Questions
Your Recently Asked and Frequently Asked Questions.
Your Recently Asked and Frequently Asked Questions.
Yes. Effective Jan. 1, 2024, Minnesota’s earned sick and safe time law requires employers to provide paid leave to employees who work in the state. Minnesota’s current sick and safe leave law remains in effect until Dec. 31, 2023 and will be replaced by the new earned sick and safe time law on Jan. 1, 2024.
Sick and safe time is paid leave employers must provide to employees in Minnesota that can be used for certain reasons, including when an employee is sick, to care for a sick family member or to seek assistance if an employee or their family member has experienced domestic abuse.
An employee is eligible for sick and safe time if they:
Temporary and part-time employees are eligible for sick and safe time. Sick and safe time requirements will not apply to building and construction industry employees who are represented by a building and construction trades labor organization if a valid waiver of these requirements is provided in a collective bargaining agreement.
Review the Minnesota Dept. of Labor & Industry (DLI) Earned Sick and Safe Time (ESST) information.
Watch a video on this topic from the Minnesota Small Business Call from December 2023 - Earned Sick and Safe Time.
The new Office of Cannabis Management will release applications, issue licenses and develop regulations outlining how and when businesses can participate in the new adult-use industry in Minnesota. Over the coming months, the new state agency will develop the regulatory framework for legal adult cannabis, and establish processes and timelines to apply for licenses.
NOTE: Lower-potency hemp businesses currently in operation will need to register with the Minnesota Department of Health by Oct. 1, 2023, and eventually get licensed under the Office of Cannabis Management. Check back for more details about the registration process.
Go to the Hemp Derived Cannabinoid Products Business Registration Form. Once registration has been completed, the owner will receive a registration certificate via e-mail. This certificate contains a unique ID number and will be the proof of registration for the business. Keep a copy of the email for your records.
Updated information on a halt to reporting is here Small Business Notes *March 2024 Special Issue*
Beginning on January 1, 2024, many companies in the United States will have to report information about their beneficial owners, i.e., the individuals who ultimately own or control the company. They will have to report the information to the Financial Crimes Enforcement Network (FinCEN). FinCEN is a bureau of the U.S. Department of the Treasury.
Here is information from the Financial Crimes Enforcement Network (FINCEN) regarding Beneficial Ownership Information (BOI) Reporting:
Prepare
File
Effective January 1, 2024, Minnesota's minimum-wage rates will increase to $10.85 an hour for large employers and $8.85 an hour for other state minimum wages.
Some local cities like Minneapolis and St. Paul have rates different from the state minimum wage rate.
All employers must complete a Form I-9, issued by DHS's (U.S. Dept. of Homeland Security) USCIS (U.S. Citizenship and Immigration Services) for each individual they hire, whether they are citizens or not. Typically, to complete Form I-9, each employee must physically present certain documents (listed on Form I-9) proving their identity and employment authorization within three business days of starting work. The employer must examine these documents in the employee's physical presence to determine whether the documents "reasonably appear to be genuine and related to" the particular employee.
When the pandemic hit in March 2020, DHS temporarily deferred this physical presence requirement and instead allowed certain employers with remote work forces to collect, inspect, and retain their employees identity employment authorization documents remotely, through platforms such as email, fax, etc., until they could safely perform in person inspections. The referral was originally said to expire later in 2020 but because of the ongoing public health emergency, it had been extended several times and now it's finally expiring on October 31, 2022. This means that as of November 1, 2022, all newly onboard employees must undergo the in-person Form I-9 verification process.
More specific information about Form I-9 compliance and instructions can be found on the USCIS website at USCIS.gov/I-9.
