FORMING A SOLE PROPRIETORSHIP
As noted in the section on choosing the form of organization, a sole proprietorship is the simplest form of business organization. There are no statutory requirements unique to this form of organization. From a regulatory standpoint, the business owner only needs to register the business name as an assumed name (if it does not contain the business owner’s first and last names), obtain business licenses and tax identification numbers if necessary, and begin operations. A list of business licenses required by the state of Minnesota appears in the Directory of Licenses and Permits section of this Guide. Procedures for registering the business name as an assumed name are discussed in the previous section of this Guide. The sole proprietor must obtain federal and state tax identification numbers if the business has employees. A sole proprietor who will hire employees also will need an unemployment insurance employer account number and must secure workers’ compensation insurance for employees. Generally speaking, employees may include family members. However, wages paid to a parent, spouse, or minor child of the sole proprietor are not reportable to unemployment insurance. A sole proprietor who will be selling a product or service that is subject to sales tax will need to register for sales and use tax purposes. These taxes and procedures for obtaining tax numbers are discussed in the section of this Guide on business taxes. Sole proprietors who will be hiring employees also should review the section of this Guide on Issues for Employers.
FORMING A PARTNERSHIP
There are two types of partnerships: general partnerships and limited partnerships. Both general and limited partnerships can elect certain legal rules that give partners in these partnerships greater protection against personal liability. A general partnership that makes this election is called a “limited liability partnership”; a limited partnership that makes this election is called a “limited liability limited partnership.” A general partnership that is formed in a state other than Minnesota, or in a foreign country, is called a foreign general partnership. A limited partnership that is formed in a state other than Minnesota, or in a foreign country, is called a foreign limited partnership and is subject to additional regulatory requirements. A limited liability partnership (or limited liability limited partnership) formed in a state other than Minnesota, or in a foreign country, is called a foreign limited liability partnership (or foreign limited liability limited partnership) and is subject to additional regulatory requirements.
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