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 office of the Secretary of State is the agency that receives applications for incorporation in Minnesota, and they must be completed in conformity with specific 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. A corporation may also find it easier to finance itself through loans, allowing creditors in the Otsego area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Lastly, a corporation's ownership stake is divided into equal slices or "shares" of stock, which make investments in the business much easier to transfer.
Costs of Incorporation
Along with a possible fee to file for incorporation in Minnesota, there are other costs that corporations incur. The most important is that a corporation is taxed as its own 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 Otsego lawyer.