ESG refers to the Environmental, Social, and Governance results of business actions. The Securities and Exchange Commission has proposed regulations requiring large publicly traded companies to disclose and explain their affirmative ESG efforts and anticipated outcomes in the regular reports that the companies file with the SEC. There has been passing reference among small businesses that they might seek to build ESG into loan applications, securities offerings, and marketing materials to make the public aware of these efforts; but there is no requirement. There has also grown up some opposition to requiring publicly traded companies to build out ESG activities and report on them on the basis that such long term and uncertain efforts can be violations of mangers’ and directors’ fiduciary duties to the company by diverting resources into ESG rather than directing them to immediate shareholder value. There are also private organizations that give ESG ratings to companies that investors seeking to invest in ESG companies can use in making investment decisions.
Yes. The fair market value of the crypto constitutes taxable wages and is reported by the employer on Form W-2. The fair market value of crypto listed on an exchange with the value determined by supply and demand is arrived at by converting the crypto to U.S. dollars at the exchange rate on the date of payment.
The Employee Retention Credit (ERC) is a refundable payroll tax credit. Eligible businesses can receive up to $26,000 per employee. Born out of the same CARES Act as PPP, its aim is to provide economic relief for small and medium businesses who retained employees during the COVID-19 pandemic. Initially, eligible employers could only take either PPP, or ERC. In 2021, as part of the Consolidated Appropriations Act, Congress amended this provision, allowing businesses to apply for both.
Eligible businesses have up to three years to amend their past returns after 2020 to claim the credit.
Because this is a refundable credit, the taxpayer will receive an actual check for the amount of refund.
Refer to IRS information, Employee Retention Credit
UPDATE February 2024
Educational sessions for tax professionals
Starting in February 2024, IRS Criminal Investigation special agents are hosting a series of educational sessions for tax professionals who may have claimed the ERC for their clients on previous years’ tax returns. The sessions are part of a nationwide initiative to ensure that tax professionals have the latest information about ERC claims and understand ERC eligibility criteria.
On this page
The IRS has developed a new FAQ on the credit available online at Frequently asked questions about the Employee Retention Credit
Yes. The California Privacy Rights Act (CPRA) and other new state data privacy laws were set to take effect in 2023. Take a look at our publication A Legal Guide to Privacy and Data Security 2024, authored by the law firm of Lathrop GPM.
No. The federal corporate income tax remains at 21%. The Inflation Reduction Act created a new 15% corporate alternative minimum tax on corporations with revenues of $1 billion or more. Congress chose to do this rather than eliminate or reduce various credits and tax strategies in the Internal Revenue Code.
Joint venture agreement are used when two more business entities or individuals enter into a temporary business relationship (joint venture) for the purpose of achieving a mutual goal, where they will each share the risks and rewards. It allows each business to grow without looking for outside funding. Other reasons businesses may enter into a joint venture relationship could be to gain access to wider markets, more financial and technical resources, share resources such as greater expertise and skills, fund the growth of another business, develop new products or services, or diversify. A joint venture agreement sets out the terms and obligations of the members of the joint venture.
If you buy or acquire a business, or the stock of goods of a business, you are a successor. Successors must notify the Minnesota Department of Revenue before the transfer takes place. If the seller does not notify Revenue, it may make the buyer of the business liable for tax debts or other debts Revenue is collecting from the business.
The business buyer must search for undisclosed tax liens before completing a purchase agreement. This will reveal any undisclosed tax obligations for the business the buyer intends to purchase. The law is in place to protect a buyer. (See Minn. Stat. 270C.57)
Detailed information is available on the Revenue website at Successor Liability.
Yes. Partnerships, and S Corporations taxed like partnerships, have an informational return to file with the IRS. See Below:
K-1 Forms for business partnerships
For businesses that operate as partnerships, it’s the partners who are responsible for paying taxes on the business’ income, not the business. Each partner is responsible for filing an individual tax return reporting their share of income, losses, tax deductions and tax credits that the business reported on the informational IRS Form 1065, U.S. Partnership Income.. As a result, the partnership must prepare a Schedule K-1 (Form 1041) to report each partner’s share of these tax items.
