Starting a Sole Proprietorship Business in Minnesota

Starting a Sole Proprietorship Business in Minnesota

Starting a Sole Proprietorship As noted in the post on choosing the form of organization, a sole proprietorship is the simplest form of business organization. There are no statutory requirements unique to this form of organization. From a regulatory standpoint, the business owner only needs to register the business name as an assumed name (if…

Naming the Business Entity: Determining Whether a Name is Distinguishable

Naming the Business Entity: Determining Whether a Name is Distinguishable

Determining Whether a Name is Distinguishable General Rule In general, any name which contains a different word from existing names on file with the Secretary of State is distinguishable and the name is acceptable for filing as an assumed name or as the name of a corporation or limited liability partnership or limited liability company….

Naming a Corporation, Limited Partnership, Limited Liability Partnership or Limited Liability Company

Naming a Corporation, Limited Partnership, Limited Liability Partnership or Limited Liability Company

Statutory Requirements Name requirements for corporations, limited liability partnerships and limited liability companies are established by statute. The name of a corporation must: Be in the English language or any other language expressed in English characters; Contain the words “corporation”, “incorporated”, or “limited”, or an abbreviation of one or more of these words, or the…

Naming a MN Business Entity: Certificate of Assumed Name

Naming a MN Business Entity: Certificate of Assumed Name

Certificate of Assumed Name After you’ve decided what type of business entity is right for your business, you may have to decide on a business name. In this sub-series of posts, we’ll discuss: Certificate of Assumed Name Naming the Business Entity – Naming a Corporation, Limited Partnership, Limited Liability Partnership or Limited Liability Company Determining…

Considering Disposition of Ownership Interest When Choosing a Business Type

Considering Disposition of Ownership Interest When Choosing a Business Type

Disposition of Ownership Interest Sole Proprietorship The sole proprietor who sells the business is treated as selling the individual assets of the business. The income tax treatment of the sale will depend on whether or not the property is a capital asset, and the length of time the property has been held. The assets may…

Considering Estimated Tax Payments When Choosing a Business Type

Considering Estimated Tax Payments When Choosing a Business Type

Estimated Tax Payments Sole Proprietorship The sole proprietor generally will be required to make federal and Minnesota estimated tax payments if his or her income tax and (for federal purposes) self employment tax will exceed taxes paid through withholding and credits by $1,000 or more. The tax is determined on income from all sources, including…

Considering Net Operating Loss When Choosing a Business Type

Considering Net Operating Loss When Choosing a Business Type

Net Operating Loss If the taxpayer’s deductions for the year exceed gross income, the taxpayer may have a net operating loss (NOL). The NOL is used to reduce taxable income in other years. There are limits on the kinds of deductions, and the amounts, that can be used in computing an NOL. These limits are…

Considering Capital Gains and Losses When Choosing a Business Type

Considering Capital Gains and Losses When Choosing a Business Type

Capital Gains and Losses A business that sells or otherwise disposes of capital assets will have a capital gain or capital loss from the transaction. Capital assets are defined by Internal Revenue Service regulations and generally include everything a business owns except property held for sale to customers, most accounts or notes receivable, real and…

Considering Employment Taxes and Workers' Comp When Choosing a Business Type

Considering Employment Taxes and Workers' Comp When Choosing a Business Type

Employment Taxes and Workers’ Compensation Insurance Employment taxes include income tax withholding, Social Security and Medicare taxes and federal and state unemployment insurance taxes. Although workers’ compensation insurance technically is not a tax, coverage is required for most employees. Employment taxes and workers’ compensation insurance are deductible business expenses in determining net income. Note: The…

Sample Franchise Disclosure Documents – Item 23: Receipts

Sample Franchise Disclosure Documents – Item 23: Receipts

Sample Item 23: Receipts ITEM 23: RECEIPTS Receipt This disclosure document summarizes certain provisions of the franchise agreement and other information in plain English. Read this disclosure document and all agreements carefully. If Belmont offers you a franchise, it must provide this disclosure document to you 14 calendar days before you sign a binding agreement…

Minnesota Homeowner’s Property Tax Refund Program

Minnesota Homeowner’s Property Tax Refund Program

What is the property tax refund program? The homeowner’s property tax refund program (sometimes called the “circuit breaker” or the PTR) is a state-paid refund that provides tax relief to homeowners whose property taxes are high relative to their incomes. If property tax exceeds a threshold percentage of income, the refund equals a percentage of…

Small Business Profile for Minnesota, February 2011

Small Business Profile for Minnesota, February 2011

Minnesota’s small businesses are key to the state’s well-being. They account for a significant share of the state’s economic production and hiring. This profile from the SBA Office of Advocacy uses the latest available data to illustrate the status and contributions of Minnesota small businesses. (Note that a small business is defined as one with…

Considering Compensation When Choosing a Business Type

Considering Compensation When Choosing a Business Type

A business may use a variety of methods to compensate persons who provide services to it. Some of these methods include salaries or wages, personal draw, cash for services, and property for services. This section discusses the tax consequences of compensation for services provided by the owner of the business. Compensation to non-owner third parties,…

Considering Selection of the Tax Year When Choosing a Business Type

Considering Selection of the Tax Year When Choosing a Business Type

The business figures its taxable income and files a tax return on the basis of an accounting period called a tax year. A tax year usually is 12 consecutive months, although in some cases a 52-53 week year or a short tax year may be permitted. A calendar tax year is 12 consecutive months ending…

Considering Tax Impact Choosing a Business Type

Considering Tax Impact Choosing a Business Type

Many factors determine the full tax burden on a business. Some of these factors – such as treatment of capital gains, deductibility of certain items, and the availability of certain credits – will vary depending on the form of organization. Other factors, such as employment taxes attributable to non-owner employees or property taxes, will apply…

Considering Tax Rates When Choosing a Business Type in MN

Considering Tax Rates When Choosing a Business Type in MN

The rate of tax paid on income from the business activity depends on whether the business is organized as a sole proprietorship, a partnership, an S corporation, a C corporation, or a limited liability company. Income from a sole proprietorship, partnership, S corporation, or limited liability company is taxed to the owner at individual tax…

What Tax Forms Are Used When Forming a Business in MN?

