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Special Types of Organizations

Some business structures are designed for unique or highly specialized purposes. Here's a very high-level overview of a few of the most common.

Professional Entities

If you offer certain licensed professional services, state law allows you to structure your business in ways that would otherwise be prohibited.

Under the Minnesota Professional Firms Act a variety of medical professions, certain counselors and therapists, accountants and lawyers, architects and others to set up as corporations (either for-profit or nonprofit), limited liability companies or limited liability partnerships.

Without the law, such professions would be able to form only as a sole proprietorship or general partnership, because the ethics rules of their licensing boards prohibit organizing in a way that limits their professional liability towards clients.

While the state law does not affect an individual practitioner’s liability for her or his own malpractice or other wrongful conduct directly arising from the rendering of professional services, it does grant limited liability for debts or obligations of the business itself.

Professional firms are subject to the law under which they were formed as well as the Professional Firms Act, which contains additional restrictions. Where the two conflict, the act controls. Members of the firm are also subject to the laws, regulations and licensing requirements of their licensing boards.

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  medical physician’s assistants; architecture; engineering; surveying; landscape architecture; geoscience; certified interior design; accountancy; and law.

Nonprofit Corporations

By state law, a Minnesota nonprofit corporation can have many different purposes. But the one purpose it can’t have is to make money – directly or indirectly – for its members.

It makes sense then that a business corporation (regardless of whether it actually makes a profit) cannot be a nonprofit corporation because a primary purpose of every business corporation is to bring financial gain to its shareholders.

A nonprofit corporation may be formed under the Minnesota Nonprofit Corporation Act (Minn. Stat. Chapter 317A) for any lawful purpose, unless another statute requires incorporation for a different or specific purpose.

The nonprofit corporation is managed by a board of directors, which must consist of at least three individuals. The nonprofit corporation must have at least two officers, a president and a treasurer. One person may perform both of these functions.

Nonprofit corporations are required to file an annual registration with the Secretary of State once each calendar year, on a registration form mailed to the corporation’s registered office address. Failure to file in a calendar year will result in statutory dissolution, but nonprofit corporations may be reinstated at any time upon filing the annual registration.

A nonprofit corporation may qualify for tax exempt status for some or all of its income, for federal or state tax purposes, or both. Donors to the tax exempt organization may qualify for a tax deduction on their contributions to the organization. Both the IRS and the state of Minnesota impose a corporate tax on nonprofit’s business activities.


Cooperatives are organized primarily for the purpose of providing service to their user-owners, rather than to generate profit for investors.
Although cooperatives had their origins in Minnesota in the agricultural sector, in recent years many consumer cooperatives have been established. Some common purposes for which cooperatives are formed:

  • To supply members with agricultural production components such as fuels, fertilizers, feed and chemicals
  • To provide members with an organizational structure for jointly handling and marketing their products
  • To provide services to members, like housing, electricity, telephone, insurance, and health care.

Cooperatives have several features that distinguish them from for-profit business corporations, including:

  • Control of the cooperative by user-owners
  • Services provided at cost
  • Limited return on equity capital

Cooperatives are required to file an annual renewal once each calendar year. Failure to do so results in dissolution.


Franchising is a method of distributing and marketing goods or services. It is not a separate form of business organization. The franchisor’s business and the franchisee’s business each will take one of the forms of organization.

A franchise is an agreement or contract between two or more persons by which the franchisor, for a fee, gives the franchisee the right to engage in the business of offering or distributing goods or services using the franchisor’s trade name, trademark, service mark, logotype, advertising, or other commercial symbol. Both the franchisor and the franchisee must have a community of interest in the marketing of the goods or services.

Franchises are regulated in Minnesota by the Department of Commerce. Anyone contemplating the sale of a franchise should check with that office for registration and filing requirements and exemptions that may apply.

Learn More

Consultants at our Small Business Assistance Office can help you understand more about these or other special types of business organizations. And our network of Small Business Development Centers has experts located in nine main regional offices and several satellite centers statewide.

Our Guide to Starting a Business in Minnesota provides a detailed look at this and other important issues.

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