Setting Up a Business Partnership in Minnesota
Forming a business partnership in Minnesota requires careful planning and compliance with state-specific regulations. Partners must file a Certificate of Assumed Name with the Minnesota Secretary of State, obtain necessary licenses, and create a comprehensive partnership agreement that outlines rights, responsibilities, and profit-sharing arrangements.
Without a written partnership agreement, your business will default to Minnesota's Uniform Partnership Act provisions, which may not align with your specific business needs or intentions. Taking time to properly establish your partnership structure now can prevent costly disputes and legal complications in the future.
Key Considerations
Scenarios
Decisions
Scenarios
Decisions
Scenarios
Decisions
Relevant Documents
Buy-Sell Agreement
A contract that outlines what happens to a partner's share of the business if they die, become disabled, retire, or wish to sell their interest in the partnership.
Partnership Agreement
A comprehensive contract that outlines the rights, responsibilities, and obligations of all partners, including profit sharing, decision-making authority, capital contributions, dispute resolution, and dissolution procedures.
Partnership Capital Contribution Agreement
A document that specifies the initial and ongoing capital contributions of each partner, including cash, property, services, or other assets.
Partnership Operating Procedures
An internal document that details day-to-day operations, management responsibilities, and standard procedures for the partnership business.
Relevant Laws
Minnesota Uniform Partnership Act (Chapter 323A)
This is the primary law governing partnerships in Minnesota. It defines what constitutes a partnership, the rights and duties of partners, and the rules for partnership formation, operation, and dissolution. Understanding this act is essential when setting up any partnership in Minnesota.
Minnesota Business Name Registration (Chapter 333)
When forming a partnership in Minnesota, you must register your business name with the Secretary of State if you're operating under a name other than the surnames of all partners. This law outlines the requirements for name registration and the process to follow.
Minnesota Tax Laws for Partnerships (Chapter 289A)
Partnerships in Minnesota must comply with specific tax filing requirements. While partnerships themselves don't pay income tax, they must file informational returns, and partners report their share of income on individual returns. This law outlines the tax obligations for partnerships operating in Minnesota.
Minnesota Business License Requirements
Depending on your partnership's activities, you may need specific licenses or permits to operate legally in Minnesota. This varies by industry and location, but all businesses must comply with applicable licensing requirements at state and local levels.
Minnesota Employment Laws (Chapter 177)
If your partnership will have employees, you must comply with Minnesota's employment laws regarding minimum wage, overtime, workplace safety, and other employment practices. These laws apply to all business entities with employees, including partnerships.
Regional Variances
Twin Cities Metropolitan Area
Minneapolis has additional business partnership registration requirements through its Business Licensing department. Partners must obtain a Minneapolis business license in addition to state filings if operating within city limits. The city also has specific zoning regulations that may affect where partnership businesses can operate.
St. Paul requires partnerships to register with the city's Department of Safety and Inspections if conducting business within city limits. The city has its own business licensing process separate from state requirements and may require additional permits depending on the nature of the partnership business.
Greater Minnesota
Partnerships in Duluth must comply with the city's special business district regulations if operating in designated areas like Canal Park or Downtown. The city has unique tax increment financing districts that may provide benefits to new partnership businesses in certain locations.
Rochester has specific partnership regulations related to businesses in the medical and healthcare sectors due to the presence of Mayo Clinic. Partnerships may need to comply with additional requirements if providing services related to healthcare or if located within the Destination Medical Center district.
Tribal Jurisdictions
Partnerships operating within Red Lake Nation boundaries must obtain tribal business licenses and comply with tribal business codes. State partnership laws may have limited application, as Red Lake Nation maintains sovereignty over business regulations within its territory.
Partnerships on White Earth Reservation may be subject to both state and tribal regulations. The reservation has its own business development office that provides guidance on forming partnerships within tribal lands and may offer specific incentives for Native-owned businesses.
Suggested Compliance Checklist
Research Partnership Types
Day 1 days after startingDetermine which type of partnership structure is best for your business in Minnesota: general partnership, limited partnership (LP), or limited liability partnership (LLP). Each has different liability protections, tax implications, and filing requirements. Consider consulting with a business attorney to understand which structure aligns with your business goals and risk tolerance.