Schedule K-1 for S corporations
Similar to a partnership, S corporations must file an annual tax return on IRS Form 1120-S, U.S. Income Tax Return for an S Corporation. The S corporation provides Schedule K-1s that reports each shareholder’s share of income, losses, deductions and credits. The shareholders use the information on the K-1 to report the same thing on their separate tax returns.
New employees, and existing employees who wish to change their income tax withholding, must use the 2024 version of IRS Form W-4. Review the IRS information, About Form W-4, Employee's Withholding Certificate.
Certificates of Assumed Name, sometimes referred to as DBAs, and trademarks are two very different things and serve two completely different purposes. An assumed name allows you to do business using a fictitious name, which is any name other than your legal name or your legal corporate name. A trademark, on the other hand, is a type of intellectual property registration that protects your business's Branding. Though similar, there are major differences between the two.
Registering an assumed name is simpler than registering a trademark. Registering an assumed name in Minnesota is as simple as performing a name search, filling out a form, publishing a notice and paying a fee. The process for registering an assumed name is pretty straightforward whereas the trademark application process is more extensive, more expensive and can take many months to process.
An assumed name is cheaper than a trademark because it ultimately offer less protection in terms of location and all that is protected.
Assumed names only protect on a state level. Since everything is done at the state level for an assumed name, that's as high as the protection goes. Minnesota has laws preventing businesses from registering names that are too similar to another assumed name. However, if a business has the same name as you in another state there's probably nothing you can do.
A trademark offers more protection than an assumed name. Where an assumed name only reaches to the state level, a trademark is yours to use on a national level. However another trademark can use the same words as yours as long as the font and color or different, or a different image is used.
A trademark is your legal property. By registering your trademark, you have exclusive rights to use it. No one else can infringe on that right. When you register a trademark, it becomes your business's property and your business's property alone.
Where an assumed name only covers the use of a name, the trademark can be registered for different parts of your company's branding.
Trademarks have inherent value.
Both assumed names and trademarks keep other businesses from using your business name. The important thing to remember is they both do the same job. It's the amount of protection, what is being protected, and the process and cost the differ.
An operating agreement is an internal document that defines internal operating procedures and how the business owners (members) professionally relate to each other in terms of management and operations, whereas the articles of incorporation is a formal document that legally establishes a business as a corporation. Together those documents help to make up the legal framework of the Organization.
Operating agreements and articles of incorporation also differ based on legal structure, application, state requirements, tax outcomes and rigidity. Operating documents are less formal and easier to amend to.
Articles of incorporation are filed as of the date of creation and often not updated to include include shareholder information, profit distribution methods or ongoing business relations, whereas operating agreements can be more easily adjusted to stay correct within the current state of operations.
Although they serve a similar purpose, operating agreements differ slightly from a company's bylaws. Operating agreements tend to outline items in greater detail than the bylaws of a corporation would.
With corporations, it is common to have additional agreements created, often referred to as a shareholders agreement, which outlines in greater detail the information that would typically be contained inside an operating agreement.
An operating agreement is an internal document that outlines business owner relationships, and articles of incorporation legally define a business as a corporation within the state.
"Startup expenditures" are defined in the Internal Revenue Code [Section 195(c)] as amounts paid or incurred in connection with investigating the creation or acquisition of a business (for example, market studies) or with the actual creation of the business (for example legal fees or state filing costs).
No deduction is allowed for such expenditures unless the business files an election, at the time of filing its first year’s income tax return, in which case the business is allowed a deduction that first year for the lesser of $5,000 or $5,000 reduced by the amount that the expenditure exceeds $50,000. The remainder of any startup expenditures can be claimed as deductions ratably over the 180 month period that begins with the month in which the business begins active operation.
Expenditures that are "ordinary and necessary" in carrying on a trade or business are deductible in the tax year in which they were incurred. [Section 162] These expenditures can include cost of goods, management salaries, cost of labor, property rentals, supplies, advertising, and insurance.
