THE CHOICE OF BUSINESS STRUCTURE When deciding to start a child care business, a potential provider must choose a legal structure for the business. That choice will affect many different aspects of the business and its operations including tax treatment, liability, expenses, financing, and growth potential. The major structures available for organizing a business are: a sole proprietorship; a corporation; a limited liability company. In Minnesota today, the most popular form of business structure for a small business is a limited liability company, followed by a sole proprietorship and corporation. Few small businesses outside the delivery of professional services are organized as partnerships. Below is a general overview of these different structures. MnDEED’s publication A Guide To Starting A Business In Minnesota contains a more substantial treatment of the tax and non-tax consequences of the choice of business structure. Whichever structure is chosen, the initial choice is not permanent; it can be changed as the business grows or to facilitate specific business activities like raising capital. Sole Proprietorship A sole proprietorship is the easiest business structure to form if there is only one owner. With that structure, the owner and the business are not treated as separate entities for legal and tax purposes: the owner is the business. In Minnesota no legal formalities or filings are required to create a sole proprietorship. If, however, the business is being conducted under a business name that is different from the owner’s full first and last name—as, for example, “Blue Sky Child Care” rather than “Jon Jones Child Care” – a Certificate of Assumed Name must be filed with the Secretary of State’s office. Information on completing this filing is available at Assumed Name/DBA Liability The sole proprietor is personally responsible for all debts and obligations of the business; to include, for example, the obligation to perform on contracts. Creditors of the business activity can proceed directly
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