Choose a Business Name
Day 3 days after startingSelect a name for your partnership that complies with Minnesota naming requirements. For general partnerships, the name typically includes the surnames of the partners. For LPs and LLPs, the name must include the appropriate designation. Conduct a name availability search through the Minnesota Secretary of State's website to ensure the name isn't already in use.
Draft Partnership Agreement
Day 10 days after startingCreate a comprehensive partnership agreement that outlines the rights and responsibilities of all partners, profit and loss allocation, decision-making processes, dispute resolution procedures, and partnership dissolution terms. While not legally required for general partnerships in Minnesota, a written agreement is strongly recommended to prevent future disputes and misunderstandings.
Draft Partnership Capital Contribution Agreement
Day 12 days after startingCreate a document detailing each partner's initial and ongoing capital contributions to the business. Specify the type of contributions (cash, property, services), valuation methods, timing of contributions, and how capital accounts will be maintained. This agreement should also address how additional capital calls will be handled if needed in the future.
File Certificate of Partnership
Day 15 days after startingFor LPs and LLPs in Minnesota, you must file a Certificate of Limited Partnership or Statement of Qualification with the Minnesota Secretary of State. General partnerships are not required to file, but may choose to file an Assumed Name Certificate if operating under a name other than the partners' surnames. The filing fee is typically $135-$155 depending on the partnership type.
Apply for Employer Identification Number (EIN)
Day 17 days after startingApply for an EIN from the IRS, which is required for partnerships even if you don't have employees. This number is used for tax filing purposes and opening business bank accounts. Apply online through the IRS website for immediate processing at no cost.
File Fictitious Business Name Statement
Day 19 days after startingIf your partnership will operate under a name different from the legal name of the partners (for general partnerships) or the registered name (for LPs/LLPs), file an Assumed Name Certificate with the Minnesota Secretary of State. This is also known as a 'doing business as' (DBA) registration. The filing fee is approximately $50.
Open a Business Bank Account
Day 21 days after startingOpen a separate bank account for your partnership using your EIN and partnership documentation. Prepare a Business Bank Account Resolution that authorizes specific partners to conduct banking activities. Maintaining separate business finances is crucial for proper accounting and liability protection.
Obtain Required Business Licenses
Day 25 days after startingResearch and apply for all necessary business licenses and permits required for your specific industry and location in Minnesota. This may include city, county, and state licenses. Check with the Minnesota Department of Employment and Economic Development and your local government offices to determine specific requirements.
Register for Sales Tax Permit
Day 27 days after startingIf your partnership will sell taxable goods or services in Minnesota, register for a sales tax permit with the Minnesota Department of Revenue. You'll need to collect and remit sales tax on applicable transactions. Registration can be completed online through the Minnesota e-Services system.
Draft Partnership Operating Procedures
Day 30 days after startingCreate a document outlining the day-to-day operational procedures for your partnership, including management responsibilities, meeting schedules, reporting requirements, and internal controls. While not legally required, this document helps establish clear expectations and promotes efficient business operations.
Draft Buy-Sell Agreement
Day 35 days after startingPrepare a buy-sell agreement that addresses what happens if a partner wants to exit the business, becomes disabled, or dies. This agreement should outline the valuation method for partnership interests, payment terms, and transfer restrictions. This is essential for business continuity planning and preventing potential disputes during ownership transitions.
Register for Employer Accounts (if hiring employees)
Day 40 days after startingIf your partnership will have employees, register with the Minnesota Unemployment Insurance Program and the Minnesota Department of Revenue for withholding tax. You'll also need to set up workers' compensation insurance through a private insurer approved to operate in Minnesota.
Establish Recordkeeping Systems
Day 45 days after startingSet up systems for maintaining required business records, including financial transactions, meeting minutes, and tax documents. Minnesota partnerships must maintain accurate books and records, and partners have the right to access these records. Consider using accounting software designed for partnerships.
