Minnesota LLC Accountants Law

Limited Liability Company – General – Minnesota

In Minnesota a limited liability company (LLC) may be organized for any lawful purpose or purposes. A LLC which is organized for the purpose of rendering professional services is subject to the Limited Liability Company Act and is subject to the Minnesota Professional Firms Act. Additionally, a limited liability company organized to engage in the practice of accountancy is governed by the various rules and regulations of the Minnesota State Board of Accountancy.

The Minnesota Professional Firms Act provides the following definitions:

“Board” means an agency of the State of Minnesota which has jurisdiction to grant a license to furnish professional services, except that in the case of a professional firm that provides legal services, “board” means the board of professional responsibility.

“Disqualified” means to have a license to provide pertinent professional services suspended, unless by its terms the suspension will automatically end less than 90 days after it takes effect, or revoked. A disqualification occurs when the suspension or revocation first takes effect.

“Firm” includes a corporation, limited liability company, and limited liability partnership, wherever incorporated, organized, or registered.

As applicable to a limited liability company, “generally applicable governing law” of a firm means the state statute under which the limited liability company is organized, plus any other law that is generally relevant to the structure, governance, operations, or other internal affairs of the firm.

“Governance authority” means the authority and responsibility to:

(1) determine important policies for a professional firm;
(2) superintend the professional firm’s overall operations; and
(3) maintain general, active management of and ultimate control over all matters involving professional judgment.

“License” includes any license, certificate, registration, or other authority referred to in the Act.

As applicable to a limited liability company, “organizational document” means the limited liability company’s articles of organization.

As applicable to a limited liability company, “owner” means a member in the limited liability company.

As applicable to a limited liability company, “ownership interest” means a membership interest in the limited liability company.

“Professional” means a natural person who is licensed by the laws of the state of Minnesota or similar laws of another state to furnish one or more professional services. Professional includes a natural person who is licensed or otherwise authorized to practice under the laws of a foreign nation.

“Professional services” includes services of the type required to be furnished by a professional pursuant to a license or other authority to practice accountancy under the laws of a foreign nation.

A professional firm may exercise any powers accorded it by its generally applicable governing law, so long as the professional firm exercises those powers solely to provide the pertinent professional services or to accomplish tasks ancillary to providing those services.

A professional firm may not conduct any other business or provide any other services, either within or outside of Minnesota, beyond those authorized by statute.

A professional firm may not adopt, implement, or follow a policy, procedure, or practice that would give a board grounds for disciplinary action against a professional who follows, agrees to, or acquiesces in the policy, procedure, or practice.

A professional firm may furnish professional services within Minnesota only through professionals licensed or otherwise authorized by the state of Minnesota to furnish the pertinent professional services. Firm owners who are properly licensed professionals may provide professional services on a professional firm’s behalf, and a professional firm may also hire or retain properly licensed professionals as employees, non-employee agents, or independent contractors to furnish professional services on the professional firm’s behalf.

The provisions of the Minnesota Professional Firms Act does not alter any law applicable to the relationship between a person furnishing professional services and a person receiving the professional services, including liability arising out of the professional services and the confidential relationship and privilege of communications between the person furnishing professional services and the person receiving the professional services. Additionally, those provisions do not alter any law applicable to the relationship between a professional firm furnishing professional services and a person receiving the professional services, including liability arising out of the professional services and the confidential relationship and privilege of communications between the professional firm furnishing professional services and the person receiving the professional services.

Whether a professional firm’s owners and persons who control, manage, or act for the firm are personally liable for the firm’s debts and obligations is determined according to the firm’s generally applicable governing law.

