Minnesota Small Business Law | What’s A Registered Agent And Why Do You Need One?

Minnesota Partnership AgremeentsAnyone who plans on incorporating a business in Minnesota, including those interested in creating a corporation or LLC, has likely run into the phrase “registered agent.”

To find out more about what a registered agent is, what they do and why they are important, keep reading.

Minnesota Small Business Law | What’s a registered agent?

Registered agents are people (or companies) who are designated to receive legal documents, government notices and other important paperwork. Registered agents provide a way for others to file suit against your company and are the point person for the delivery of tax documents or payments and other official matters concerning the business. Though a registered agent is certainly an important part of registering a business in Minnesota, there’s no reason that the registered agent must play an active role (or any role) in the business itself.

Minnesota Small Business Law | Requirements of a registered agent

Registered agents must list not only their names, but also contact information, including a physical address where paperwork can be delivered. In Minnesota, the law says that the registered agent must have a publicly accessible address. This means that the address will be made a matter of public record and can be found by anyone who is interested. The address must have a street number and cannot simply be a PO Box.

Who can be a registered agent?

In some cases, the owner or another officer of the company serves as its registered agent. This can be a simple solution and requires little work or thought. In other cases, business owners decide to use a company or another person as the registered agent.

Under Minnesota law (Minnesota Statutes Chapter 5, Section 36), registered agents can be a person, a domestic corporation, a limited liability company or a foreign (meaning out-of-state) company authorized to do business in the state. Businesses do this for several reasons, including a desire to shield the owners from having their names and information revealed publicly. In other cases, businesses owners select a company to serve as their registered agent because they do not live in the state and thus do not have a physical Minnesota address.

Minnesota Small Business Law | Why do you need one?

Besides the legal requirement to have one, there are a few important benefits of having a registered agent. First, it’s good to know you won’t need to worry about missing out on important legal or tax documents. The fact that someone has been designated as being generally available to receive such things means there’s little chance of them slipping through the cracks.

Another benefit to having a registered agent is that you need not worry about being served with a lawsuit or having to accept other potentially embarrassing legal documents on your own, perhaps in front of clients or employees. Naming someone other than yourself as registered agent creates a buffer between you and the front lines of dealing with business paperwork.

What if you don’t name a registered agent?

Those companies that fail to name a registered agent can end up suffering penalties from the state and risk losing their good standing. Possible penalties include license revocation, fines and other civil penalties.

It’s good to know that with the right help, establishing a Minnesota small business does not have to be a scary proposition. An experienced Minnesota small business attorney can help walk you through the process of setting up your new company and ensure it offers the maximum benefits for your individual situation. For more information, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

See Our Related Blog Posts:

Minnesota Partnership Law | What are the different kinds of MN partnerships?

Minnesota Small Business Law | What Needs To Be In A Minnesota Partnership Agreement?

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Minnesota Partnership Law | What are the different kinds of MN partnerships?

Minnesota Business Law Board of DirectorsWe’ve already discussed what Minnesota partnerships are and what some of the pros and cons of choosing that particular form of business entity.

Now that you have a general background of knowledge regarding partnerships, lets dig a little deeper and explore some of the different varieties of partnerships that can be formed in Minnesota.

Minnesota Partnership Law | General partnerships

General partnerships are the default state of a partnership. These are the simplest form of a partnership and typically result in handshake and other informal cases where little has been done to clarify the role of partners in the organization.

General partnerships in Minnesota exist where all partners evenly share the businesses’ management and profits. Issues in a general partnership are settled by a vote of the majority of the partners, something that can lead to dangerous stalemates in the case of only two equal partners.

In terms of liability, all partners are held equally responsible for the debts of the partnership. That means that partners will share liabilities just as they share assets and these liabilities can even extend to reach their personal assets.

Minnesota Partnership Law Limited partnerships

Limited partnerships are more complicated than general partnerships and result from specific agreements that outline the different roles of partners in the entity. Limited partnerships exist where two classes of partners own a firm: general partners and limited partners. General partners are those who are tasked with managing the company and can be held personally liable for the company’s debts. Limited partners, on the other hand, contribute money to the operation and share in profits, but do not participate in management decisions.

The biggest difference in limited partnerships is that limited partners are not liable for the debts of the business beyond the amount of money they have directly contributed to the company. That means that limited partners experience a similar limitation of liability that shareholders in corporations have.

Limited partnerships cannot be formed by simple oral agreement and instead need to have paperwork filed with the state. Here in Minnesota, those interested in forming a limited partnership or those interested in converting a general partnership into a limited partnership must file a Certificate of Limited Partnership with the secretary of state.

