New Businesses Start Up in Minneapolis

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A recent edition of the Southwest Journal had an article focusing on 10 new start-up businesses in the Southwest metro area. The businesses range from a self-serve dog wash service to a brewery (Fulton Beer, whose owners include Jim Diley, a former student of mine at William Mitchell), a second-hand clothing store, a community gym and a barbecue restaurant, among others.

Many people who have lost their jobs in the Great Recession, and have been unable to find a new one, have turned on their entrepreneurial spirit and started their own businesses, like these Minneapolis residents. What should they watch out for, at least from a legal perspective?

First, make sure that there aren’t any state or local ordinances or licensing requirements that you must follow. A restaurant clearly has to apply for a food and perhaps a liquor license. There are also different types of entertainment licenses, depending on the city and on the type of entertainment that an establishment wants to provide (karaoke? live performers? dancing? all are regulated). A business like a gym or a beauty will also have licenses that it will need to obtain through the Department of Health.

All businesses should also set up a corporate entity such as a corporation or a LLC (limited liability company). Both will protect your personal assets, provided that corporate formalities are followed. If you have a partner or partners, put together a written partnership agreement, or clearly state in the corporate documents how the profits and losses will be divided and who is responsible for what. Get in writing how things will be run, because there is nothing worse than having a dispute with nothing in writing, with each partner stating how he or she thought how the business was meant to be run.

If you are going to hire anyone to work at your new business, make sure you aren’t calling this person and paying her as an independent contractor when she is really an employee. There are laws that define what type of relationship can be considered an independent contractor and what type can be an employee-employer relationship. You can’t choose, and nor can the worker. Talk with an attorney before making this determination and start paying someone with a 1099.

Good advice in general is to talk with an attorney, and an accountant for that matter, before starting a business to make sure that you are getting off on the right foot.


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