Minnesota LLC Formation I: Essential Documents

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It is conventional wisdom that forming a Limited Liability Company (“LLC”) in Minnesota is not hard. Furthermore, a lot of people believe that, in order to form an LLC, the only (and the easiest) thing to do is to file the Articles of Organizations – a one-page fill-in form prepared by the Secretary of State – and that is it. I have seen dozens of examples where entrepreneurs would file the Article of Organization believing they are completely protected and they do not to pursue anything further, saving money on a legal advice.

In fact, however, the issue is much more complex. Even assuming that the LLC is the correct entity form for the business in question (a discussion which requires substantial legal analysis and is a topic for another article), organizing an LLC is process which has its owns legal complexities and requires proper documentation in order to achieve the results that most organizers are striving for – limited liability and protection of one’s business interests. A business owner who is negligent in organizing an LLC is likely to pay a hefty penalty in the future, including a possibility of losing his business altogether.

This article begins a series of articles that I am writing on the topic of LLC formation in Minnesota. It is important to point out this series merely provides a general educational background on this topic and you should consult a Minnesota business lawyer regarding your specific legal situation.

In this essay, I would like to outline the minimum essential documentation one needs for the purposes of organizing an LLC. This is a suggestive list of documents that most Twin Cities business lawyers adopt. Notice, this article does not discuss the process of LLC formation (which is the topic of another article, later in this series).

1. Articles of Organization

The LLC is formed by filing the Articles of Organization with the Minnesota Secretary of State. The Articles become effective on filing and payment of the $160 (current as of the year 2010) filing fee. The Office of the Secretary of State would then issue a Certificate of Organization to the LLC.

It is important to understand that the one-page, fill-in form provided by the Secretary of State Office is not the only possible form. In fact, this form merely incorporates the minimum required provisions in order to form the LLC. The Articles may incorporate a lot more information, stating the rules on various issues such as cumulative voting, preemptive rights, a governor’s liability, et cetera. It is important to consult your business attorney in deciding what the Articles of Organization should include.

2. Bylaws (or Operating Agreement)

In most cases, it is important for the LLC to adopt Bylaws (also known as “Operating Agreement”). Bylaws may contain provisions relating to the management of the LLC, as long as these provisions are not inconsistent with Minnesota law and/or the Articles of Organization.

3. Member Control Agreement
As long as specific requirements are satisfied, Minnesota law allows the organizers of the LLC to adopt a Member Control Agreement. The most crucial aspects of this Agreement are that it permits the organizers to adopt a different governance structure for the LLC and over-rule many default provisions of the Minnesota Limited Liability Company Act, including on such crucial issues as: terms and conditions for transfer of membership interests, voting quorum, valuation of membership interests, and so on.

The recent trend among Minneapolis business lawyers and St. Paul business lawyers is to combine the Bylaws and the Member Control Agreement into one “Member Control and Operating Agreement”.

Conclusion

LLC formation can be a complex process, which deserves a lot more consideration than merely filling out a simple form with minimum formation requirements. Your specific situation may require filing an expended Articles of Organization. Then, in order for the new LLC to operate, you need to describe how it will be managed in the Bylaws. Moreover, the Minnesota Limited Liability Company Act contains many default provisions which may interfere with proper functioning of your business. Therefore, a Member Control Agreement may be necessary for greater flexibility in and proper management of your business.

It is crucially important to consult a Minnesota business lawyer while forming the LLC. Only a business attorney will be able to properly analyze your situation, help you file correct Articles of Organization, and draft the necessary Bylaws and/or Member Control Agreement.

Sherayzen Law Office can help you navigate these complex issues of entity choice and LLC formation as well as draft all of the necessary paperwork, including customized Bylaws and Member Control Agreements.

Call Sherayzen Law Office NOW to discuss your business formation issues with an experienced business lawyer!