Minnesota Partnership Law Limited liability partnerships

Limited liability partnerships exist in cases of licensed professionals joining together in business. Examples include LLPs for lawyers, accountants or architects. LLPs are beneficial in these cases because they protect partners from the potentially negligent actions of each other. Partners in an LLP are not personally liable for the acts of other partners, but can be held personally liable for their own actions. Limited liability partnerships are discussed in Minnesota Statutes, beginning in Section 323A.1001.

It’s good to know that with the right help, establishing a Minnesota small business does not have to be a scary proposition.  Experienced Minnesota small business attorneys can help walk you through the process of setting up your new company and ensure it offers the maximum benefits for your individual situation. For more information, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

 

Source:The Legal Ins and Outs of Forming a Partnership,” by Michael Spadaccini, published at Entrepreneur.com

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Minnesota Small Business Law | What Needs To Be In A Minnesota Partnership Agreement?

Minnesota Partnership AgremeentsMinnesota partnership agreements are crucial for those considering starting a business.

Whether your partner is a friend, family member or colleague, it is essential that you craft a detailed written agreement to clarify your rights and responsibilities regarding the business. To find out more about how important partnership agreements are, keep reading.

Minnesota Small Business Law | What are partnership agreements?

Partnership agreements are written documents that explain how your business will run, how ordinary decisions are made and how disputes will be resolved. Partnership agreements also explain matters such as ownership shares, profit division and how potential buyouts are to be undertaken. Because these matters can ultimately prove crucial down the road, it’s important to consult an experienced Minnesota small business lawyer who can help guide you through the process.

Minnesota Small Business Law | Who owns what?

The most important thing for a partnership agreement to explain is who owns what share of the business. Though it may seem obvious that two partners evenly divide the control and profits of a business, this is not always the case. It’s quite possible that one partner could have contributed more money early on or that the other partner has important skills vital to the success of the business. In either case, this might justify awarding a larger share of the partnership to one person or the other.

You need to specifically list the proportion of the business that each partner will own and the authority that will flow from that ownership. Doing so early on is the only way to avoid potentially explosive disputes later on.

Minnesota Small Business Law | Who makes the decisions?

Explaining who has what share of voting rights is another crucial aspect of any partnership agreement. Though ordinary decisions should be handled more informally, it is important to have a way to break damaging deadlocks. If there are three partners with equal shares of the company then it will be relatively simply to find a majority during any vote. For those partnerships with only two partners who have 50-50 control, you should devise a method for avoiding deadlock. Many times, these businesses provide for a third person or a trusted employee to break the tie, sometimes granting the person a nominal ownership interest in the business.

Though a deadlock may not seem like such a bad thing, the reality is that an impasse among partners often serves as the basis to unravel a business. If the dispute is over something critical to the future of the company, not having a way to break the tie is a good way to cripple the company.

Minnesota Small Business Law |  What happens when one partner wants out?

Partnership agreements are all about planning for the worst. A perfect example of this is planning for a day when one partner wants to leave the partnership. If someone wants out, you need to have clear rules in place for how the exit will be managed to avoid harming the company any more than is necessary.

One component of this is to explain how the value of the partner’s share will be determined. To avoid fighting among partners, it is often easiest to agree to have a neutral third party, possibly an accountant or other trusted financial advisor, to appraise the business. This appraisal can then serve as the basis for determining the value of the person’s partnership interest.

After the value is decided, you may think the mater of withdrawal is done. However, many businesses lack the kind of money to buyout a partner in one lump sum. To ensure that the company isn’t crippled financially, you can draw up terms in your partnership agreement explaining that they money will be paid out over a period of time; perhaps two, five or even ten years into the future, with interest.

It’s good to know that with the right help, establishing a Minnesota small business does not have to be a scary proposition. An experienced Minnesota small business attorney can help walk you through the process of setting up your new company and ensure it offers the maximum benefits for your individual situation. For more information, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

 

Source: “The Legal Ins and Outs of Forming a Partnership,” by Michael Spadaccini, published at Entrepreneur.com.

 

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Minnesota Business Law | When Do You Need An Employer Identification Number (EIN)?

Minnesota Business Law Board of DirectorsAnyone starting a Minnesota small business in Minnesota is likely worried about following the rules when it comes time to pay taxes.

Though you may have run across the phrase “Employer Identification Number (or EIN), it might not be clear in which circumstances you need to apply for an EIN and which you don’t. To find out more about applying for tax identification numbers, keep reading.

Minnesota Business Law |  What is an EIN?