Ownership interests in a professional firm may not be owned or held, either directly or indirectly, except by:

(1) professionals who, with respect to at least one category of the pertinent professional services, are licensed and not disqualified;
(2) general partnerships, other than limited liability partnerships, authorized to furnish at least one category of the professional firm’s pertinent professional services;
(3) other professional firms authorized to furnish at least one category of the professional firm’s pertinent professional services;
(4) a voting trust established with respect to some or all of the ownership interests in the professional firm, if (i) the professional firm’s generally applicable governing law permits the establishment of voting trusts, and (ii) all the voting trustees and all the holders of beneficial interests in the trust are professionals licensed to furnish at least one category of the pertinent professional services; and
(5) an employee stock ownership plan as defined in section 4975(e)(7) of the Internal Revenue Code of 1986, as amended, if all the voting trustees of the plan are professionals licensed to furnish at least one category of the pertinent professional services, and the ownership interests are not directly issued to anyone other than professionals licensed to furnish at least one category of the pertinent professional services.

A professional firm may not sell, grant, give, allocate, issue, or otherwise transfer an ownership interest except to persons who meet the statutory requirements. No owner may transfer an ownership interest except to persons who meet the statutory requirements of subdivision 1. These restrictions apply regardless of whether a purported sale, grant, gift, allocation, issuance, or other transfer is voluntary or involuntary, constitutes a present transfer or an undertaking to make future transfer or to allow the transferee to cause a future transfer to occur, or is permanent or subject to defeasement. Additionally, these restrictions apply to the transfer of partial rights.

A firm may sell, grant, give, allocate, issue, or otherwise transfer an option to acquire an entire ownership interest to a person who meets the statutory requirements and, subject to its licensing law, may undertake to make payments, in the nature of separation, retirement, or death benefits, on account of a former owner who has died, become disqualified, or for any other reason has ceased to be an owner.

A sale, grant, gift, allocation, issuance, undertaking, creation, pledge, or other transfer in violation of this section is void.

If an owner dies or becomes disqualified to practice all the pertinent professional services, then either:

(1) within 90 days after the death or the beginning of the disqualification, all of that owner’s ownership interest must be acquired by the professional firm, by persons permitted by §319B.07 to own the ownership interest, or by some combination; or
(2) at the end of the 90-day period, the firm’s election under §319B.03(2) or §319B.04(2) is automatically rescinded, the firm loses its status as a professional firm, and the authority created by that election and status terminates.

The Minnesota professional firm must within 90 days after the death or beginning of the disqualification tender to the representative of the deceased owner’s estate or to the disqualified owner the fair value of the owner’s ownership interest, as determined by the Minnesota professional firm’s governance authority. That price must be at least the book value, as determined in accordance with the Minnesota professional firm’s regular method of accounting, as of the end of the month immediately preceding the death or loss of license. The tender must be unconditional and may not attempt to have the recipient waive any rights provided in this section. If the Minnesota professional firm tenders a price under this paragraph within the 90-day period, the deceased or disqualified owner’s ownership interest immediately transfers to the Minnesota professional firm regardless of any dispute as to the fairness of the price. A disqualified owner or representative of the deceased owner’s estate who disputes the fairness of the tendered price may take the tendered price and bring suit in district court seeking additional payment. The suit must be commenced within one year after the payment is tendered. A Minnesota professional firm may agree with a disqualified owner or the representative of a deceased owner’s estate to delay all or part of the payment due, but all right and title to the owner’s ownership interests must be acquired before the end of the 90-day period and payment may not be secured in any way that violates §§ 319B.01 to 319B.12.

No board may directly or indirectly require a person providing professional services through a professional firm to assume greater liability for the firm’s debts and obligations than is contemplated by statute. The Board may require a professional to assume personal liability for specified obligations or categories of obligations as a term or requirement of board disciplinary or corrective action concerning the professional.

No professional firm may furnish professional services within Minnesota until the firm files with each board having jurisdiction over the pertinent professional services:

(1) a copy of the firm’s organizational document, certificate of authority, or statement of foreign qualification;
(2) a report containing the same information as required in an annual report; and
(3) unless other excepted, a fee of $100.

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Inside Minnesota LLC Accountants Law