For additional information on these questions refer to the IRS information Guide to Business Expense Resources and Publication 535 Business Expenses.
A loan covenant is an agreement stipulating the terms and conditions of loan policies between a borrower and lender. The agreement gives lenders leeway in providing loans while still protecting their lending position. Similarly, due to the transparency of the regulations borrowers get clear expectations of the lenders.
In loan covenants, two commonly known types of agreements are affirmative loan covenants and negative loan covenants.
Th affirmative covenants are things that a small business or borrower must do while it is paying the business loan. Examples of affirmative covenants are very basic- Meet financial obligations, pay taxes, and maintain a positive cash flow. Other possible affirmative covenants are to maintain business insurance, maintain collateral, and accurate recordkeeping.
The bank may also ask the small business to maintain certain levels of particular financial ratios. Examples of financial ratios the banks may watch are the debt to equity ratio, the debt to asset ratio, and the company's net working capital.
Restrictive or negative loan covenants limit the borrowers behavior in favor of the bank. In other words the small business borrowing the money has to refrain from taking specific actions. The most common negative covenant requires the company not to borrow any money.
Companies the banks considered high risk will have more restrictive covenants. Companies the banks consider to be lower risk will have fewer restrictive covenants. The risk is determined on a number of factors by the bank such as financial statements, cash flow, collateral, business insurance, and the business plan.
"Loan Documentation: An Introduction for Small Businesses" provides a primer on the need for and uses of many of the terms and covenants used in commercial transactions. It is available for download on DEED's website at Publications.
According to Minn. Stat. 33.01, Commercial Assumed Names, Any person who conducts or transacts business in Minnesota under a name that is different from the full, legal name of each owner or partner must register the name of the business by filing a Certificate of Assumed Name with the Office of the Minnesota Secretary of State. It is also required of corporations, limited partnerships, limited liability partnerships, limited liability companies that do business under a name that is different from their exact legal name.
The registration of a business name requirement is a consumer protection requirement - it is designed to protect consumers from business owners hiding anonymously behind the name of a business. It does not protect the business owner’s name. Once an assumed name is filed, filing for trademark protection may be appropriate.
The requirement and need to register an assumed name vary, depending on the type of business entity. Sole proprietorships and general partnerships are the most common entities to register for an assumed name. For sole proprietorships and partnerships the original name is the actual name of the owner or partners. This secondary name doesn’t replace the original name but acts as an additional legal name for the business. This name is known as their assumed name or trade name. Corporations and limited liability companies won’t typically register a fictitious name since a unique entity name is created during the formation process. Some will file if they have another business the want to operate under their corporate/LLC umbrella to keep the liability protection without having to form another entity.
The cost to register an assumed name in Minnesota is $30 when filing by mail or $50 when filing on line. The assumed name has to be renewed annually, however, there is no cost to do so. If allowed to lapse, there will be a reinstatement fee for the assumed name designation. Registering an assumed name does not change how your company is taxed. Please note that upon filing a Certificate of Assumed name, there is no certificate issued.
Name registration and name availability guidelines are available from the Secretary of State Office and can be checked at Search Business Filings.
Using the U.S. Trademark Electronic Search System (Tess) will tell you whether someone else has already trademarked your name.
It is also a good idea to check that here is a web domain name available for your assumed name as well.
If you filed a Certificate of Assumed Name, Minnesota Business Corporation, Foreign Business, or Non-Profit Corporation, or a Cooperative, Limited Liability Company, Limited Liability Partnership or Limited Partnership, you must file an annual renewal once every calendar year, beginning in the calendar year following your original filing with the Office of the Minnesota Secretary of State. Most registration renewals have no fee, but some do. Refer to the Office of the Minnesota Secretary of State Business Filing & Certification Fee Schedule.
Your entity will be “statutorily dissolved” (no longer be recognized as existing in Minnesota) if you fail to file your annual renewal. If your entity has been statutorily dissolved, you may have it retroactively reinstated (as long as the name is still available) by filing a renewal for the current year and paying a fee.
