The Minnesota Professional Firms Act, Minnesota Statutes, Chapter 319B, was enacted in 1997 and 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 (Minnesota Statutes Chapter 302A); the Minnesota Nonprofit Corporation Act (Minnesota Statutes Chapter 317A); the Minnesota Limited Liability Company Act (Minnesota Statutes Chapter 322B); or the Minnesota Limited Liability Partnership Act (Minnesota Statutes Chapter 323A). An existing non-Minnesota entity wishing to practice a profession in Minnesota should register under the Minnesota Foreign Corporation Act (Minnesota Statutes Chapter 303) or the foreign registration provisions of the Limited Liability Company or Limited Liability Partnership Acts.
Then, either as an addendum to the original documents of formation for the entity or as a later amendment or update to those documents, the firm must file with the Secretary of State language stating:
- that the firm elects to be covered by the Minnesota Professional Firms Act (Minnesota Statutes, sections 319B.01 to 319B.012);
- that the firm acknowledges that it is subject to those sections; and
- specifying from the list of professions set forth above the profession or professions to be practiced by the firm.
A non-Minnesota firm must state in addition to the above that to the extent that its generally applicable governing law differs from or conflicts with Minnesota Statutes, sections 319B.01 to 319B.12, that it has made the necessary changes to the agreements and other documents controlling its structure, governance, operations and internal affairs so as to comply with those sections.
Such a filing constitutes an election to be a professional firm. These entities may rescind such elections, may again elect professional status, and may change the designated practiced profession freely, subject to the regulations of the appropriate governing board(s).
Health professionals (including medicine and surgery; chiropractic; registered nursing; optometry; psychology; dentistry and dental hygiene; pharmacy and podiatric medicine) are specifically authorized to practice in the same professional firm; others should consult their licensing boards for further information on whether joint practices are permitted. Where they are not, a professional firm can provide only those professional services listed in the election described above.
The name of a professional firm which is a corporation must include one of the following designations or abbreviations; Professional Corporation, Professional Service Corporation, Service Corporation, Professional Association, Chartered, Limited, P.C., P.S.C., S.C., P.A., or Ltd.
The name of a professional firm which is an LLC must include Professional Limited Liability Company, Limited Liability Company, P.L.L.C., P.L.C., or L.L.C.
The name of a professional firm which is an LLP must include Professional Limited Liability Partnership, Limited Liability Partnership, P.L.L.P. or L.L.P.
The internal governance of professional firms is governed by the same statutes that apply to nonprofessional firms. For example, a professional LLP and a non-professional LLP are bound in virtually all respects by the same statutes. The only difference is that the professional LLP may provide professional services as listed above and the non-professional LLP may not.
This post is part of a series of posts on forming a business in Minnesota.