Office of Administrative Hearings: Sources of Procedure and Procedural Rights

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If you appealed your business license denial and your case is pending effectively in the Office of Administrative Hearings, it is essential to understand the procedural rules of this administrative court as well as your procedural rights. This means that you and/or your attorney must have a good understanding of the sources of the administrative rules and procedural rights.

There are five main sources of the administrative procedure, including procedural rights, for the cases pending in the Office of Administrative Hearings. First, the Due Process Clause of the U.S. and Minnesota constitutions. Due process rights must be afforded to parties irrespective of whether they are explicitly mentioned in a relevant statute. The two most important rights include: a right to notice and a right to a hearing. A deep understanding of the due process clause may be required to mount an effective defense against the state’s claims or to support your arguments for approval of your business license application.

Second, Minnesota Administrative Procedure Act can be found in Chapter 14 of the Minnesota Annotated Statutes. It constitutes is an important source of the procedural rules for Minnesota state agencies, and, among other things, sets up the procedures for an agency’s rulemaking and applicant petitioning.

The most direct source of the OAH procedures are the rules of the Office of Administrative Hearings(OAH). The Rules can be found in Chapter 1400 of the Minnesota Administrative Rules. Knowledge of the rules is crucial for effective pre-hearing practice as well as the conduct of the actual hearing.

Fourth, a specific statute or an agency’s procedural rules may provide for the specific procedural rules and even substantive requirements.

Finally, where an agency or the OAH has not promulgated a rule to govern unanticipated circumstances, the administrative law judge is likely to rely on the Minnesota Rules of Civil Procedure. In fact, the OAH rules specifically mention the Rules of Civil Procedure as a guide for an administrative law judge in situations where the administrative rules are silent.

I have already detailed elsewhere (click here) the great importance of timely hiring an attorney to represent you in case of a business denial appeal. Here, I will just reiterate that hiring a business lawyer knowledgeable in the OAH rules and procedures is likely to save you nerves, time, money, and even determine the outcome of your case.

Sherayzen Law Office can help you every step of the way in your business license denial appeal case. We will make the utmost use of the pre-hearing process and will provide a vigorous and creative defense of your interests during the hearing.

Call NOW to schedule the consultation!

Minnesota Business Lawyers: Applying for a Business License

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In many industries, obtaining a business license is one of the most significant prerequisites for doing business in Minnesota. Paradoxically, despite its importance, too many businesses resist involving Minnesota business lawyers in this process from the very beginning – at the stage of the business license application preparation. Instead, attorneys throughout Minnesota (including Minneapolis business attorneys and St. Paul business attorneys) are involved in the process only after the business license application is rejected by the relevant state agency.

There are two primary reasons for the late involvement of Minnesota business lawyers in the process. First, business owners believe themselves perfectly capable of filling-out a license application. Second, small businesses are always looking for a way to cut costs and think they are saving money by involving business lawyers only by the time of an administrative appeal hearing.

Both motivations are flawed. A business license application often involves much more than simply filling out the basic information and gathering the supporting materials (such as financial statements or criminal records). The key to a successful application is the ability to spot potential issues and fix the problems prior to the submission of the application to the government agency. It is true that Minnesota business owners are smart and energetic individuals perfectly capable of filling out an application. However, they often lack the necessary legal experience and training to identify potential problems and know how to fix them.

Second, it is much cheaper to involve an attorney at an early stage of the business license application process than to deal with the problems at an administrative appeal hearing. Prior to the submission of the application to the agency, the attorney should be able to review the application filled-out by the owner and all of the supporting materials, spot potential problems, and advise on how to fix these problems immediately. Even after the application is submitted and the relevant Minnesota government agency raises an objection, involving an attorney who may be able to negotiate the solution to the problem prior to the final agency determination may prove to be very cost-effective.

By the time the application is rejected, however, Minnesota business license appeal lawyers will have to deal with a prolonged process defending the business owner’s interests. Even worse, in many cases, the burden of proof may be on the initial applicant, which means, for example, that a business lawyer would have to prove that the government more likely than not committed an error of judgment (or some other legal theory).

