers
  • Professional Clinical Counselors
  • Veterinarians
  • Attorneys
  • Speech-Language Pathologists
  • Pharmacists
  • Registered Nurses
  • Physical Therapists
  • Occupational Therapists
  • Acupuncturists

Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.

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Structure of a Professional Corporation

  • Shareholders: Minnesota Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
  • Directors: The directors of a professional corporation in Minnesota are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
  • Officers: The officers of Minnesota Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.

Starting a Professional Corporation in Minnesota: A Guide

Here is a detailed guide to starting a professional corporation in Minnesota that you should follow.

Step 1: Appointment of Registered Agent

The first step in forming a Professional Corporation is appointing Registered Agent in Minnesota. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in Minnesota and be available during regular business hours.

We compiled the list of the best registered agent services in Minnesota to help you choose the one you can rely on.

Step 2: Choosing the Name of the Corporation

Selecting a name for your Minnesota Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.

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Step 3: Drafting of By-laws

By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.

Step 4: Appointment of Board of Directors

The board of directors oversees the management and operations of the Minnesota Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.

Step 5: Conduction of Board Meetings

Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.

Step 6: Issuance of Corporate Shares

Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.

Step 7: Comply with State Requirements

Forming Minnesota Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.

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Step 8: Filing of Statement of Information

Minnesota professional corporations must file an annual report with the Minnesota Secretary of State. This document includes essential information about the corporation, including its name, address, Registered Agent, and directors.

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the Minnesota Department of Revenue, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Step 10: Opening of a Bank Account

Finally, open a separate bank account for the Minnesota Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in Minnesota

Here are some of the most common fees when starting a professional corporation in Minnesota.

  • State Laws and Regulations: To form a professional corporation in Minnesota, it is crucial to comply with the state laws and regulations governing professional corporations. The Minnesota Statutes Chapter 319B and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
  • Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in Minnesota is to draft and file the Articles of Incorporation with the Minnesota Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Articles of Incorporation requires a filing fee currently $135 for most professions. However, it is essential to check with the Minnesota Secretary of State for the specific fee associated with your profession.
  • Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in Minnesota. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the Minnesota Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Articles of Incorporation requires a reservation fee of $35 online and $55 mail.
  • Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in Minnesota. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Articles of Incorporation must be filed with the Minnesota Secretary of State, accompanied by the appropriate filing fee.
  • Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in Minnesota may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the Minnesota Secretary of State every December 31st of filing the Articles of Incorporation. The filing fee for this form is $0.
    • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
    • Registered Agent Fee: Hiring of Registered Agent service will likely involve an annual fee of $50 – $150, which can vary depending on the service provider.
    • Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.

Advantages of a Professional Corporation

  • Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
  • Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
  • Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
  • Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.

Disadvantages of a Professional Corporation

  • Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
  • Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
  • Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.

Taxation of Professional Corporations

Here are the taxes that your professional corporation must pay in Minnesota:

Federal income tax

A professional corporation in Minnesota is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.

State taxes

Minnesota Professional Corporation is also subject to state taxes, such as the Minnesota franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in Minnesota.

Tax deductions and exemptions

A professional corporation in Minnesota can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.

Alternatives to Professional Corporations in Minnesota

If you decide that a professional corporation is not for you, then you might consider the following alternatives.

  • Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
  • Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
  • Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
  • S-corporations: Starting an S Corp in Minnesota avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