An EIN, also known as a Taxpayer Identification Number, is a nine-digit number that is assigned to businesses by the IRS for tax purposes. The format for an EIN is two digits followed by seven digits: 12-3456789. A good way to think of an EIN is like a Social Security Number for businesses. The number serves as a unique identifier for your company and is used when filing taxes, requesting business permits and even when opening certain bank accounts.

Minnesota Business Law |  When do you need an EIN?

Right off the bat it is important to understand that any and all corporations (C corporations and S corporations) and partnerships are required to have EINs. Sole proprietorships that have one or more employees, use Keogh retirement plans or manage pensions will also need to get an EIN. Finally, EINs are required for certain trusts, estates and non-profit organizations.

Minnesota Business Law |  When do you not need an EIN?

The only people who don’t need to worry about applying for an EIN are those operating sole proprietorships or LLCs without employees. Though LLCs can get away without having an EIN, if you intend to hire employees or take on multiple members you will need to get an EIN within a year. If you are your firm’s only employee or if you use independent contractors, then you are not required to file for an EIN. However, even if you aren’t required to have an EIN, you can still choose to use one.

In some cases, EINs are useful even for sole proprietors because it reduces the instances where you will need to use your own Social Security Number for business purposes, minimizing the risk that personal information will be floating around. Also, some banks require an EIN before they allow you to set up business bank accounts.

Minnesota Business Law |  How to apply

Luckily applying for an EIN is relatively simple. The IRS handles the process for free and allows you to submit the required paperwork, IRS Form SS-4, either by mail, phone, fax or online. The form can be found on the IRS’s website (IRS.gov) or can be requested by mail. Once the form has been submitted, the IRS will respond with a paperwork containing your EIN, which you can then use going forward.

It’s good to know that with the right help, establishing a Minnesota small business does not have to be a scary proposition. An experienced Minnesota small business attorney can help walk you through the process of setting up your new company and ensure it offers the maximum benefits for your individual situation.

 

For more information, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.  The firm offers Minnesota S. Corporation formation and Minnesota LLC formation.

 

Source:Do You Need an EIN?,” published at IRS.gov

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Minnesota Business Law | What is a Sole Proprietorship?

Minnesota Business Law MoneyAccording to the U.S. Census Bureau, there are more than 18,000,000 sole proprietorships in the United States. A sole proprietorship is seen as the default method for operating a business and, given its obvious popularity, deserves some discussion regarding advantages and disadvantages.

What is a sole proprietorship?

Before delving into the pros and cons of Minnesota sole proprietorships we should start by defining what they are. Unlike a LLC, corporation or partnership, sole proprietorships are not legal entities. Instead, sole proprietorships refer to the person who owns and operates the business. Sole proprietorships can function based only on the name of the person who runs the business (John Smith) or can do business under another name (John Smith’s Coffee Shop). It’s important to understand that even if the sole proprietorship is given its own name, this does not create a legal entity separate from the owner of the business.

Advantages of sole proprietorship

The principal advantages to sole proprietorships include ease of operation and low costs. For a sole proprietorship to begin operations, the owner only needs to register the name of the entity and secure any local business licenses that are required. Because of the loose legal structure of sole proprietorships, there is no need for some of the time-consuming formalities required under other forms of business. No board meetings, no voting and no articles of incorporation.

Another benefit of a sole proprietorship is that the owner can commingle personal and business funds because all money brought into the business belongs solely to the owner. Taxes are relatively straightforward and are paid as personal income to the owner. This can save money at the end of the year when it comes time to pay an accountant.

Disadvantages of sole proprietorship

The single most important drawback to sole proprietorship is the complete legal liability of the owner. Because there is no distinction between the company and its owner, all debts taken on by the company become the personal obligation of the owner. If the company runs into trouble, creditors can sue and hold the owner personally liable for all debts associated with the enterprise.

Another downside to sole proprietorships is that it can be difficult to raise money form others. Because sole proprietorships cannot issue stock it can become difficult to seek outside capital to grow your company.

Finally, another negative associated with sole proprietorships is a lack of continuity. The owner and the business are legally one and the same which means when the owner dies, the business will become part of that person’s estate and eventually be liquidated. If you intend to create a company that will outlive you, perhaps providing for your children and grandchildren, sole proprietorships are likely not the best way to accomplish this.

It’s good to know that with the right help, establishing a Minnesota small business does not have to be a scary proposition. An experienced Minnesota small business lawyer can help walk you through the process of setting up your new company and ensure it offers the maximum benefits for your individual situation. For more information, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

 

Source: “Advantages and Disadvantages of Sole Proprietorships,” published at NYTimes.com.

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Minnesota Business Law | When Do You Need To Use An Assumed Business Name?

