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Checklist for Proper Formation of a Corporation

Simply filing articles of incorporation at the Minnesota Secretary of State's office does not result in the proper formation of a corporation.  The primary considerations for the proper formation of the corporation, even a corporation owned by a sole shareholder, are as follows: ___ My corporation has filed Articles of Incorporation with the Minnesota Secretary of State. ___ My corporation has completed the written action of the incorporator(s), subscription agreement letter of investment intent, first meeting of the board of directors, first meeting of shareholders, bylaws, and issued stock certificates. ___ My corporation has up-to-date minutes that have been approved by...

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Top Ten Legal Mistakes Businesses Make

As professionals, we work hard every day to ensure the success of our businesses.  Unfortunately, if we are not well prepared and protected, our business, our reputation, and even our personal assets can all be lost, due to a single mistake or oversight. As business owners ourselves, we understand the limits all of us face in regard to time and money, but as attorneys, we have seen the consequences, which can financially destroy a business and the owners personally. The most common legal mistakes we see business owners make are in the following ten areas: Failure to Incorporate (incorporating your business...

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Do It Yourself: Business Hypotheticals

Everyone has completed or at least attempted to complete a do it yourself project. The results are usually mixed from limited success to catastrophic. One area in which doing it yourself could be catastrophic is doing your own legal work yourself. Hypothetical #1: You decide to purchase a business. You “crib” documents from another business owner and off the internet. The purchase of the business goes smoothly. You congratulate yourself. That is until your business is sued by a vendor for an unpaid invoice that was incurred by the previous business owner. You remain unconcerned until you seek the advice of an...

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Tips Regarding Employee Handbooks

It is important that your employee handbook is custom drafted so that the policies fit within your business goals and generally only include laws that apply to your business size.  Generally the employment laws that apply to your business is dependent oftentimes on the number of employees, your geographic location, the amount of revenue, and whether or not you are involved in interstate commerce. For example, most "small" businesses believe they are subject to the federal Family and Medical Leave Act (FMLA), but FMLA only applies to employers with fifty (50) or more employees. Here are some quick tips: Are you aware...

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The Mistake of a Business Owner in Landlord/Tenant Issues

Hypothetical: Peter owns two single-family homes and one duplex in St. Paul, Minnesota that he rents out to families. He has been renting them out for 10 years without any problems. The homes are owned personally in his name and there are no mortgages on the properties. The duplex has a shared meter. Peter does not have a rental license with the City of St. Paul. In addition, he requires that his tenants keep up the yard and remove the snow during the wintertime, which they have not been doing. All of the rental agreements are oral. The Smith family...

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Registration with the Minnesota Secretary of State

Maintaining your business registration with the Minnesota Secretary of State (and all other states in which you do business in, if required) is essential. Generally all businesses have to file an annual renewal with the Minnesota Secretary of State. If you do not file the annual renewal, your business is “statutorily dissolved” by the Minnesota Secretary of State. If your business is “statutorily dissolved” your business does not exist. More importantly, your business loses its corporate/company veil, which is generally one of the primary reasons why you incorporated or organized your business. While you can pay the reinstatement fee for your...

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Contracts and Leases: Are You Protected?

Entering into a contract or lease as either an individual or a business owner or both is often seen as a simple process. However, that view is deceptive because the process is actually quite complicated. One issue arises when there is a request for the business owner to sign a personal  guarantee. As a result, if the business fails, the business owner is still on the hook for the entire amount of the lease. Even more problematic is when the lender requests that the spouse of the business owner signs a personal     guarantee. If the spouse is not an owner...

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Corporate Formation Tips for Business Owners

Tip 1: Are you aware that prior to forming a corporation, you should seek the advice of a business accountant to make certain that you are choosing the best type of structure for your business from a tax standpoint? Best practice is working with your business accountant and business attorney to make certain that your business structure provides the best protection. Tip II: Are you aware that the designation of a corporation to what is referred to commonly as a S-Corp is that the S-Corp status is a tax designation that you must separately apply to obtain from the Internal Revenue Service?  Make...

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The Mistake of a Business Owner in Misclassifying a Worker

Hypothetical: Jessica owns Jessica’s Cleaning Services, LLC. Her business provides residential cleaning services. Jessica uses independent contractors. That way, she does not have to provide workers compensation, pay taxes on her workers, and it provides her with the flexibility to terminate a worker without worrying about all of those “pesky employment laws.” However, Jessica advertises that her workers are employees and refers to them as such. Jessica has been cautioned by her friends that her workers are employees, and that she is going to find herself in legal trouble one day. She ignores it because it “isn’t a big deal.”...

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Business Succession Planning

Business succession planning is how a business is going to remain successful in the future through proper, strategic planning for the eventual change of ownership. Spangler and de Stefano, PLLP helps business owners prepare for the future change of ownership through the use of business succession planning. Business succession planning usually comes up in two different ways. First, as part of a business owner’s preplanning for distribution of their assets upon death. Second, when a business owner decides that it is time to retire. It is wise to start the process of business succession planning at least five years from when...

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