In sum, litigation is almost always more expensive than the prophylactic measure of involving a Minnesota business license lawyer at an early stage of the business license application process. At the very latest (i.e. the last opportunity to save the application while lowering legal expenses), the business owners should involve Minnesota business lawyers at the time when they receive the first request for additional information from a relevant Minnesota government agency.

Sherayzen Law Office can help you at every stage of the business license application process, starting from the initial review of the application to dealing with the government agencies , handling the administrative appeal hearing, and litigating further appeals to the district court and higher appellate courts if necessary.

Call  to speak with an experienced Minnesota business license application lawyer!

Minnesota Unemployment Insurance Appeal Hearing: Top Five Preparation Strategies

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Minnesota Unemployment Insurance Appeal Hearing (“UI hearing”) is a serious legal event for many small- and mid-size businesses that may have far-reaching tax and employment law consequences for these businesses, especially when the hearing is about such a delicate and important issue as classification of workers as independent contractors. Yet too many business owners are completely ignorant of the rules and procedures of the UI hearings. Too often they think that it is enough to just show up and tell their story. As a consequence, these business owners often lose a case even when the facts seemed mostly favorable to the employer.

In this essay, I will list and discuss top five strategies that business owners should adopt in order to adequately prepare for their UI hearings.

1. Accept the Need to Prepare for the Hearing.

Too many business owners (and even some inexperienced attorneys) accept the wrong myth that the UI hearings are so straightforward that there is no need to prepare for them. It is very convenient for a busy business owner to believe that he needs not spend any time preparing for the hearing.

This is exactly the attitude that results in so many lost cases. Indeed the UI hearings are conducted in a manner less formal and more flexible than a district court trial. Yet, these are hearings conducted by an unemployment insurance judge, usually a lawyer with specialized knowledge in this area; there are rules and procedures that must be followed; there is a direct and cross-examination of witnesses; physical and testimonial evidence is presented; and there is a ruling by the judge that determines whether you lose or win.

If this were not enough, the UI hearing is the last opportunity for you to enter your evidence into the record of the proceedings. If you decide to appeal the unemployment insurance judge’s ruling, the Court of Appeal will almost always only consider the evidence on record for the UI hearing; you will not be able to enter new evidence into the record.

This is why your first strategy is to accept the reality of spending time, perhaps significant amount of time, on the preparation for the UI hearing.

2. Hire an Attorney.

There can be no downside to hiring a legal professional to represent you and help you properly prepare for the hearing. While you will know the facts (especially at the beginning of the representation) better than any outsider, your attorney should have the general legal knowledge about and specialized experience in the administrative appeal proceedings. Moreover, your attorney is likely to take advantage of the pre-hearing rules and procedures to better your case. Finally, even a business owner who has had experience in relevant areas of law will be no match for a lawyer’s deeper understanding of the law and procedure.

There is a notion that a cost-benefit analysis shows that an attorney just costs too much money for a business owner to spend on the unemployment insurance hearing. Usually, this analysis is wrong because it compares how much money you would spend on the hearing if you hire an attorney versus how much money you would spend on a hearing without one – the issue at stake is completely ignored in these calculations. The proper comparison would be between the importance of the issue to your business and the higher chance of winning the UI hearing with an attorney on the one side versus the costs of losing the UI hearing. Usually, if you deemed the issue important enough to file an appeal, this means that you assessed the cost of losing the UI hearing higher than the legal representation expenses necessary to properly prepare for the UI hearing.

3. Know and Be Able to State the Facts of Your Case.

There are two sides to this strategy. First, you need to know every relevant fact of your case: remember the exact dates and relevant events, construct a time-line of events, and know what the relevant documents say. Second, you should be able to state the facts of your case in court in a way that the judge understands and using the “verbiage” that clarifies your argument. For example, if the appeal is about classification of workers as independent contractors, you should use the word “contractor” and not “employee” to describe your workers. Your lawyer should educate you in the legal meaning and implications of each relevant term.

