Are you looking to form a professional limited liability company (PLLC) in Minnesota, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Minnesota PLLC that is compliant and able to do business in the state.
What is a Minnesota Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. In Minnesota, PLLCs can be formed by the following professionals for the purpose of rendering professional services: physicians and surgeons, physician assistants, chiropractors, registered nurses, psychologists, social workers, certain therapists and counselors, dentists, pharmacists, podiatrists, veterinarians, architects, engineers, surveyors, landscape architects, geoscientists, certified interior designers, accountants, and lawyers.
The Minnesota PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Minnesota have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in Minnesota (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
Minnesota law requires that the name of a PLLC end with the words “Professional Limited Liability Company” or “Limited Liability Company” or the abbreviation “P.L.L.C.,” “P.L.C.,” or “L.L.C.” In addition, the name of a PLLC cannot imply or be used to imply superiority.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. To check if a name is available, you can search Business Filings on the Minnesota Secretary of State’s website. Once you’ve chosen a name and confirmed that is available, you can reserve the name for 12 months by filing a Request for Reservation of Name with the Minnesota Secretary of State. The filing fee for this form is $55 for expedited service in-person and online filings and $35 for filings by mail. The reservation may be also be renewed for additional 12-month periods.
Step Two) Designate a Registered Agent
Every PLLC in Minnesota is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
In Minnesota, if you designate a registered agent, the registered agent must be a person residing in Minnesota, a Minnesota entity, or a foreign entity authorized to do business in Minnesota. The registered agent must also maintain a business office at your PLLC’s registered office address.
Without a registered agent, you could lose your good standing with the state of Minnesota, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your Minnesota professional limited liability company, you will fill out the Articles of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of the PLLC
- Registered office address
- Name of registered agent, if any
- Name(s) and address(es) of organizer(s)
- Email address for official notices
- Name and telephone number for contact person
In addition, you must include an attachment to the Articles of Organization that (i) includes a statement that your company elects to operate and acknowledges that it is subject to Minnesota Statutes, Chapter 319B.01 to 319B.12 and (ii) lists the professional service your company is authorized to provide under Minnesota Statutes, Chapter 319B, subd 19. You can file your completed documents with the Minnesota Secretary of State online, in person, or by mail.
Cost to Form a PLLC
The filing fee of the Articles of Organization is $155 for expedited service in person and online filings and $135 if filing by mail.
In person filings are generally processed the same day while you wait, and online filings are usually returned electronically within 1 or 2 business days. Non-expedited filings by mail are processed first in/first out and generally take 5-7 business days.
Step Four) Create an Operating Agreement
After you register a PLLC in Minnesota, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
Business taxes in Minnesota include, among others, corporate franchise tax, S corporation tax, partnership tax, and sales & use tax. Your PLLC’s specific tax obligations in Minnesota will depend on how you elect to treat your PLLC for tax purposes, as well as the nature of your business. For detailed information on state-level business taxes in Minnesota, you can visit the Minnesota Department of Revenue’s website. Once you’ve formed your business, you can also register with the Minnesota Department of Revenue’s e-Services website, where you can file returns, make payments, communicate with the Department, and view account information.
Depending on where in Minnesota your business is located, you may also need to pay some local taxes. You should contact the local government where your business is located to confirm your company’s tax obligations. If your business is located in one of the four largest cities in Minnesota, you can visit their websites for local business resources: Minneapolis, Saint Paul, Rochester, and Duluth.
Step Six) Obtain Business Licenses and Permits
Minnesota doesn’t require a general business license for every business in the state, but depending on the nature of your business activities, you may still need to obtain one or more state-required licenses, permits, or registrations to operate your business. To find out what may be required for your business, you should start by visiting the Minnesota Elicensing web portal. You can use this website to review licensing information by activity, agency, license name, or by using a keyword search. You can also view an alphabetical list of licenses.
You should be sure to check with your city and county as well to confirm if a local business license or any other local licenses, permits, or registrations will be required for your PLLC.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in Minnesota
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
In Minnesota, all employers, subject to limited exceptions, are required to either buy workers' compensation insurance or become self-insured. This requirement applies if you have any number of employees, including minors, part-time workers, and workers who are not citizens. For more information, you can visit the Minnesota Department of Labor and Industry’s website. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
You will need to determine which income tax form is appropriate for your business income. The various Minnesota income tax forms and instructions are available on the Minnesota Department of Revenue’s website.
Understand annual reporting
Minnesota requires that all PLLCs file an Annual Renewal form once every calendar year. If you need to make changes to your PLLC’s name or registered agent and office address, you will need to file an amendment form along with the Annual Renewal form and pay the applicable filing fee for the amendment form. You can make changes to the principal executive office address and manager’s name and address once a year by filing the Annual Renewal form. If your PLLC is active and in good standing, there is no filing fee for the Annual Renewal form. If your PLLC has been dissolved for failure to file an Annual Renewal, it’s possible to retroactively reinstate its existence by filing the current year’s Annual Renewal form and paying the applicable fee.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.