Many self-employed Minnesota residents are eager to start their businesses. The simplest and most rational solution to this issue is to join the ranks of sole proprietors.
Organizing and managing a business in this format is the least difficult in America and has no service pitfalls. Although, future business owners will have to adhere to certain norms. Also, be prepared that you will have to face some restrictions regarding the functions of your sole proprietorship.
So, the main task of this manual is to help you answer the essential question – is the business format of an individual enterprise right for you? And, of course, we will tell you which aspects to pay attention to while opening a sole proprietorship and how to set up a business structure in this vein properly.
The Proper Way To Start Business As The Minnesota Sole Proprietor
There is no algorithm for organizing the business work of an individual entrepreneur in Minnesota as for LLC. In addition, the state does not charge additional service fees for the formation or management of this type of business or company. Are you looking to become an individual business owner and start a sole proprietorship in Minnesota? – Just start working!
Though, you still have to go through several additional legal formalities. These service stages are optional. Although many sole proprietors prefer not to neglect them, compliance with these formalities guarantees the legal protection of their interests.
Applying For DBAs
Almost every company and business owner prefers doing business as a DBA. There are many benefits to running a business under an assumed name compared with an entity or LLC. We are talking primarily about creating the business image of your company. Potential clients and consumers will find this approach more professional and give you more confidence. It turns out that a company that uses the real name of its owner is often not competitive.
Let’s clarify that a company owned by sole proprietors can use the DBA to open and manage a business bank account. Customers will appreciate it as one more advantage in favor of the business owner, so they feel more comfortable.
If you have a business in Minnesota and want to get a DBA, you need to check its availability. To do this, refer to Minnesota’s business database. Is the chosen trade name not used by another company in the state? – Then, you can proceed with the registration procedure! You must fill out a Certificate of Assumed Name with the correct and relevant data and apply to the Minnesota Secretary of State.
Clarification & Compliance with Tax Requirements
You can run your business in this format and not hire third-party employees. In this case, you do not need to obtain an EIN (Federal Tax Identification Number) because your Social Security number will replace it. Of course, it would be correct to take care of your confidentiality and still use the EIN and not the SSN.
The nature and the structure of the business activity of individual entrepreneurship determine the list of tax requirements that the state will put forward (as with LLC).
The amount of tax rates depends on the type of your business activity and on which island you conduct it. Also, don’t forget that if your business is on the list of those subject to special tax rates, you can exercise your pre-emptive right. All Minnesota businesses are tax liable. These are companies that:
- are engaged in retail sales;
- provide taxable services;
- receive income from commercial activities.
The main types of taxes are sales and use tax. In addition, if your company has a staff of salaried employees, you must ensure that the FICA is paid on time. All detailed information on the tax liabilities of Minnesota sole proprietors is available here. It is the official website of the state’s Employment and Economic Development.
Business Licenses & Permits
Minnesota sole proprietors are exempt from the need to purchase a general business license. However, each of them must take care of obtaining many other licenses and/or permits. The law puts forward different licensing requirements for different types of businesses.
In Minnesota, business owners will have to deal with the need to obtain different licenses and permits. Naturally, not all of them apply to your business. Therefore, this issue requires a thorough study. In the beginning, it may seem to you that this task is overwhelming. But as soon as you open the state’s Elicensing Platform, your mood will improve.
All necessary information is presented here as accessible as possible and grouped into separate sections. In general, navigation is quite simple, and you will quickly find the information you need regarding exactly those requirements that relate to your business activities.
In addition, there are many licenses that you need to obtain locally. It is an important issue that should not be overlooked.
As with tax requirements, the nature of your business determines the individual list of licenses and claims that you will need to obtain. So, all the giant cities of Minnesota have individual licensing and permitting rules:
It also applies to customs and tax requirements. Be sure to meet them all.
Minnesota Sole Proprietor: The Notion & Essence
A sole proprietor is not a legal entity! But any corporation and limited liability company (LLC) has this status. As a sole proprietor, you run the business alone (register and manage it on your behalf). It is worth noting that this gives the business owner advantages, though, imposes additional obligations and responsibilities on him.
Make Sure to Pay Attention to the Following Three Aspects
There are obligations to pay taxes to the state
A business owner and an individual entrepreneur are the same people. It means that filing tax returns is not a requirement, as with an entity or LLC. You need to declare your income and expenses and fill out the declaration of an individual;
Business owners who are registered as sole proprietors have the right to enter into contracts on their behalf, unlike an entity. Also, receiving profit from clients, in checks they can indicate their name in the recipient column;
Flexible terms of business management
The advantage difference between individual entrepreneurship and any entity is the ability to combine work and personal assets. Whereas corporations and LLCs must separate personal assets from company assets. It has several positive and negative aspects. For example, if you have financial difficulties, creditors can seize or confiscate your personal property (house, car, etc.). In the case of corporations and LLCs (or any entity), creditors do not have this freedom, as their powers only apply to business assets.
Of course, the structure of doing legal business as a sole proprietor is greatly simplified while in Minnesota. You don’t even have to pay any commission fees provided for the entity or LLC. At the same time, based on the nature and structure of the business activity that you conduct, you will all have to go through a series of entity stages.
The issues of taxation, obtaining licenses, and permits require more detailed consideration. Also, pay attention to the possibility of obtaining and using DBA. These aspects are vital, as their omission can result in unnecessary legal penalties for you.
We have prepared this manual so that you can think over the structure of your business to the smallest detail. Manage it correctly and get more legal profit!