Schedule Annual Compliance Calendar
Day 50 days after startingCreate a compliance calendar that includes all recurring filing deadlines, tax payment due dates, and annual report requirements. In Minnesota, partnerships must file annual renewals for assumed names and LLPs, and all partnerships have federal and state tax filing obligations. Set reminders at least 30 days before each deadline.
| Task | Description | Document | Days after starting |
|---|---|---|---|
| Research Partnership Types | Determine which type of partnership structure is best for your business in Minnesota: general partnership, limited partnership (LP), or limited liability partnership (LLP). Each has different liability protections, tax implications, and filing requirements. Consider consulting with a business attorney to understand which structure aligns with your business goals and risk tolerance. | - | Day 1 |
| Choose a Business Name | Select a name for your partnership that complies with Minnesota naming requirements. For general partnerships, the name typically includes the surnames of the partners. For LPs and LLPs, the name must include the appropriate designation. Conduct a name availability search through the Minnesota Secretary of State's website to ensure the name isn't already in use. | - | Day 3 |
| Draft Partnership Agreement | Create a comprehensive partnership agreement that outlines the rights and responsibilities of all partners, profit and loss allocation, decision-making processes, dispute resolution procedures, and partnership dissolution terms. While not legally required for general partnerships in Minnesota, a written agreement is strongly recommended to prevent future disputes and misunderstandings. | Partnership Agreement | Day 10 |
| Draft Partnership Capital Contribution Agreement | Create a document detailing each partner's initial and ongoing capital contributions to the business. Specify the type of contributions (cash, property, services), valuation methods, timing of contributions, and how capital accounts will be maintained. This agreement should also address how additional capital calls will be handled if needed in the future. | Partnership Capital Contribution Agreement | Day 12 |
| File Certificate of Partnership | For LPs and LLPs in Minnesota, you must file a Certificate of Limited Partnership or Statement of Qualification with the Minnesota Secretary of State. General partnerships are not required to file, but may choose to file an Assumed Name Certificate if operating under a name other than the partners' surnames. The filing fee is typically $135-$155 depending on the partnership type. | Certificate of Partnership | Day 15 |
| Apply for Employer Identification Number (EIN) | Apply for an EIN from the IRS, which is required for partnerships even if you don't have employees. This number is used for tax filing purposes and opening business bank accounts. Apply online through the IRS website for immediate processing at no cost. | Employer Identification Number (EIN) Application | Day 17 |
| File Fictitious Business Name Statement | If your partnership will operate under a name different from the legal name of the partners (for general partnerships) or the registered name (for LPs/LLPs), file an Assumed Name Certificate with the Minnesota Secretary of State. This is also known as a 'doing business as' (DBA) registration. The filing fee is approximately $50. | Fictitious Business Name Statement | Day 19 |
| Open a Business Bank Account | Open a separate bank account for your partnership using your EIN and partnership documentation. Prepare a Business Bank Account Resolution that authorizes specific partners to conduct banking activities. Maintaining separate business finances is crucial for proper accounting and liability protection. | Business Bank Account Resolution | Day 21 |
| Obtain Required Business Licenses | Research and apply for all necessary business licenses and permits required for your specific industry and location in Minnesota. This may include city, county, and state licenses. Check with the Minnesota Department of Employment and Economic Development and your local government offices to determine specific requirements. | Business License Application | Day 25 |
| Register for Sales Tax Permit | If your partnership will sell taxable goods or services in Minnesota, register for a sales tax permit with the Minnesota Department of Revenue. You'll need to collect and remit sales tax on applicable transactions. Registration can be completed online through the Minnesota e-Services system. | Sales Tax Permit Application | Day 27 |
| Draft Partnership Operating Procedures | Create a document outlining the day-to-day operational procedures for your partnership, including management responsibilities, meeting schedules, reporting requirements, and internal controls. While not legally required, this document helps establish clear expectations and promotes efficient business operations. | Partnership Operating Procedures | Day 30 |
| Draft Buy-Sell Agreement | Prepare a buy-sell agreement that addresses what happens if a partner wants to exit the business, becomes disabled, or dies. This agreement should outline the valuation method for partnership interests, payment terms, and transfer restrictions. This is essential for business continuity planning and preventing potential disputes during ownership transitions. | Buy-Sell Agreement | Day 35 |
| Register for Employer Accounts (if hiring employees) | If your partnership will have employees, register with the Minnesota Unemployment Insurance Program and the Minnesota Department of Revenue for withholding tax. You'll also need to set up workers' compensation insurance through a private insurer approved to operate in Minnesota. | - | Day 40 |
| Establish Recordkeeping Systems | Set up systems for maintaining required business records, including financial transactions, meeting minutes, and tax documents. Minnesota partnerships must maintain accurate books and records, and partners have the right to access these records. Consider using accounting software designed for partnerships. | - | Day 45 |
| Schedule Annual Compliance Calendar | Create a compliance calendar that includes all recurring filing deadlines, tax payment due dates, and annual report requirements. In Minnesota, partnerships must file annual renewals for assumed names and LLPs, and all partnerships have federal and state tax filing obligations. Set reminders at least 30 days before each deadline. | - | Day 50 |
Frequently Asked Questions
In Minnesota, you can form several types of partnerships: 1) General Partnership (GP), where all partners share equally in management and liability; 2) Limited Partnership (LP), which has both general partners who manage the business and limited partners who are primarily investors; 3) Limited Liability Partnership (LLP), which provides some liability protection for all partners; and 4) Limited Liability Limited Partnership (LLLP), which combines features of LPs and LLPs. Each structure has different formation requirements, liability protections, and tax implications.
