Budge Law Offices

When it is Time to Shut the Doors

Mary Budge — Sun, 19 Feb 2012 16:39:36 +0000

Not every business succeeds, that is a simply a reality. It may be that the shareholders no longer wish to continue in business or the business is no longer viable. Your company may also be subject to administrative dissolution if you fail to meet annual corporate renewal filing requirements. This is the first in a series of three articles discussing voluntary dissolution and administrative dissolution. A third type of dissolution is a remedy for minority shareholders and creditors which is beyond the scope of this article.

There are two forms of voluntary dissolution: dissolution without outstanding shares and dissolution with outstanding shares. (Note: this article is referring to corporations, there are similar rules for limited liability companies, partnerships and professional firms).

If the corporation has no outstanding shares, a majority of the incorporators or directors may dissolve the corporation by filing articles of dissolution (see Minn. Stat. §302A.711, subd.1, 2(a)). Once filed the corporation is dissolved.

However, most companies issue shares at the time of formation, therefore the process is a bit more involved. Voluntary dissolution must be authorized by the shareholders of the company and approved at a meeting of the shareholders. Written notice of such meeting must be given to every shareholder (whether entitled to vote or not). Dissolution must be approved by an affirmative vote of the holders of a majority of the power of all shares entitled to vote.

Once the dissolution is authorized by the shareholders, the company must file a note of intent to dissolve with the Secretary of State. Note, once this notice is filed the corporation must cease all business except for the winding up of the corporation. However, during this period, the board must collect the debts due or owing the corporation; pay all debts, obligations and liabilities of the corporation according to their priorities, and give notice to creditors or follow the procedures for dissolution without notice under Minn. Stat. §302A.2971. After satisfaction of all debts, obligations and liabilities, all property must be distributed to the shareholders.

There is a strategy to consider in whether to provide notice to your creditors or to simply follow the procedures for dissolution without notice which will be discussed in part two of this three part series.

One of Minnesota’s Top 25 Blawgs

Mary Budge — Sun, 29 Jan 2012 22:30:37 +0000

When I redesigned my website this past year I did so with the small business owner in mind. I wanted the business owner (new or experienced) to be able to get useful information from my site.

My efforts paid off! I am proud to announce that budgelaw.com was named one of Minnesota’s Top 25 Legal Blawgs – for the second year in a row!! See http://practiceblawg.com/top25/2011-selections/.

Doing Business Under An Assumed Name

Mary Budge — Mon, 23 Jan 2012 00:37:54 +0000

I get a lot of phone calls from small business owners who may need some work done, or just have a simple question. What I have noticed is that some business owners will file an assumed name (or file a d/b/a) and think they have created a “company” and are thus protected from being personally liable for the acts of the business. In reality, unless they already have an established limited liability company or corporation, they are simply acting as a “sole proprietor” and nothing more. As a sole proprietor, the business owner is personally liable for the debts of the business. In addition, subject to certain exemptions, an owner’s assets (both personal and business property) can be attached by creditors to pay the debts of the business. If the sole proprietor obtains adequate insurance, he/she may be able to minimize certain risks such as property loss, personal injury or product liability. But again, there is risk, and as an attorney it is my job to help minimize risk to the business owner.

The simple message here is unless you believe you have adequate insurance, or the nature and type of your business doesn’t provide a lot of exposure to liability, then fine test the waters by hanging up your shingle as a sole proprietor (doing business under an assumed name). But if you are providing certain services, selling products, hiring employees, etc., take the time and incorporate your business. And as always, when in doubt call an attorney to discuss the pros and cons of both!

The Year in Review

Mary Budge — Thu, 15 Dec 2011 03:45:39 +0000

As 2011 draws to a close, I was reflecting back over the year and thinking about all the wonderful clients, business owners, attorneys and friends that I came in contact with this past year, and am thankful and grateful for the relationships that were formed.

Based on the type of work that came across my desk this past year I would say the economy is improving! I formed a lot of new businesses, advised on expanding staff and hiring employees, and worked on a record number of purchase agreements (clients purchasing businesses). If that isn’t an indication that things are turning around, I don’t know what is!

As we move toward 2012, my practice will be changing a bit (think virtual), but more on that in the coming months. Meanwhile, to all my readers, clients, friends and family, I want to thank you for such an outstanding 2011, for trusting in me and letting me share in your success. Here’s hoping for continue success and growth in 2012!

All the Best!

Mary Budge

Why Your Small Business May Need a Board of Directors

Mary Budge — Mon, 14 Nov 2011 02:22:12 +0000

If you don’t already subscribe to the Small Business Association’s RSS feed you should, they have relevant information and resources for small businesses (the website is www.sba.gov). Their most recent post discussed why a small business may need a board of directors. You can find the article here.

Under Minnesota Law, both the Minnesota Business Corporation Act and the Minnesota Limited Liability Company Act require that the business affairs of a company be managed by a board of directors (board of governors, if an LLC). Granted, the board can be comprised of one member, but a board is required nevertheless.

The SBA article cites three reasons why a having a board may be a good idea: 1) a board of directors can help a business grow by bringing on board members with complementing skills and industry expertise that you may not have in house; 2) board members are generally well-connected in the community and can help bring in new talent when needed; and 3) more than anything the board is there to help you! They are an excellent sounding board, because they aren’t engrossed in the day-to-day activities of the company they can spot things you may have missed.

If having a formal board seems overwhelming or you are just not quite ready for one, you can always test the waters with an advisory board (they don’t make formal decisions on behalf of the company, but rather are there to help advise you, provide you with their networks as well as their expertise).