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The Minnesota Family Business: Avoid These 4 Lethal Legal Mistakes

Lucere Legal helps family business owners

If you operate a family-owned business in Minnesota, or are considering starting one up, there are four potentially lethal legal mistakes you should take care to avoid, including:

No employment agreements.  Family members who work together are usually hesitant to confront one another if someone isn’t pulling their weight.  Having an employment agreement for everyone ensures that expectations for job performance are spelled out and what the grounds are for termination.

Mixing family and business finances.  Many family businesses start with loans from various members, and as the business grows, those initial investments need to be protected.  This is the stage when you want to consider setting up your family enterprise as a limited liability company (LLC) or a corporation.  Most small businesses use an LLC structure, which provides liability protection for personal assets and allows for company profits to flow through to owners.

No licenses.  Even if you operate out of your home, you will likely need to obtain a local, state or federal license to operate your family business.  While licenses are generally inexpensive, the fines for not having them can be costly.  You can find out what the requirements are in your area by contacting your city hall or county office.

No succession plan.  Family business feuds can easily occur when there is no succession plan in place.  In addition, legally speaking, if a business has not been incorporated or formed as an LLC, the business dies when its owner does.  If you started a family business to keep it in the family, you need to follow through with a formal succession plan.

Want legal help with your family owned business? Call us at (612) 206-3701 or fill out our contact form today to schedule a business consultation session.

Image courtesy of Stuart Miles, freedigitalphotos.net

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The plain-English guide for Minnesota small business owners

When it comes to business, ignorance isn't bliss; ignorance is risk.

There's a handful of legal topics that business owners should be familiar with, at least on a rudimentary level, to reduce the risk of having something horrible come out of left field.

This book is a legal guide to help you put the most common business legal issues on your radar, with enough information for you to be on the alert for when you may need to get some professional advice.

The intention in arming you with this information is so that you can proceed in business confidently and with fewer legal quagmires.

Do you have a cabin?

The first generation that buys a cabin enjoys it to the fullest and it’s a magical place where happy memories are made and families go for some much needed respite. Unfortunately, without thoughtful planning, the chances of the cabin staying a place of happiness and tranquility into successive generations is very, very slim.

If you haven’t done the planning in advance and made it legally binding, the family members (and their ex-spouses and new spouses) will have to work every detail out for themselves. If they can’t, what is likely to happen is a lawsuit called an action for partition that forces everyone to sell their interest. This lawsuit is expensive, and the costs of litigation will come out of the proceeds of the sale of the cabin, so to add insult to injury to those who wanted to keep the cabin but couldn’t afford to buy the others out, they are footing part of the legal bills in the lawsuit against them. Ouch!

It’s no wonder that family members stop speaking for years after the cabin conflict is “resolved.” You can’t make family relationships perfect, but you can take away much of the fuel for the family conflict fire. That’s what cabin planning does, and it has the nice side effect of giving you peace of mind now.

That’s why Kimberly wrote The Minnesota Cabin Planning Guide and Workbook, and you can get a free electronic copy of her book on our cabin planning website, or you can find it in many county libraries in Minnesota, or you can get it on amazon.com.

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