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Minnesota Business Formation Attorney
Starting a Business in Minnesota
When deciding what type of structure you want to use in your business, it is important to take different aspects of each business type into account.
The preferred business type for most new businesses is an LLC or S Corporation, but some people may consider a sole proprietorship (because it is cheaper), partnership (generally a bad idea), or C corporation (generally for large companies).
For an overview of the key differences, this table compares the differences between a sole proprietorship, general partnership, limited partnership, limited liability partnership, LLC, S corp, and C corp
Sole Proprietorship and Partnership
In the old days, a new business may have begun as a Sole Proprietorship or General Partnership. In a Sole Proprietorship, a single individual owns the business and in a General Partnership there are multiple owners that serve as co-owners. In either case a corporation or limited liability company has not been formed. This means that the business is not capable of owning assets because everything owned is considered personal property of the owner(s). Here the owner(s) are only partially liable for the business debts.
Furthermore, neither a Sole Proprietorship or General Partnership require legal document filings or other formalities. Their only concern is to comply with state and local licensing requirements. These may include registering the business with the Minnesota Secretary of State and other local authorities so that the business’s personal property can be properly assessed and it can obtain state and local licenses.
In either case it is recommended that a corporation or limited liability company (LLC) is formed in order to decrease personal liability.
LLC and Corporation
Today, most knowledgable business owners begin by forming an LLC or corporation (including a S corp). An LLC or corporation will give the owner protection from personal liability for harm caused by the business.
Owners of an LLC or corporation may elect to be taxes as an S corp, providing additional tax benefits for successful businesses. However, an S Corp election also requires additional paperwork for quarterly tax reporting and payments, so smaller businesses typically find an LLC is the best option until the business is generating significant profits.
Minnesota Business Formation Attorney
People often ask why they should use an attorney for business formation in Minnesota. There are two reasons:
- to ensure that your business is set up with a good foundation and in compliance with the law; and
- to educate you on how to maintain legal compliance, minimize taxes, and reduce legal risks.
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