Minnesota. The birthplace of the phrase “holy cow”, masking and Scotch tape, Wheaties cereal, the pop-up toaster, the Snickers and Milky Way bars, Bisquick, HMOs, the bundt pan, Aveda beauty products, Spam and Green Giant vegetables. You house the country’s largest regional theatre, dinner theatre, sculpture garden and ear of corn. You’ve been home to Laura Ingles Wilder, Kevin Kling and Frank C. Mars. Way to go, Minnesota. Especially for a state boasting frigid winters that have Eskimos counting their blessings.
Minnesota is also an extremely creative and welcoming state in which to register your small escort business, and in this article you’ll find clear step-by-step advice on how to do just that. For more information on why it’s vitally important to register your business,refer to our article Don’t get busted for tax evasion: Why registering your escort business is the only option.
Step one: Define and describe your business
There are several kinds of business structures applicable for registering your escort business with the government, and picking the right one for you is important. For example, someone working completely as an independent escort and someone who wants to run an agency would file for different types of businesses. Ask yourself these questions to define what your business is / will be and under which structure you should register:
- How do I define my work? What is it, in essence, that I serve? Do I supply the connections between escorts and clients, or am I myself the escort and am providing the company?
- Am I the only one who will benefit monetarily from my business? If not, who else will and why are they collecting profits?
- Am I the only one who will manage my business – schedule clients, hire drivers etc.? If not, will it be another owner doing this or someone I employ?
- Will I be hiring regular employees to take calls, set up appointments, manage any office work on a regular basis etc., or will I maintain my business by myself?
- Will I be hiring independent consultants (freelance escorts) and, if so, how do I expect to manage and pay them?
- Who will fund costs such as buying advertisements in newspapers, renting an office or the cost of running a website?
- Would I ever want to brand my business name or logo?
- Who will be responsible for my business if I run into debt? Is this just me?
- Will I ever want to sell my business?
Write the answers to these questions down and your business model will start to take shape for you.
Another step in articulating your business is to write a one-sentence summary of what the business actually does. As an escort you’re registering a service you provide, rather than a product that you sell, and this service will need to be articulated. Having this readily on hand will save you time when filling out various forms. Make this unique to you from the questions you’ve answered above, along the lines of “We provide company to our clients in a social setting”.
For information on what terms you legally can and cannot use, refer to our article The fine legal line between escort and prostitute: some strategies for an escort to stay out of trouble.
Step two: Choose your business structure
Once you have a handle of what your business is and how it will be run, it’s time to pick out a business model. Below are four quick definitions of what it means to be one of the four business models that make sense for an escorting service: a sole proprietorship, a partnership, a corporation and an LLC.
- Sole Proprietorship: One person owns and operates the business, and is responsible for all profits and losses. Legally, there is no difference between your business and you. If you are just starting out and/or will be working and managing and collecting your fees alone, this is what you want.
- Partnership: Two or more people own and are responsible for the business. If you have a small group of close friends who will share contacts and the actual time spent with clients or will work with one person as a manager and you as the only escort, this is what you should choose. However, as you are equally responsible for losses and this structure requires more paperwork, it can be a risky investment.
- Corporation: The business is a legal entity owned by shareholders. While the shareholders may invest money and collect in profits, they are not responsible for losses or claiming personal bankruptcy if the business claims it. This model requires much more paperwork, and most likely the addition of an accountant and possibly a business lawyer as well. A corporation is definitely the way to go if you have been in business for a few years, juggle many consultants and clients, and want to expand and legitimize your work on a higher platform. If that’s not you, don’t become a corporation.
- Limited Liability Company (LLC): An LLC provides the liability insurance of a corporation with the tax efficiencies of a sole proprietorship or partnership. One or more owners are referred to as members. The taxes of the business are filed with the income taxes of the members, but they are not responsible for (most) company losses. If you have a small company involving a few close friends and want to expand to having a separate bank account and records slightly more independent than your own, an LLC is for you.