Renewal may be made online.at the Secretary of State Office, How to File Your Annual Renewal or Amendment Online.
*See this information from the Minnesota Attorney General Office, Business Compliance Solicitation Scams
Form 1099-K, Payment Card and Third-Party Network Transaction, is an IRS information return that tracks payments including those made with credit cards; cash apps; online payment services; and freelancing platforms that manage payments. It reports the gross amount of reportable transactions for both the calendar year and its corresponding months to the IRS and to the people who accept the payment cards or payments made by third-party settlement organizations.
Effective January 1, 2022, all third-party settlement organizations (TPSO) such as PayPal, Amazon, Venmo, cash app, or online market places like Etsy and eBay, are required to issue a 1099-K form for goods and services transactions totaling $600 or more in annual gross sales. This threshold has been dramatically reduced from $20,000 to $600 in 2022, with no minimum number of transactions, and may include those where the business owners have no tax liability.
The “gross amount” on the 1099-K is the total unadjusted dollar amount of the payment transactions made to you. This amount is not adjusted to account for any fees, refunds, or any other amounts before it’s reported on the 1099-K and to the IRS. This means that form 1099-K shows the value of the transactions processed for you in the past year, as well as any expenses paid on your behalf by your clients, such as processing fees deducted before payment reaches you, meaning that your 1099-K will include those expenses, reporting an income higher than you receive.
If you let customers receive cashback when they use the debit cards for purchases, your form 1099–K will include the cash back amounts as part of the gross amount of payment card transactions. Typically, cash back amounts would not be included on an income tax return or claimed as a business expense.
If a credit card terminal is shared with another person or business, the form 1099-K will include payment card transactions belonging to the person or business that shared your terminal, in addition to your own payments. When required, you’ll need to file and furnish information returns for those who you shared a card terminal with, including the total payment card transaction amount and any other income belonging to them.
We recommend reviewing your recordkeeping requirements with your business advisor.
While you do not need a business plan to open a business, we think it is a good idea for the following reasons:
For some, though not all, businesses the State may require a state issued license or permit to enter into business or conduct certain activities in that business. These can be issued for various purposes: to ensure the competency of practitioners of a business, trade or profession; to protect the physical well-being and welfare of the public; to prevent fraud or ensure the financial solvency of a party to financial transaction; to ensure the safety and efficacy of products or services; to promote the responsible use of natural resources; to authorize a business to collect sales taxes and specialty taxes like cigarette or motor fuel taxes and remit those taxes to the state.
A comprehensive list of state required licenses and permits together with their requirements, schedules, and fees is available online at Minnesota ELicensing.
Some local governments also impose licensing requirements on businesses. Larger cities like Minneapolis and St. Paul have actual licensing departments. Small units of local government at city or county level more often utilize the city clerk or county clerk to direct licensing application and issuance.
The State of Minnesota does not approve, endorse, or market any franchise offerings. The Minnesota Franchise Act does require that a proposed franchise must be registered with the Minnesota Department of Commerce before any offers or sales are made. In addition, the Minnesota Franchise Act sets the requirements for public offering statements, defines unfair and prohibited practices, establishes enforcement standards and provides for civil money penalties for violations.
Minnesota accepts for registration franchise applications that comply with the Uniform Franchise Offering Circular put out by the North American Securities Administrators Association. That circular describes the disclosures that franchisors must make and requires that franchisors provide prospective franchisees with audited financial statements and copies of all proposed contracts and agreements pertaining to the proposed franchise relationship. Refer to this information from the MN Department of Commerce, Franchises.
Yes. Treasury regulations treat the owner as a sole proprietor in this situation and allow the owner to deduct trade or business expenses, including the LLC's share of employment taxes and the cost of health insurance for the owner, the owner's spouse, and the owner's dependents. These deductions are made on the appropriate schedule of IRS Form 1040.