Are you considering starting a professional corporation in Minnesota? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Minnesota can be daunting.
This article aims to provide a comprehensive guide on how to form a professional corporation in Minnesota, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Minnesota!
On this page, you’ll learn about the following:
- What is a Professional Corporation in Minnesota?
- How to Form a Professional Corporation in Minnesota
- Step 1: Verify If You Are Qualified for a Professional Corporation
- Step 2: Name your Professional Corporation in Minnesota
- Step 3: Choose the Minnesota Registered Agent
- Step 4: File the Articles of Incorporation in Minnesota
- Step 5: Write an Operating Agreement in Minnesota
- Step 6: Designate the PC Board of Directors in Minnesota
- Step 7: Write the Corporate Bylaws
- Step 8: Hold the First Board of Directors’ Meeting
- Step 9: Request an EIN in Minnesota
- Step 10: Open a Bank Account and Prepare for Taxes
- Step 11: Get a Business License in Minnesota
- Step 12: File Your Taxes in Minnesota
- Important Information
- Advantages of Forming a Professional Corporation in Minnesota
- FAQs
What is a Professional Corporation in Minnesota?
A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Minnesota. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.
PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Minnesota.
– LLCBuddy Editorial Team
Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Minnesota if you hire a professional service that provides LLC formation at $0.
How to Form a Professional Corporation in Minnesota
To form a Professional Corporation 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-
- Doctors
- Architects
- Engineers
- Accountants
- Lawyers and others
You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.
Step 2: Name your Professional Corporation in Minnesota
After you have decided on the idea to form a professional corporation in Minnesota, deciding the name for your corporation is significant. There is a complete guide on Minnesota LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while 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)
- No confusion with a government entity name.
- A unique name is needed with no match
- Limit of restricted words that need a license.
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. To keep the name, you must file a name reservation application with Minnesota Secretary of State.
A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.
Step 3: Choose the Minnesota Registered Agent
The next step in forming a professional corporation is hiring the Minnesota Registered Agent, a person that accepts legal paperwork on behalf of 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 Minnesota Registered Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Minnesota.
Step 4: File the Articles of Incorporation in Minnesota
After you hire a Minnesota 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. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.
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 states. 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 is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Minnesota 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 appoint the initial board of directors in your PC in Minnesota. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Minnesota SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.
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.
In creating corporate bylaws, you should include the following on how the decisions will be made.
- The responsibilities are given to each officer.
- How will judgments in business be made?
- Where and when are the annual shareholder meetings?
- The minimum number of shareholders required for decision-making.
- Location and timing of dividend payments.
Step 8: Hold the First Board of Directors’ Meeting
After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.
Step 9: Request an EIN in Minnesota
After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional 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 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 4 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 a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.
Step 10: Open a Bank Account and Prepare for Taxes
Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.
Your business dealings in Minnesota might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.
Step 11: Get a Business License in Minnesota
Before your professional corporation operates in Minnesota, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Minnesota, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.
Step 12: File Your Taxes in Minnesota
Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Minnesota classification of taxes for the taxes an LLC in Minnesota has to pay.
Important Information
Maintaining Professional and Business License in Minnesota
Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.
Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.
Filing an Annual Report in Minnesota
In Minnesota, you will be required to submit a report each year. 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 one yearly in Minnesota, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.
Advantages of Forming a Professional Corporation in Minnesota
A professional corporation takes a lot of time to process and pursue. However, with the help of the Minnesota Registered Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Minnesota.
- Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
- Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
- Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.
FAQs
Also Read
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- Form a Professional Corporation in Arizona
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- Form a Professional Corporation in Colorado
- Form a Professional Corporation in Connecticut
- Form a Professional Corporation in DC
- Form a Professional Corporation in Delaware
- Form a Professional Corporation in Florida
- Form a Professional Corporation in Georgia
- Form a Professional Corporation in Hawaii
- Form a Professional Corporation in Idaho
- Form a Professional Corporation in Illinois
- Form a Professional Corporation in Indiana
- Form a Professional Corporation in Iowa
- Form a Professional Corporation in Kansas
- Form a Professional Corporation in Kentucky
- Form a Professional Corporation in Louisiana
- Form a Professional Corporation in Maine
- Form a Professional Corporation in Maryland
- Form a Professional Corporation in Massachusetts
- Form a Professional Corporation in Michigan
- Form a Professional Corporation in Minnesota
- Form a Professional Corporation in Mississippi
- Form a Professional Corporation in Missouri
- Form a Professional Corporation in Montana
- Form a Professional Corporation in Nebraska
- Form a Professional Corporation in Nevada
- Form a Professional Corporation in New Hampshire
- Form a Professional Corporation in New Jersey
- Form a Professional Corporation in New Mexico
- Form a Professional Corporation in New York
- Form a Professional Corporation in North Carolina
- Form a Professional Corporation in North Dakota
- Form a Professional Corporation in Ohio
- Form a Professional Corporation in Oklahoma
- Form a Professional Corporation in Oregon
- Form a Professional Corporation in Pennsylvania
- Form a Professional Corporation in Rhode Island
- Form a Professional Corporation in South Carolina
- Form a Professional Corporation in South Dakota
- Form a Professional Corporation in Tennessee
- Form a Professional Corporation in Texas
- Form a Professional Corporation in Utah
- Form a Professional Corporation in Vermont
- Form a Professional Corporation in Virginia
- Form a Professional Corporation in Washington
- Form a Professional Corporation in West Virginia
- Form a Professional Corporation in Wisconsin
- Form a Professional Corporation in Wyoming
Why Minnesota Professional Corporation is So Important
A professional corporation, or professional service corporation, is a specific type of corporation that is formed by licensed professionals, such as doctors, lawyers, accountants, architects, and engineers, to conduct their business practices. This legal structure offers various advantages that can help professionals protect their personal assets, secure their professional reputation, and comply with industry regulations.
One of the primary reasons why Minnesota professional corporations are so important is that they provide a layer of liability protection for their shareholders. By operating as a corporation, professionals can shield their personal assets from any legal claims or lawsuits that may arise from their business activities. This means that in the event of a lawsuit or legal dispute, the personal assets of the shareholders, such as their homes, savings, and investments, are generally protected from being seized to satisfy any outstanding debts or judgments.
Another key benefit of establishing a professional corporation in Minnesota is that it helps professionals safeguard their professional reputation and credibility. By operating under a formal corporate structure, professionals can enhance their credibility and legitimacy in the eyes of clients, investors, and other stakeholders. This can ultimately lead to increased trust and confidence in the services and expertise offered by the professionals, helping them attract more clients and grow their business.
In addition to liability protection and reputation management, forming a professional corporation in Minnesota can also help professionals comply with industry regulations and licensing requirements. Many licensed professionals are required to operate under a specific legal structure, such as a professional corporation, in order to maintain their professional licensure and adhere to regulatory guidelines.
Furthermore, a professional corporation can offer tax advantages and flexibility in terms of financial management. By structuring their business as a corporation, professionals can take advantage of tax strategies and deductions that are available to corporate entities. Additionally, professionals can benefit from increased flexibility in managing their finances, including opportunities for retirement planning, estate planning, and wealth accumulation.
Overall, the importance of establishing a professional corporation in Minnesota cannot be overstated. This legal structure offers a wide range of benefits and advantages that can help professionals protect their personal assets, enhance their credibility, comply with industry regulations, and take advantage of tax advantages. By choosing to operate as a professional corporation, professionals can position themselves for long-term success and growth in their respective fields.
Conclusion
In forming a professional corporation in Minnesota, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.