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: |
- Electrical contractors
- Elevator contractors
- High-pressure-piping business (contractors)
- Manufactured home dealers
- Manufactured home installers
- Manufactured home manufacturers
|
- Plumbing contractors
- Residential building contractors
- Residential remodelers
- Residential roofers
- Technology system contractors
- Water conditioning contractors
|
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.
- 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.
- 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.
- 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.
- 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.
- Fee: Pay the license fee as indicated on the application form.
- Copy: Make a copy of the application before submitting it.
- 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.