Step three: Create your name
Let’s pretend your name is “Jane Doe”. First, decide whether you simply want to call your business your name — “Jane Doe” — or take on a DBA name (‘doing business as’ name, also called an ‘assumed name’ or ‘trade name’).
With a sole proprietorship or partnership, you have the option of using your own name as your business name, and won’t be required to register your business name in Alaska. If you’re a corporation or LLC, you will have to take on a DBA name. If you’re required to or simply want to take on a DBA, have fun picking your company name.
Do you want to be brassy and devil-may-care? Pick something as straightforward as “Jane Doe Escort Service”. Want to be flirty and funny? “Jane Doe—The Company Company”. Feel like being a little more discreet and want to stay out of the limelight? Try something demure, like “Jane Doe Social Consulting”. Your name can be as simple or as flashy as you’d like, just make sure it’s honest to what you want your business to be. And keep in mind that escorting is a controversial issue in the United States. Do you want to push the envelope of acceptability or maintain a low profile?
Make sure the DBA name is not already being used in Minnesota. You’ll have wasted time and money if you apply to register the name and it’s already been taken. A simple internet search and comb through the yellow pages will take care of this. Also know that you shouldn’t do business with a DBA name until the registration has been approved.
For some helpful advice on picking out a business name, visit Business.gov
Step four: Register your business / business name
In Minnesota you are not required to register your sole proprietorship escort business as a separate business entity: because the business is you, it is not recognized as a separate business and you’ll file your business information along with your own personal taxes.
You are also not required to register your business name if it is your full name and service: “Jane Doe’s Escort Service”. However, if you take on any other form of a DBA name, including something as simple as “Doe’s Escort Service”, you must register a Certificate for Assumed Name Registration Form. This is submitted to the Minnesota Secretary of State and requires a $25 filing fee.
For more information on if taking on a DBA is a good choice for your business, refer to our article Do I want to be a sole proprietor?
In Minnesota you are not required to register your general partnership business as a separate business entity. However, it is highly recommended that you draft a partnership agreement. This is not filed with the state but defines and protects your business should you run into legal trouble. And you will have to file an information return come tax time, so having your books in order is very important. More on that below.
You are also not obligated to register your business name in Minnesota if it is the collected names of the partners outlined in your partnership agreement. But if you choose to take on a DBA name you must register a Certificate for Assumed Name Registration Form. This is submitted to the Minnesota Secretary of State and requires a $25 filing fee.
To register your escort corporation in Minnesota you’ll need to file your Articles of Incorporation with the Minnesota Secretary of State. You can find instructions and download this form at the Minnesota Secretary of State: Document Central. You’ll include information on the amount of shares for the corporation and the incorporating persons, and include a $160 filing fee. Because of the intricate information required when starting a corporation, it is highly recommended that you seek advice from a business lawyer and accountant.
Registering your Articles of Incorporation will register your business name, so you will not have to file any additional paperwork for this.
To register your escort LLC in Minnesota, you’ll need to file your Articles of Organization with the Minnesota Secretary of State. You can find instructions and download this form at the Minnesota Secretary of State: Document Central. The form includes basic information about the members and managers of the LLC, and requires a $160 filing fee.
Registering your Articles of Organization will register your business name, so you will not have to file any additional paperwork.
For more information on these business structures and their requirements, visit Minnesota Secretary of State: Starting a Business.
Step five: Get an Employer Tax Identification Number (EIN)
If you are a sole proprietor in Minnesota, your EIN will be your own social security number, whether you do or do not register a DBA/trade name. But if you are a partnership, corporation or LLC or say YES to any of the following questions, you’ll have to apply for a new EIN.
- Do you have employees? This means anyone you pay regularly, such as a personal assistant, office manager, driver etc.
- Do you plan to open a bank account solely for the business? Will you be collecting money from clients and then using that money to pay escort or other employees (if you have any employees, you should have a separate bank account for this)?
