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, agreeing 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 advantages, the most important being a limit of liability for the shareholders. The most shareholders can lose is the amount they invest in the business. Had the business remained unincorporated, owners risk losing their personal property should the business become unable to pay its liabilities. Also, creditors in the Bloomington area generally 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 stake in a corporation can be apportioned into uniform slices, known as "shares" of stock. This makes it possible to sell ownership investments in more manageable slices.
Costs of Incorporation
These benefits come at a price. First, incorporation in Minnesota may require a filing fee. Second, a corporation pays taxes just like any other entity. Disbursements to the owners of the corporation are also taxed as individual income, so this means earnings might be taxed twice. But this double taxation can be avoided with proper planning and help from a local Bloomington lawyer.