It depends on the type of partnership. For a General Partnership, no state filing is required in Minnesota, though it's formed automatically when two or more people operate a business for profit. However, Limited Partnerships (LPs), Limited Liability Partnerships (LLPs), and Limited Liability Limited Partnerships (LLLPs) must file registration documents with the Minnesota Secretary of State and pay the required filing fees. Additionally, all business entities should register with the Minnesota Department of Revenue for tax purposes.
While Minnesota law doesn't legally require a written partnership agreement, operating without one is extremely risky. Without a written agreement, your partnership will be governed by the default provisions of the Minnesota Uniform Partnership Act, which may not align with your intentions. A comprehensive written partnership agreement should address ownership percentages, profit and loss distribution, management responsibilities, dispute resolution, partner exits, and dissolution procedures. Having an attorney draft or review your agreement is highly recommended.
Partnerships in Minnesota are generally considered 'pass-through' entities for tax purposes. This means the partnership itself doesn't pay income taxes; instead, profits and losses 'pass through' to the individual partners, who report them on their personal tax returns. Partners must pay Minnesota state income tax on their share of partnership income. Additionally, partnerships must file an informational tax return (Form M3) with the Minnesota Department of Revenue, and partners typically need to make quarterly estimated tax payments. Self-employment taxes also apply to general partners' income.
Liability protection varies significantly by partnership type in Minnesota. In a General Partnership (GP), all partners have unlimited personal liability for business debts and legal claims. In a Limited Partnership (LP), general partners have unlimited liability while limited partners' liability is restricted to their investment. Limited Liability Partnerships (LLPs) provide all partners protection from the negligence of other partners, though partners remain liable for their own negligence and the partnership's debts. Limited Liability Limited Partnerships (LLLPs) combine these features, giving limited partners investment-only liability and general partners some liability protection.
To register your partnership name in Minnesota, first check name availability through the Minnesota Secretary of State's business name search tool. For General Partnerships using a name different from the partners' surnames, you must file a Certificate of Assumed Name with the Secretary of State. For LPs, LLPs, and LLLPs, the name is registered when you file your formation documents. Partnership names must comply with Minnesota naming requirements, including containing appropriate designations (like 'LP' or 'LLP') and not being deceptively similar to existing business names. Name registration must be renewed every 10 years.
Minnesota partnerships must fulfill several ongoing compliance requirements. All partnerships must file annual renewal forms with the Secretary of State (due by December 31 each year). Partnerships must also file annual informational tax returns with both federal and Minnesota tax authorities. If you have employees, you'll need to comply with employment laws, tax withholding, and insurance requirements. Depending on your business activities, you may need to maintain specific licenses or permits. LLPs and LLLPs must maintain their status through timely renewals to preserve liability protection for partners.
To dissolve a partnership in Minnesota, follow these steps: 1) Review your partnership agreement for dissolution procedures; 2) Hold a partner meeting and document the dissolution decision; 3) File a Statement of Dissolution with the Minnesota Secretary of State (required for LPs, LLPs, and LLLPs); 4) Notify all creditors, customers, and business contacts; 5) Cancel business licenses, permits, and registrations; 6) File final tax returns with 'final return' indicated; 7) Close business accounts and distribute remaining assets according to ownership percentages or partnership agreement terms. Consider consulting with an attorney to ensure proper dissolution and avoid future liabilities.