When a corporation extends into a new product line or a new geographic area, it frequently establishes a “subsidiary” corporation. A subsidiary corporation is a separate legal entity which happens to be controlled by another corporation (its “parent”) that owns enough shares of the subsidiary’s stock to dictate policy. Some subsidiaries are wholly-owned, some are not. As a separate entity, separate records and management are required, although consolidated financial and tax reporting may be possible under certain circumstances. Subsidiaries may also serve to insulate the parent corporation from liability for the action of the subsidiary under certain circumstances.
Foreign Corporations Doing Business In Minnesota
A corporation that is organized under the laws of a state other than Minnesota that transacts business in Minnesota must apply for a certificate of authority before doing business in Minnesota. The requirements for obtaining the certificate of authority are specified by Minnesota Statutes Chapter 303, and are set forth on a required form available from the Secretary of State’s website at www.sos.state.mn.us/index.aspx?page=331 or by fax from the Fax Forms library at (651) 296- 2803 or by mail from the Secretary of State. A recently-issued (within the past 90 days) certificate of existence from the state of incorporation must accompany the application.
The term “transacting business” is not clearly defined in statute, but the standard used in making the determination is the “minimum contacts” standard used in determining jurisdiction. Under this standard the facts are analyzed to determine whether the business or its local agents have conducted a continuous course of business in Minnesota or with Minnesotans sufficient to justify being governed by Minnesota law. This analysis will not be performed by the Secretary of State or any other state executive agency; each business is responsible for performing its own analysis on the topic.
Neither the Secretary of State nor any other state agency will make a determination as to whether a particular organization should register as a foreign corporation. As a general rule, doubts should be resolved in favor of registering the organization. Minnesota Statutes § 303.03 establishes certain activities as exceptions to the registration requirement. Corporations organized outside Minnesota should consult with their legal counsel to determine whether any of the exceptions apply.
A foreign corporation also must file with the Secretary of State an annual registration and pay a $135 fee. Annual registration forms are sent by the Secretary of State to the registered agent and office address of the corporation in Minnesota. The forms are also available at the Secretary of State’s website at www.sos.state.mn.us/index.aspx?page=331 or by fax from the Fax Forms library at (651) 296-2803 or by mail from the Secretary of State. However, foreign nonprofit corporations are exempt from this requirement. Failure to file the annual registration in a calendar year will result in revocation.
In addition to obtaining the certificate of authority, a foreign corporation must obtain a Minnesota tax identification number from the Department of Revenue. If the corporation will have employees in Minnesota, it also must obtain a Minnesota employer withholding tax number and an unemployment insurance employer account number and arrange for workers’ compensation insurance. The procedure for obtaining these numbers is described in the section of this Guide on business taxes and the Checklist for Hiring an Employee.
Foreign corporations also must obtain any state and local business licenses necessary to conduct business operations. Information on business license requirements may be obtained from the Minnesota Small Business Assistance Office at the address and telephone number provided in the Resource Directory section of this Guide.
Finally, the Minnesota Department of Revenue has the power to order the Secretary of State to revoke a foreign corporation’s certificate of authority to do business in Minnesota if that corporation “fails to comply with any tax laws” administered by the Department of Revenue.
This post is part of a series of posts on forming a business in Minnesota.