documents, making the corporation the least private form of organization. An S corporation must meet specific requirements to qualify for S corporation tax treatment, and this status may be terminated when these requirements are not met. Minnesota corporations must file an annual corporate registration with the Secretary of State which will provide corporations with a reminder-to-file notice. Failure to file an annual registration for two years will trigger administrative dissolution of the corporation. Limited Liability Company. Rules governing the Limited Liability Company are established by statute as well as the Limited Liability Company’s operating agreement and its articles of organization. These rules are similar in complexity to those governing partnerships and corporations.
TAX CONSIDERATIONS IN CHOOSING THE FORM OF ORGANIZATION
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 the case of LLCs with only one member); or as a partnership or a corporation, (in the case of LLCs with at least two members). (The Minnesota Department of Revenue, in Revenue Notice 13-08, has stated that the Department of Revenue will for Minnesota tax purposes respect the choice made under the Federal Regulations). Because LLCs are treated as sole proprietorships, corporations, or partnerships, they are not specifically described in the following text. How a business is treated for federal tax purposes, is how it will be treated for Minnesota state tax purposes. Detailed advice on specific situations should be obtained from a competent tax advisor. Considerations addressed in this section include: • Who is the Taxpayer? • What Tax Forms Are Used? • Tax Rates • Tax Impact
• Selection of the Tax Year • Compensation for Services • Employment Taxes and Workers’ Compensation Insurance • Employee Retirement Benefit Plans • Fringe Benefits • Capital Gains and Losses • Net Operating Loss • Estimated Tax Payments • Disposition of Ownership Interest
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