What Tax Forms Are Used When Forming a Business in MN?

Note: Income tax forms identified here apply to the 2010 tax year. Amendments to the Minnesota tax laws and federal Internal Revenue Code may change these requirements. Sole Proprietorship Federal The sole proprietor reports income and expenses from the business on Schedule C or Schedule C-EZ (Form 1040) and any related forms and schedules. The…

Home Office Deduction of Space and Operating Expenses

Home Office Deduction of Space and Operating Expenses

Introduction Whether you are self-employed or an employee, if you use a portion of your home for business, you may be able to take a home office deduction, including some operating expenses for the business use of a part of your home. These expenses may include mortgage interest, real estate taxes, insurance, utilities, repairs, and…

Who is the Taxpayer? Major Tax Considerations in Choosing a Business Type

Who is the Taxpayer? Major Tax Considerations in Choosing a Business Type

This section discusses the major tax considerations for the sole proprietorship, partnership, and corporation. For limited liability companies, the Internal Revenue Service has adopted rules (which appear in 26 C.F.R. 301.7701-1 et. seq.) that allow the organizer(s) to select the federal tax treatment for the LLC: either as a sole proprietorship or a corporation, in…

Considering the Extent of Government Regulation When Selecting a Business Type

Considering the Extent of Government Regulation When Selecting a Business Type

Certain types of government regulation will apply to the business regardless of the form of organization. Licenses or permits, where required, will be required of all business entities conducting the regulated activity. Note that businesses operating in multiple jurisdictions (whether cities, states or counties) should inquire about licensing requirements imposed by each of those jurisdictions….

Considering Complexity and Expense of Terminating the Business When Choosing a Business Type

Considering Complexity and Expense of Terminating the Business When Choosing a Business Type

Sole Proprietorship There are no federal or state regulations governing termination of the sole proprietorship itself. The sole proprietor simply winds up the affairs of the business and discontinues operations. If the business had employees, the owner must notify federal and state taxing authorities that the proprietor is no longer operating the business and paying…

Considering Continuity When Choosing a Business Type

Considering Continuity When Choosing a Business Type

Sole Proprietorship Following Withdrawal or Death of an Owner Sole Proprietorship. The business entity terminates at the death of the proprietor or if the proprietor becomes unable to manage it. Partnership General partnerships and limited liability partnerships under the Revised Uniform Partnership Act (RUPA) (Minnesota Chapter 323A) do NOT automatically cease to exist when a…

Considering Transferability of Ownership Interest When Choosing a Business Type

Considering Transferability of Ownership Interest When Choosing a Business Type

Sole Proprietorship A sole proprietor transfers ownership of the business by transferring the assets of the business to the new owner. The prior proprietorship is terminated and a new proprietorship is established under the new owner. Partnership The transfer of a partner’s economic interest in a partnership is determined by the partnership agreement, or by…

How to Fund the Startup & Operation of Your Minnesota Business

How to Fund the Startup & Operation of Your Minnesota Business

A startup business, regardless of form, generally will find it difficult to obtain outside financing. The statistical failure rate for new businesses is high, and many lenders view financing the startup business venture as extremely risky. Banks and other creditors generally will require a significant capital investment by the business owner, and a personal guarantee…

Considering Management Control & Decision Making When Choosing a Business Type

Considering Management Control & Decision Making When Choosing a Business Type

Sole Proprietorship The sole proprietor has full and complete authority to manage and control the business. There are no partners or shareholders to consult before making decisions. This form of organization gives the proprietor maximum freedom to run the business and respond quickly to day-to-day business needs. The disadvantage of this form is that the…

Considering the Distribution of Profits and Losses When Choosing a Business Type

Considering the Distribution of Profits and Losses When Choosing a Business Type

Sole Proprietorship The sole proprietor receives all the profits from the business, and bears all the losses, which may exceed the proprietor’s investment in the business. Partnership In the general partnership, the limited liability partnership, the limited liability limited partnership and the limited partnership, profits and losses are passed through to the partners as specified…

Considering Liability of the Business Owners When Choosing a Business Type

Considering Liability of the Business Owners When Choosing a Business Type

Sole Proprietorship The sole proprietor is personally liable for the debts of the business, even if those debts exceed the owner’s investment in the business. All of the owner’s assets – both those used in the business and personal property (subject to certain exemptions) – can be attached by creditors and sold to pay business…

Complexity and Expense of Organizing the Business

Complexity and Expense of Organizing the Business

All businesses, regardless of their form, will encounter certain organizational costs. These costs can include developing a business plan, obtaining necessary licenses and permits, conducting market research studies, acquiring equipment, obtaining the advice of counsel, and other costs. Sole Proprietorship The sole proprietorship is the simplest form of organization, and the least expensive to establish….

Gallup Poll Survey Suggests Small Business Optimism Doesn't Exist

Gallup Poll Survey Suggests Small Business Optimism Doesn't Exist

A Gallup poll published on July 29, 2011 finds that small business optimism is nearly non-existent due to growing recession fears. The data suggests that any small business confidence in present financial conditions has been eroded by concerns over future revenues and recessionary pressures. According to Gallup, small-business owners’ future expectations for their operating environment…