One of the most important decisions entrepreneurs in Minnesota and around the county make is choosing the appropriate structure for their new commercial ventures. Going into business as a sole proprietor is usually the quickest and least expensive way to get a new company off the ground, but sole proprietors have no asset protection and could lose their homes and savings if their business is sued. Setting up a corporation protects personal assets, but the paperwork involved can be daunting. Limited liability companies have become extremely popular in recent years because they offer the asset protection of corporations with the simplicity of partnerships and sole proprietorships.
The owners of an LLC are known as members, and they can be individuals, corporations or even other LLCs. Members do not have to worry about losing their assets if their LLC is sued unless they are guilty of fraud or some other sort of wrongdoing. The number of members is not capped when an LLC is formed, and Minnesota is one of the states that allows single-member LLCs. Certain businesses, such as insurance companies and banks, cannot be LLCs.
Members can also choose how their business income will be taxed by the Internal Revenue Service. The IRS usually taxes LLC profits and losses in the same way that it taxes partnership income, but members can choose to be treated like a corporation by submitting a Form 8832. Single-member LLCs can be taxed as either corporations or sole proprietorships in Minnesota.
Help with important decisions
Attorneys with experience in this area might advise entrepreneurs about the advantages and disadvantages of the various types of business structure. They may also help business owners to secure any permits or licenses they will need to get their new companies up and running.