A Guide to Starting a Business in Minnesota
CHOOSING THE FORM OF BUSINESS ORGANIZATION TAX AND NON-TAX CONSIDERATIONS
INTRODUCTION One of the first important decisions you’ll make as a new business owner is how to organize your business. The form of business organization you choose affects how your business is taxed, how decisions are made, and what personal liability you may have for business debts or obligations. In general, you are considered “in business” as soon as you start operating an activity with the intent to earn money — even if you still have another job, or if your business is seasonal or short- term. Most Minnesota businesses choose one of the following common forms of organization: • Sole Proprietorship • Partnership • Limited Liability Partnership (LLP) or Limited Liability Limited Partnership (LLLP) • Corporation (C or S) • Limited Liability Company (LLC) • Cooperative or other specialized forms Each form has different rules for taxes, liability, and management. The following sections de- scribe each option to help you decide which best fits your goals. Sole Proprietorship A sole proprietorship is the simplest type of business. It’s owned and run by one person. It is owned and operated by one person, and there is no legal separation between the owner and the business. Key features: • Easy to start and operate — no formal filing is required with the Minnesota Secretary of State, unless you use an assumed name (a name other than the owner’s full legal name). • The business income and expenses are reported on your personal income tax return). • Business income and expenses are reported on the owner's personal income tax return.
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