Subsequent Reorganization or Change in the Tax Status of the Business. If the business is being terminated because the owner wishes to do business under a different type of entity (such as converting a sole proprietorship to an S corporation), special issues might need to be addressed. For instance, when an S corporation terminates its election and becomes a C corporation, adverse tax consequences often result. Likewise if the shareholders of a C corporation elect to have it taxed as an S corporation, it may be subject to adverse tax consequences requiring the corporation to be subject to various entity level taxes that can be significant. Also, certain assets of the business may not be transferable; for example, a contract that the business has entered into might or might not be transferable if the business is terminated and reorganized. Many other issues could arise when a business is terminated and begun again under a different form of organization. Although generally speaking an owner is permitted to change the form of his or her business at any time, a business owner is advised to seek professional assistance when considering changing the form of his or her business to avoid unintended consequences. Extent of Government Regulation Federal, state and local consumer protection laws regulate business relationships with the public, without regard to the form of organization. Every business that hires employees will be required to comply with certain federal and state labor and tax laws governing the employment relationship. This section explains how Minnesota regulates each common business type and what routine filings keep you in good standing. Sole Proprietorship • Minnesota does not register or generally regulate sole proprietorships at the state level, beyond general tax and licensing rules that apply to all businesses. • You may still need licenses or permits and must comply with labor and tax rules if your business will have employees. General partnership • A general partnership can operate without filing formation documents or annual reports with the Secretary of State unless you choose to file an assumed name or a statement of authority. • Most rules for how partners work together come from your partnership agreement, with Minnesota’s partnership law filling gaps if your agreement is silent. Limited partnerships, LLPs, and LLLPs • LPs, LLPs, and LLLPs file with the Secretary of State and must keep their status current with an annual renewal to remain active.
• If you elect LLP or LLLP status, set a reminder to renew each calendar year so you do not lose the liability protection that status provides.
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