In Minnesota, businesses are allowed to incorporate, thereby becoming their own legal entities. An incorporated business acts in its own name, whether buying and selling property, assenting to contracts or exercising legal rights. The Minnesota Secretary of State receives and processes applications for incorporation, which must be submitted in compliance with local guidelines.
Benefits of Incorporation in Minnesota
An incorporated business enjoys certain benefits, the most important being a limit of liability for the shareholders. The most shareholders can lose is the amount they invest in the business. If the business had remained a personal asset of the owners, they would run the risk of losing their personal property to pay for the company's financial liabilities in case of default. Also, creditors in the Andover area usually prefer to deal with corporations, since a loan is an investment more easily evaluated when the credit-worthiness of various owners is not an issue. Finally, the ownership of a corporation is divided into an abundance of equal portions or "shares" of stock. Without this mechanism, transferring ownership of a business would be impractical.
Costs of Incorporation
These advantages come at a price. First, incorporation in Minnesota may require a filing fee. Second, a corporation pays taxes just like any other entity. In other words, the profits a corporation makes are now taxed separately, while any disbursements to shareholders are taxed as individual income. This is called double taxation. However, a business may avoid this disadvantage with proper planning and assistance from a local Andover lawyer.