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S-Corp vs. C-Corp

The most common types of legal entity structures for multi-owner businesses are a Corporation, Limited Liability Company or a Partnership. Deciding which type of legal entity structure is best for your business depends on numerous factors. Each type of legal entity has advantages and disadvantages. There is no one type of legal entity structure for multi-owner businesses that are not without serious disadvantages. However, the type of legal entity that you chose is complicated because it depends on several different factors. In addition to tax and liability implications, an often over-looked factor is ownership structure. This blog article discusses ownership...

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Avoid Creating Personal Liability for a Business Debt

It is very easy and common for a business owner to inadvertently create personal liability for a business debt. For example, “your business” enters into a contract, but the name on the contract is your personal name rather than your business name.  Another example is when you sign your personal name rather than signing for the business entity. The proper way to enter into a business contract and ensure that the debt is a business debt and not a personal debt is to follow these steps: 1)Make certain that the name on the contract is the business name as it appears in...

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Common Mistakes Regarding Assumed Names

If your business uses a name other than the name filed with the Minnesota Secretary of State (“SOS”), you must file the assumed name with the SOS, and publish the assumed name in a legal publication pursuant to Minnesota law. Whether or not you have to file an assumed name depends on your particular circumstances. In our experience, there are three common mistakes that businesses make regarding assumed names.  First, a business uses a name other than the one filed with the SOS.  For example, the name of your business that is registered with the SOS is Wholesale Flowers, Inc., but...

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No Good Deed Goes Unpunished

Good Deed: You and your best friend Sam open up a cleaning business   together in Minnesota. Since you are friends, a simple handshake and a promise works for both of you. Your business does its "bookkeeping" by hand because you don't issue invoices. Your business uses your personal account for the business. You don't file sales tax because you are in the service industry, and one of your  friends (who is an engineer) told you that services aren't taxed in the State of Minnesota. Both of you believe that hiring professionals to help you with bookkeeping, accounting and legal issues is not necessary due to...

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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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