corporation status. S corporation status also may be terminated when passive investment income (income from interest, rents, royalties, dividends and the like) exceeds a certain statutorily defined threshold). Because of the possibility that S corporation status may be inadvertently terminated, persons planning to establish an S corporation are strongly encouraged to consult in advance with legal and tax counsel in order to properly structure the corporation and its capitalization. In some cases, forming a Limited Liability Company, rather than an S corporation, may better suit the owners’ business and tax objectives. See the discussion of Limited Liability Companies in the sections of this Guide titled Choosing the Form of Business Organization and Forming a Minnesota Limited Liability Company. PROFESSIONAL ENTITIES The Minnesota Professional Firms Act, Minn. Stat. Chapter 319B, authorizes practitioners of certain licensed professions to elect to be professional firms under any one of three different forms of organization: corporations (either for-profit or nonprofit); Limited Liability Companies; and limited liability partnerships. In the absence of the Minnesota Professional Firms Act and its predecessors, members of such professions would not be able to practice under these forms of organization because the ethics rules of their respective licensing boards prohibit organizing in a way that limits the professional practitioner’s professional liability towards clients. The Minnesota Professional Firms Act does not affect a practitioner’s liability for her or his own malpractice or other wrongful conduct directly arising from the rendering of professional services, but permits the professional to have limited liability for debts or obligations of the business itself to the extent that the generally applicable governing law for the chosen form of organization permits. Professional firms are subject to the law under which the entity has been formed as well as the Professional Firms Act which contains additional restrictions; where the two conflict, the Professional Firms Act will control. Members of the professional firm are also subject to the laws, regulations and licensing requirements of their respective licensing boards. In order to practice a profession in any form other than sole proprietorship or general partnership, professionals must comply with the Professional Firms Act, except as the rules of the respective licensing board provide otherwise. Members of the following professions may elect to be professional firms: medicine and surgery; chiropractic; registered nursing; optometry; psychology; social work; marriage and family therapy; dentistry and dental hygiene; pharmacy; podiatric medicine; veterinary medicine; physician’s assistants; architecture; engineering; surveying; landscape architecture; geoscience; certified interior design; accountancy; and law. In order to operate as a professional firm, a Minnesota entity must first be formed under the chosen statute: the Minnesota Business Corporation Act (Minn. Stat. Chapter 302A); the Minnesota Nonprofit Corporation Act (Minn. Stat. Chapter 317A); the Minnesota Revised Uniform Limited Liability Company Act (Minn. Stat. Chapter 322C); or the Minnesota Limited Liability Partnership Act (Minn. Stat. Chapter 323A). An existing non-Minnesota entity wishing to practice a profession in Minnesota should register under the Minnesota Foreign Corporation Act (Minn. Stat. Chapter 303) or the foreign registration provisions of the Limited Liability Company or Limited Liability Partnership Acts.
57
Made with FlippingBook - Online Brochure Maker