Change of business structure
When a licensed business/contractor changes its structure, what is required?
Licensed businesses and contractors periodically change from one legal structure to another one, such as from an individual proprietorship to a limited liability company or corporation. The purpose of this webpage is to provide guidance on the licensing requirements for those individuals and businesses contemplating such a change. Individuals should consult an attorney and/or accountant for advise on the legal, tax, and other implications of a change in their business' structure.
What business/contractor licenses are affected when changing a business structure?
Businesses/Contractors licensed by Labor and Industry: |
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What is a business structure?
A business structure is the type of legal entity that exists to contract to perform licensed work. Examples of legal entities are individual/sole proprietors, corporations, limited liability companies (LLC), partnerships, limited partnerships (LP), and limited liability partnerships (LLP). Laws governing the contractor and business licenses identified above presume that an individual person (individual/sole proprietor) contracts to provide the licensed work. State laws also allow legal entities other than individual/sole proprietorships to contract for and perform the same licensed work provided their existence is registered with the Minnesota Secretary of State.
What is a business structure change?
It is a change from one legal business structure to another legal business structure. It occurs when one legal business structure replaces another legal business structure to contract for and perform licensed work.
- A business structure changes when an individual/sole proprietor creates a limited liability company (LLC) or corporation to handle his/her licensed business/contractor activities.
- A business structure changes when a business entity (i.e., corporation, LLC, partnership, LLP) is liquidated and the owner(s) revert to an individual/sole proprietor, or create a different legal business structure (i.e., corporation, LLC, partnership, LLP).
When making a change in business structure, what must be done?
The procedure for each license type is presented below. In all cases, a business entity must first be licensed to contract for and perform the licensed work. This includes promoting, advertising, selling and contracting to perform work.
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Requirement: Complete and submit a new application for the new business entity. Application forms are available at DLI's CCLD Forms Web page. Links to specific applications are available below.
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Business Entity Registration: The new legal business entity must file the applicable document(s) with the Minnesota Secretary of State to establish its existence if it is a corporation, LLC, LLP or LP that is planning to conduct business in Minnesota. Individual proprietors and partnerships must register their assumed name if planning to conduct business in Minnesota in any name other than their true name(s). Secretary of State forms are available online.
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Bond: If a bond is required, then a new bond in the legal name of the new business entity must be submitted. If a corporation, then it must be in the corporation's name. If a limited liability company, then it must be in the LLC's name. If a partnership, it must be in the names of the partners (dba assumed name, if any). Bond forms are available online.
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Insurance: The insured name on liability insurance and workers compensation insurance policies must be in the legal name of the new business entity. If a corporation, then it must be in the corporation's name. If a limited liability company, then it must be in the LLC's name. If a partnership, then it must be in the names of the partners (dba assumed name, if any). If an individual proprietorship, in the name of the individual proprietor (dba assumed name, if any). Insurance forms are available online.
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Fee: Pay the license fee as indicated on the application form.
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Copy: Make a copy of the application before submitting it.
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Submit: Mail the complete, accurate application, with the appropriate fee, to the Department of Labor and Industry as required for obtaining the business/contractor license or register a contractors bond. Remember to provide adequate time to process the application, which may take four (4) to six (6) weeks to process depending on workload.
What happens to the current business/contractor license or certificate?
The answer to this question depends on the license, certificate or registration and the statute(s) governing it. In most cases the license, certificate, or registration becomes inactive and replaced by the new business structure. The exceptions to this general rule are:
- Plumbing contractors because the actual license number displayed publicly is held by the Master Plumber or Restricted Master Plumber associated with the plumbing contractor.
- Water conditioning contractors because the actual license number displayed publicly is held by the individual holding the Water Conditioning Contractor license.
- Certified Pipelayers because there is no license number issued to business entities that file a plumbing contractor code compliance bond to solely install water and sewer lines external to building structures.
Licenses and certificates issued to business entities required to obtain and file a bond will be inactivated and a new license or certificate issued to the new business entity. This is the situation for the following licenses and certificates: Electrical Class A Contractor, Electrical Class B Contractor, Elevator Contractor, Technology System Contractor, Residential Roofer, Manufactured Home Installer, Manufactured Home Dealer, Manufactured Home Dealer – Subagency, Manufacture Home Manufacturer, and Mechanical Bond.
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