What is a professional corporation?
A professional corporation is a type of business entity formed by licensed professionals in a certain field, such as law, accounting, or medicine.
Why would I want to form a professional corporation in Minnesota?
Forming a professional corporation in Minnesota can offer liability protection, tax benefits, and a sense of professional credibility.
How do I name my professional corporation in Minnesota?
The name of your professional corporation in Minnesota must follow specific guidelines, such as including “Professional Corporation” or “P.A.” in the title.
Can I file for a professional corporation in Minnesota online?
Yes, you can file for a professional corporation in Minnesota online through the Secretary of State’s website.
What type of professionals are eligible to form a professional corporation in Minnesota?
In Minnesota, any licensed individual in specified professions, such as doctors, dentists, or lawyers, can form a professional corporation.
How many members are allowed in a professional corporation in Minnesota?
There is no limit to the number of members that may be a part of a professional corporation in Minnesota.
Does a professional corporation need to provide professional liability insurance in Minnesota?
Professional liability insurance is not required by Minnesota law, but many professional corporations choose to incorporate a policy as a form of risk management.
What tax forms do I need to file for my professional corporation in Minnesota?
Professional corporations in Minnesota need to file a Form M8, the Minnesota Corporation Franchise Tax Return.
Does a professional corporation in Minnesota need to have any annual meetings or report filings?
Minnesota professional corporations are not required by law to file annual reports, but the Board of Directors and Shareholders are often recommended to agree on them as part of good corporate governance.
Can out-of-state professionals form a professional corporation in Minnesota?
Out-of-state professionals must meet specific requirements to form a professional corporation in Minnesota, such as obtaining a Minnesota license if legally required by a Minnesota state board.
Is a professional corporation in Minnesota allowed to provide non-professional services?
No, professional corporations in Minnesota are not allowed to provide non-professional services.
How long does it take to form a professional corporation in Minnesota?
The processing time to form a professional corporation in Minnesota is generally between one and two weeks.
Is a professional corporation the same as a limited liability company (LLC)?
No, a professional corporation is a specific type of business entity formed by licensed professionals, while an LLC can include any type of business owner.
How much does it cost to form a professional corporation in Minnesota?
The filing fee for a professional corporation in Minnesota is $155, as of 2021.
How does a professional corporation in Minnesota elect its leadership positions?
A professional corporation in Minnesota elects its officers, board of directors, and shareholders through the bylaws specified in the Articles of Incorporation.
What is a registered agent, and does my professional corporation in Minnesota need one?
A registered agent is a designated individual that receives official documents and service of process on behalf of a professional corporation. Minnesota requires its corporations to have a registered agent.
Do professional corporations in Minnesota need to obtain a business license?
Professional corporations in Minnesota must be licensed through their governing authority, such as the state board for licensed professionals.
What happens if my professional corporation fails to pay state taxes in Minnesota?
If a professional corporation fails to pay state taxes in Minnesota, the corporation may face penalties, suspension, and dissolution without a required payment plan.
What is task specialization, and how is it relevant to a professional corporation in Minnesota?
Task specialization is the focus on limited expertise in a professional corporation by placing professionals with certain skills and training in specified roles and tasks. It is relevant for efficiency and to prioritize excellent outcomes, quality, and customer satisfaction.
Does a professional corporation in Minnesota need to obtain a federal tax ID number?
Yes, a professional corporation in Minnesota needs a federal tax ID number, also known as the Employer Identification Number (EIN).
What is a shareholder’s agreement, and is it necessary for a professional corporation in Minnesota?
A shareholder’s agreement protects shareholder rights about major decisions impacted or time-bound with a tax implication and protects company property from their creditors. While not legally obligated, a shareholder agreement is highly recommended for a professional corporation.
Can a Minnesota professional corporation name company officers and shareholders in the same roles?
Yes, a Minnesota professional corporation may use individuals that are both officers and shareholders.
What is an S corporation, and how is it related to a professional corporation in Minnesota?
An S corporation is a specific type of corporation formed for federal tax purposes. Many professional corporations in Minnesota choose to elect S corporation status due to the tax benefits.
What are dissolution and termination concerning a professional corporation in Minnesota?
Dissolution or termination is the legal process of ending a professional corporation, outlining how assets are distributed to remaining members and payments of any debts that remain.
Does a professional corporation in Minnesota need any additional business permits, such as occupational permits, with important deadlines for continued renewals?
Yes, a professional corporation in Minnesota may require additional business permits, including occupational ones. Critical renewal dates may occur every few years, depending on the entity.
Can a foreign business professionally transact in Minnesota?
In some cases, a foreign business can professionally transact in Minnesota, but restrictions may apply, including the need for a Minnesota certificate of registration and a tax clearance certificate.
Can I form a professional corporation and LLC together in Minnesota?
No, you cannot form a professional corporation and LLC together in Minnesota. Each type of business structure is presented differently with certain regulation entities, including filing fee, state license, and shareholder requirements.
Where can I find more information about forming a professional corporation in Minnesota?
More information about forming a professional corporation in Minnesota can be found on the Minnesota Secretary of State’s website and other professional organization resources, such as others organization websites, license databases, or regulatory guidelines.
What is a Professional Corporation (PC)?
A PC is a corporation that is organized for the purpose of providing professional services.
How is a Minnesota Professional Corporation formed?
A Minnesota PC is formed by filing Articles of Incorporation with the Minnesota Secretary of State.
What types of services can be provided by a Minnesota PC?
A Minnesota PC can provide services that require a professional license, including legal, medical, and accounting services.
Are there any requirements for the name of a Minnesota PC?
Yes, the name of a Minnesota PC must include the words “Professional Corporation” or its abbreviation “P.A.”
Can a Minnesota PC have multiple shareholders?
Yes, a Minnesota PC can have multiple shareholders, but only individuals who are licensed to provide professional services can be shareholders.
Are there any residency requirements for shareholders of a Minnesota PC?
No, there are no residency requirements for shareholders of a Minnesota PC.
Can a Minnesota PC be owned by a non-professional entity?
No, a Minnesota PC cannot be owned by a non-professional entity.
Is a Minnesota PC required to have a board of directors?
Yes, a Minnesota PC must have a board of directors.
How many directors must a Minnesota PC have?
A Minnesota PC must have at least one director.
Are there any specific qualifications for directors of a Minnesota PC?
No, there are no specific qualifications for directors of a Minnesota PC.
Can the officers of a Minnesota PC be the same as the directors?
Yes, the officers of a Minnesota PC can be the same as the directors.
Can a Minnesota PC issue stock?
Yes, a Minnesota PC can issue stock.
Can a Minnesota PC have different classes of stock?
Yes, a Minnesota PC can have different classes of stock.
Does a Minnesota PC have to file an annual report?
Yes, a Minnesota PC is required to file an Annual Report with the Minnesota Secretary of State.
Are there any fees associated with forming a Minnesota PC?
Yes, there are fees associated with forming a Minnesota PC, including a filing fee and an initial franchise tax payment.
Can a Minnesota PC be taxed as an S corporation?
Yes, a Minnesota PC can elect to be taxed as an S corporation.
What is a Professional Association?
A Professional Association (PA) is a type of corporation that is organized for the purpose of providing professional services.
What is the difference between a PC and a PA in Minnesota?
There is no difference between a PC and a PA in Minnesota; they are both types of corporations that are organized for the purpose of providing professional services.
Can a Minnesota PA have multiple shareholders?
Yes, a Minnesota PA can have multiple shareholders, but only individuals who are licensed to provide professional services can be shareholders.
Can a Minnesota PA issue stock?
No, a Minnesota PA cannot issue stock.
Are there any fees associated with forming a Minnesota PA?
Yes, there are fees associated with forming a Minnesota PA, including a filing fee and an initial franchise tax payment.
Are there any residency requirements for shareholders of a Minnesota PA?
No, there are no residency requirements for shareholders of a Minnesota PA.
Can a Minnesota PA be owned by a non-professional entity?
No, a Minnesota PA cannot be owned by a non-professional entity.
How is a Minnesota PA formed?
A Minnesota PA is formed by filing Articles of Incorporation with the Minnesota Secretary of State.
Can a Minnesota PA have different classes of members?
Yes, a Minnesota PA can have different classes of members.
Does a Minnesota PA have to file an annual report?
Yes, a Minnesota PA is required to file an Annual Report with the Minnesota Secretary of State.
Is a Minnesota PA required to have a board of directors?
No, a Minnesota PA is not required to have a board of directors.
Can the shareholders of a Minnesota PA also be the members?
Yes, the shareholders of a Minnesota PA can also be the members.
What is a Certificate of Authority?
A Certificate of Authority is a document issued by the Minnesota Secretary of State that allows a corporation from another state to do business in Minnesota.
Does a Professional Corporation from another state need a Certificate of Authority to operate in Minnesota?
Yes, a Professional Corporation from another state must obtain a Certificate of Authority to operate in Minnesota.

