circumstance, state income tax filings must be made using a state tax identification number available from the Minnesota Department of Revenue. • If a sole proprietorship has employees, filings for federal unemployment insurance for employees must be made using the Federal Employer Identification Number. Filing for state unemployment insurance contributions are made using a separate identification number issued by MnDEED’s Division of Unemployment Insurance which will determine an initial rate of contribution. The sole proprietorship does not pay unemployment insurance contributions at either federal or state level for the sole proprietor who is not considered an employee for unemployment insurance purposes. Corporation A corporation is a legal entity separate from its owners that has the status of a legal “person”. As such it can do the same things that a “natural person” (an individual) can do in the conduct of a business. The corporation can, for example, carry on a business; own property; enter into and perform contracts; employ individuals; sue and be sued; earn, hold, or disburse profits; borrow money in its own name. A corporation has officers who are responsible for managing the daily business operations, and directors who determine the direction of the corporations activities and oversee the actions of the officers. It is possible for one individual to be a shareholder, director, and officer who functions in all roles. Both directors and officers of a corporation can also be shareholders. The major advantage of the corporate structure is that it relieves its shareholders, officers and directors of personal liability for the debts and obligations of the corporation. Creditors of the corporation, for example, cannot recover from the personal assets of shareholders, officers, or directors. The only assets at risk for those parties are the monies that they have invested in the corporation. There are, however, three important exceptions to exemption from liability:
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