4. Submit Relevant Exhibits and Other Records into Evidence

It is almost impossible to over-estimate the importance of having good records and timely submitting them into evidence. Most cases are won on complete favorable documentation that supports a well-prepared testimony.

Your lawyer can help you identify the relevant records, present them in the most favorable manner and timely submit them into evidence. Remember that, pursuant to Minn. Rules pt. 3310.2912, the exhibits for a telephone hearing must be submitted no later than five calendar days prior to the hearing.

There is one more advantage to submitting your own records for the hearing. By the time of the hearing, there is usually already an adverse written report made by the UI auditors that supports their findings. Therefore, by entering your own exhibits into evidence (even better if it is supported by your lawyer’s written brief detailing the legal arguments), you are countering the already written evidence that supports the other side of the argument.

5. Learn the Hearing Etiquette

It is important that your behavior during the hearing leaves the impression of you as a law-abiding, responsible, and courteous human being. Knowing the hearing etiquette is crucial to creating this image. Your lawyer should be able to educate you about how to behave in front of the judge, listen to the testimony of the other side, and general rules of the court etiquette.
Conclusion

Obviously, these five factors described above do not constitute a conclusive list of strategies for a successful preparation and conduct of the UI hearing. There are many other important tactics that may be employed during the hearing. However, these fivw top strategies are designed to provide you with the most basic structure for how to move forward in your preparation for the Minnesota Unemployment Insurance Appeal Hearing.

Sherayzen Law Office has the necessary experience and knowledge to help you prepare for and conduct the UI hearing. We will lead you every step of the way and offer you a vigorous ethical representation during the hearing.

Call NOW to discuss your case with a Minnesota unemployment insurance business lawyer!

Business License Denial Appeals and Office of Administrative Hearings

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If your business license was denied by a government agency in Minnesota, you need to act immediately to secure an administrative appeals lawyer to analyze the facts of your case from a legal perspective. In almost all cases, a license denial by a government agency can be appealed for additional review. This right to appeal, however, usually has a definite time limitation. Most Minnesota government agencies give you as little as thirty (30) days to appeal the denial of your business license, and it is very rare to have more than sixty (60) days to appeal an administrative determination.

In Minnesota, most of the business license denial cases are appealed to the State of Minnesota Office of Administrative Hearings. The Office of Administrative Hearings is an independent agency which should conduct impartial hearings for other state agencies. Once you appeal your business license denial, you will become part of what is known as a “contested hearing” – basically, this means that there will be a trial-like hearing. An administrative law judge will preside over a hearing while both sides have an opportunity to present their evidence and cross-examine each other’s witnesses.

Indeed, even though this is supposed to be an administrative hearing with much more relaxed procedures than those adopted by the civil courts, the Office of Administrative Hearings follows a set of rules which partially adopt and/or resemble the Minnesota Rules of Civil Procedure. This means that a skilled lawyer may take full advantage of the prehearing motion practice to benefit his client’s case.

A major drawback of the contested hearings conducted by the Office of Administrative Hearings is the fact that, in most cases, an administrative law judge is only able to issue a recommendation which may be rejected or accepted by a government agency that originally denied the license. This means that, if the government agency persists in its denial and ignores a contrary ruling by an administrative judge, you will have to appeal the case further to the district court. This is not common, but it happens.

As you can see, the appeal of a business license denial is not an easy task and may require a detailed knowledge of laws and administrative procedures. This is why it is important to secure the help of a Minnesota administrative appeals business attorney as soon as possible.

Sherayzen Law Office has the necessary administrative appeals experience and knowledge of the rules and procedures of the Office of Administrative Hearings to mount an effective and vigorous representation of your interests.

Call NOW to talk with an experienced administrative appeals lawyer!