Also Read

How to Save Money While Forming Minnesota Professional Corporation

One of the first ways to save money while forming a professional corporation in Minnesota is to do your research thoroughly. Understand the legal requirements and regulations for forming a corporation in the state, so you can avoid costly mistakes that may delay the process or result in fines. By being well-informed and prepared, you can save money on legal fees and minimizing potential errors.

Another way to save money is by creating a detailed business plan before starting the process of forming your professional corporation. This plan will help you identify your goals, objectives, target market, and revenue projections. By having a clear vision of your business, you can avoid unnecessary expenses and focus on the essentials of your corporation formation.

Furthermore, consider utilizing online resources and services to aid in the formation of your professional corporation. There are various websites and platforms that offer templates, guides, and tools to assist with the incorporation process at a fraction of the cost of hiring a lawyer or consultant. Utilizing these resources can save you time and money while ensuring that your corporation is formed correctly and efficiently.

In addition, consider registering your professional corporation as an LLC (Limited Liability Company) instead of a traditional corporation. LLCs offer similar liability protection for shareholders but typically have lower administrative requirements and costs associated with formation and maintenance. By choosing this business structure, you can save money on legal and administrative fees while still enjoying the benefits of liability protection.

When it comes to choosing a registered agent for your professional corporation, opt for a cost-effective and reliable service. Registered agents are responsible for receiving legal documents and official communication on behalf of your corporation, so it is crucial to select a trustworthy agent. However, there are many registered agent services available at affordable rates, so be sure to research and compare your options to find the best value for your money.

Lastly, consider consolidating your business needs, such as legal services, accounting, and marketing, to a single provider or firm. Many professional service firms offer bundled packages or discounts for clients who utilize multiple services. By consolidating your business needs, you can save money on overall costs and simplify the management of your corporation’s operations.

In summary, forming a Minnesota professional corporation does not have to break the bank. By doing your research, creating a solid business plan, utilizing online resources, choosing the right business structure, selecting a cost-effective registered agent, and consolidating your business needs, you can save money and streamline the process of forming your corporation. With proper planning and informed decision-making, you can establish a successful professional corporation without overextending your budget or resources.

Conclusion

Minnesota Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in Minnesota.

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