Minnesota Contingent BeneficiariesIf you’re operating a new Minnesota business – be it a sole proprietorship, LLC, or S. Corporation, and you want to give the company a name other than your own or want to use a different name for an existing registered LLC or S. corporation, you’ll need to create an assumed business name.

To find out more about the process of creating and registering an assumed business name in Minnesota, keep reading.

What is an assumed business name?

Assumed business names are also referred to as “Doing Business As” names, DBA names, fictitious names or trade names. Each refers to the idea that your business name differs from either your personal name or the officially registered name of your company.

Why might you need an assumed business name?

When you first start a company it’s important to understand that the default name of the business will be the same as the person who owns the business. To operate under another name will require choosing and registering an assumed name with the state. A good example of this would be if Jane Doe decides to open up a coffee shop. Jane decides she wants the business to have its own name, rather than her own, and calls it “Doe’s Cup of Joe.” This name is deemed an assumed name and Jane will need to register with the Office of the Minnesota Secretary of State.

Who needs to register an assumed business name?

There are two cases where assumed business names need to be registered with state authorities. First, in the case of sole proprietorships or partnerships where you choose to conduct business under a name other than your own, you will need to register an assumed name. Second, if your business is already set up under one name but you would like to conduct business under a new name, then you’ll have to register your assumed business name.

Minnesota Business Law | How to register an assumed business name

If you want to use an assumed business name in Minnesota you will need to first file a Certificate of Assumed Name with the Minnesota Secretary of State. The filing fees cost between $30 and $50, depending on whether you file the paperwork by mail or in-person. Minnesota Statutes Section 333.01 says that after filing the proper paperwork, you are required to publish the Certificate of Assumed Name with a legal newspaper for two consecutive issues in the area where your business is located. Once the name is officially registered, you’ll need to renew it every year, though thankfully there is no charge for the renewal unless the name has expired.

It’s good to know that with the right help, establishing a Minnesota small business does not have to be a scary proposition. An experienced Minnesota small business attorney can help walk you through the process of setting up your new company and ensure it offers the maximum benefits for your individual situation. For more information, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.
Source: “Assumed Names/Sole Proprietorships,” published at SOS.State.MN.US.

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Minnesota Business Law | Actions that Must be Taken by a Board Directors in a MN Corporation

Minnesota Business Law Board of DirectorsMinnesota Board of Director Action

Matters of a more general operating policy should be considered and authorized by the Board of Directors of the Minnesota Corporation.

Although there is no statutory requirement with respect to how frequently the Board of Directors should act, it is typical that the Board of Directors meets on an annual basis.

In addition, a specially convened meeting of the Board, as authorized by the Bylaws, may be called if action is required before the next regular meeting of the Board. Action by the Board may also be taken by the unanimous written consent of the directors. The directors of the Corporation should schedule a regular meeting at least annually to deal with significant matters which have arisen over the course of the year. Matters appropriate for director action include, but are not limited to, the following:

(A)       Election of officers, setting of salaries, and declaration of bonuses (at least annually, typically at a meeting of the Board of Directors immediately following the annual meeting of shareholders);

(B)       Appointment of Board committees;

(C)       Opening of corporate bank accounts and the designation and change of corporate officers authorized as signatories (any bank’s corporate account form invariably includes a corporate resolution which the party executing the form represents to have been adopted by the Board);

(D)       Corporate borrowing and the giving of security in connection therewith;

(E)       Consummation of material contracts for the acquisition or lease of significant assets or services or the disposition of assets or for the rendition of services outside of the ordinary course of the business of the Corporation;

(F)       Policy decisions with respect to the construction of material assets or the investment of material amounts in research and development projects (this area is particularly important to document, because of its relevance to the necessity for accumulation of surplus and the use of available cash);

(G)       The adoption of pension, profit sharing, bonus and other employee benefit plans;

(H)       The declaration of dividends or the redemption of shares;

(I)        Amendment of the Bylaws;

(J)        Review of financial statements and, if a public corporation, approval of filings with the Securities and Exchange Commission;

(K)       Appointment of auditors;

(L)       Any action which requires a shareholder vote described in items 1(a) through (d) above; and

(M)      The issuance and sale by the Corporation of shares or the grant of options to purchase additional shares.

If the secretary of the Corporation will prepare a draft of the minutes or written consent evidencing any such director or shareholder actions, I will be happy to assist in finalizing the documentation. The form of minutes of the first meeting of the directors might be used as a format.

Though it may be confusing, the requirements of a board of directors in a Minnesota business can be simplified by working with an an experienced Minnesota business lawyer For more information on business law in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

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