- Do you operate your business as a corporation or a partnership?
- Do you file any of these tax returns: Employment, Excise, Alcohol, Tobacco, Firearms? If you hire employees, you’ll need to pay employment taxes. Other than that, as an escort service this answer is most likely no.
- Do you withhold taxes on income, other than wages, paid to a non-resident alien? Are any of your employees non-Americans?
- Do you have a Keogh plan? (A retirement plan you set up for yourself in the business)
- Are you involved with any of the following types of organizations? (I’m going to save you an explanation of what all of these mean, because you’ll most likely know if your business is involved with such, and the answer is probably no.)
- Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers’ cooperatives
- Plan administrators
All application processes require only basic information: your legal name and contact information, a name and description of your business, the type of entity, your social security number, employees etc. And there is no fee.
- Online: This is the currently preferred way to obtain your EIN, and you’ll get the results immediately as soon as your business is approved without needing to fill out a separate SS-4. You have 15-minutes to complete the form. Go to IRS.gov to apply for an online EIN.
- By Mail: Fill out an SS-4 form, which you can obtain on IRS.gov. and mail to Internal Revenue Service, Attn: EIN Operations, Philadelphia, PA 19255. It takes about 4 weeks to get the EIN once your application has been processed.
- By Fax: Fill out and fax an SS-4 form to (859) 669-5760. If you include your fax number on the form, they’ll fax your EIN within 4 business days.
- By Phone: Call toll-free (800) 829-4933, 7am-10pm, Monday—Friday. An assignor will take your information over the phone and then directly process the application and give you your EIN.
Step six: Register for your federal and Minnesota state taxes
There are a few basic types of taxes small businesses in Minnesota may register for.
- Individual Income Tax: If you’re a sole proprietor or LLC, you’ll file your business profits/losses in a Schedule EZ form that will go along with your personal income tax 1040 form. For more information go toIRS.gov. You can also find more forms and information at the Iowa Department of Revenue—Individual Income Tax Forms.
- Business Taxes: Businesses in Minnesota have to pay corporate taxes. Partnerships must file a Partnership Tax Return and corporations must file a Corporation Tax Return. More information, online filing and downloadable forms can be found at the Minnesota Department of Revenue.
- Unemployment Insurance: All businesses with employees pay unemployment insurance to safeguard the state’s unemployed. More information, online filing and downloadable forms can be found at Minnesota Unemployment Insurance.
- Withholding Taxes: Employers must withhold taxes from employees for their personal income taxes. More information, online filing and downloadable forms can be found at the Minnesota Department of Revenue—Withholding Tax.
- Workers Compensation: If you have employees, you’ll have to pay Worker’s Compensation. More information can be found at the Minnesota Department of Labor and Industry: Workers’ Compensation.
- Self-Employment Taxes: If you own and operate your business and are not paid as an employee, you’ll need to file your own self-employment taxes for social security and Medicaid. This is particularly true for sole proprietorships, general partnerships and LLCs. You can find this Schedule C / 1040 form and get more information at IRS.gov.
For more information on registration and taxes in Minnesota visit the Minnesota Department of Revenue.
Step seven: Get necessary licenses and permits
There’s no specific “escort license” in Minnesota, and chances are you won’t need any other permits to conduct your escort business, but it’s a good idea to familiarize yourself with the License Department at Minnesota North Star and run your city through the IRS’s Permit Me tool to get more information about specific filing from their site.
More information about registering an escort business in Minnesota
The state of Minnesota is extremely generous in clear, useful online resources provided to help you start your own business. While the guidelines above are meant to give you a helpful checklist when considering how you are going to register your escort business, it is highly recommended that you familiarize yourself with the resources below, and download and read the chapters on the business model that you choose. They will give you an even more straightforward approach to registering your small escort business in Minnesota. And most of the forms can be filled out and filed online, or in person at your local office.