Many businesses in Minnesota elect to form a limited liability company because it allows pass-through taxation with the limited liability that is associated with corporations. An LLC is not a separate tax entity like a corporation. Its owners pay the business taxes, accordingly.
On April 11, 2014, the Minnesota Revised Uniform Liability Company Act was approved. It is intended to change Minnesota’s corporation-based model into a partnership model utilized in other states.
The new law allows other entities to form an LLC in addition to natural persons. Now, corporations or partnerships may form an LLC by filing the necessary documents with the Minnesota Secretary of State.
This law also provides more flexibility with the conduct of standards applied to LLC members, managers and governors. The current law contains an unmodifiable statutory standard of care and duty. Under the new law, the standards in the operating agreement may now be changed if the changes are not manifestly unreasonable.
The current law’s exemption from member liability for LLC debts and other obligations remains the same. However, LLC members will be liable for certain actions such as filing inaccurate information with the Secretary of State, failure to make contributions or receiving an improper distribution.
This act applies to all limited liability companies in the state formed on August 15, 2015 and after. It will also govern an LLC that elects for coverage under this law and amends its governing documents. Minnesota’s current LLC law will be repealed on January 1, 2018 and this new law will then govern all limited liability companies in the state.
Many laws and requirements govern the formation and operation of LLCs, corporations, partnerships and sole proprietorships. Compliance is important to avoid prosecution and financial losses. Prompt legal advice helps assure that businesses comply with these laws and adopt a business formation applicable to its needs.
Source: Minnesota Department of Employment and Economic Development, “Minnesota adopts new law on formation and operation of limited liability companies,” Retrieved Sept. 22, 2014