A corporation that is required to file a business activities report and fails to do so is prohibited from prosecuting any cause of action upon which it may bring suit under Minnesota law. In addition, those corporations generally are barred from using Minnesota courts for contracts executed and causes of action arising during the violation period. The Commissioner of Revenue may disclose to litigants whether a business activities report has been filed by a party to a lawsuit. Copies of Form M4R Minnesota Business Activity Report, may be obtained from the Minnesota Department of Revenue at the contact information listed in the Resource Directory section of this Guide. SUBSIDIARIES When a corporation extends into a new product line or a new geographic area, it frequently establishes a “subsidiary” corporation. A subsidiary corporation is a separate legal entity which happens to be controlled by another corporation (its “parent”) that owns enough shares of the subsidiary’s stock to dictate policy. Some subsidiaries are wholly-owned, some are not. As a separate entity, separate records and management are required, although consolidated financial and tax reporting may be possible under certain circumstances. Subsidiaries may also serve to insulate the parent corporation from liability for the action of the subsidiary under certain circumstances. PUBLIC BENEFIT CORPORATIONS Public Benefit Corporations, a new legal corporate form, are like traditional for-profit business corporations in most ways except that they choose to make social commitments a part of their business plan. Primarily, a public benefit corporation declares a legally binding social purpose, in addition to its general business purpose, which its directors and officers must consider when making strategic decisions for the business. A public benefits corporation publicly reports its progress toward its social purpose each year by filing an annual benefit report with the Minnesota Secretary of State. Minn. Stat. Chapter 304A creates two different types of public benefit corporations, a general business corporation (GBC) and specific benefit corporation (SBC). The corporation must elect one of these two types in Minnesota and use the name of the type of entity in its legal name. A GBC always has a purpose to pursue a general public benefit, and may have an additional purpose to pursue a specific public benefit, while an SBC has a purpose to pursue only a specific public benefit and not any general public benefit. The distinctions between a GBC and an SBC effect the scope of the fiduciary duties of the directors. The Public Benefit Corporation Act does not create a new corporate tax status, nor does election to be a PBC confer tax-exempt status or transform a for-profit enterprise into a nonprofit organization. A PBC is taxed as a regular business corporation – either as a C corporation under the Internal Revenue Code or, if it qualifies and makes an election, as a Subchapter S corporation. A nonprofit corporation cannot become a PBC, but it can create a subsidiary PBC. Under Minnesota law enacted in 2016, an LLC is prohibited from converting directly to a Public Benefit Corporation.
49
Made with FlippingBook - Online Brochure Maker