Overview

Starting a Minnesota business also includes choosing the form of that business. This is an important part of any process of business formation. The business form you choose may have lasting financial, governance and tax implications for the owners. You may choose to incorporate or to form an LLC. However, your choice may have a lasting impact on the business' legal and financial circumstances.

When starting a Minnesota Business, you have the following business options:

(1) sole proprietorships; (2) partnerships; (3) Minnesota limited partnerships; (4) Minnesota limited liability companies; (5) Incorporating as a subchapter S corporation -- (Minnesota closely held corporations ); (6) Incorporating as a C corporation. (C Corp)

Sole Proprietorships

Sole proprietorship is the simplest form of business ownership. You are a sole proprietor if you are the sole owner of your business. A sole proprietorship does not require any filing with the State to start operating the business. However, there are some serious drawbacks to this form of business ownership.

First and foremost, a sole proprietorship affords the least amount of asset protection to the business owner. Anything you do as a sole proprietor may expose your personal assets to garnishment or liens based on the debts or actions of the business enterprise. There are manty other business forms including LLC's, and incorporations that provide limited liabilty as part of their protections.

General Partnerships

A general partnership may carry even more risk than the sole proprietorship as a business form. It is generally not recommended over the LLC and/or minnesota incorporation.

A general partnership is formed when there are two or more owners of a business. Again, this form of business also does not require any filing with the state. If you start a business with a partner without completing any forms or agreements, you would be considered a General Partnership.

Like a sole proprietorship, the personal assets of the owners are subject to liens and garnishments for acts performed on behalf of the business or debts incurred for the business. Even more significant, anything that one partner does affects all of the partners. That means each partner is personally responsible for all obligations of the partnership.

Often, we are presented with business disputes that arise from the general partnership where no agreements have been executed which define exit strategies, succession ownership or partner buy-outs. Most people who enter into general partnerships never expect that at some point they may disagree with their partner(s) on business strategies, or business efforts. This may result is serious conflict.

Even more vexing, if one partner dies and agreements do not exist to purchase that partners interest, the remaining partners may find themselves in partnership with a wife or other relative with whom they have conflict. If you need legal contracts to govern your business, contact us at 952.746.2153. Avoid disputes before they start.

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