Notice from Minnesota Secretary of State regarding pre-2015 limited liability companies in Minnesota

From the MN Secretary of State

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NOTICE: Owners of pre-2015 limited liability companies in Minnesota: Upcoming changes to the law will affect your business.

The Office of the Secretary of State (OSS) wants to remind all limited liability companies formed prior to August 1, 2015 that they will become subject to a new law passed by the 2015 Legislature, Chapter 322C, beginning January 1, 2018.

It is recommended that owners contact their attorneys, accountants or other business advisors well before the end of the calendar year to review the impact of the new law.

The new law pertaining to LLCs may bring significant changes to governance and management, operating agreements, and other aspects of your business.

All owners of an interest in an LLC should be aware of the impending law change, and should review the governing documents of the LLC to determine whether any adjustments are necessary. The law does provide certain provisions to smooth the transition to the new law. For further information on the transition, click here to see an article provided to the Office of the Secretary of State by the LLC and Partnership Committee of the Business Law Section of the Minnesota State Bar Association.

If you decide you need to amend your articles of organization, please use the amendment form here.

Again, it is recommended that owners contact their attorneys, accountants or other business advisors to review the impact of the new law before the end of the year.

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Who can Sue when a Freelancer is Discriminated Against?


Freelancers take note: Under Minnesota Law if you have formed an LLC or other business entity and you experience discrimination at the hands of one of your clients, as an individual you cannot make a claim under Minnesota’s Human Rights Act (Minn. Stat. § 363A.17 (2008)), which authorizes parties to a business contract to sue for business discrimination in the performance of that contract.

The Minnesota Supreme Court reasoned in Krueger v. Zeman Construction Co. that the focus of the statue was the relationship of the parties, not on the individual subject to the discrimination. As a result, the court argued that an individual employee, even one that is a single member owner of an LLC, is not the intended beneficiary of the statute and therefore they cannot file a lawsuit in their individual capacity.

While I generally believe freelancers should consider business entities like LLC over that of sole proprietorship, this case provides a stark example of how there are some disadvantages to forming a separate legal entity and an evaluation of the advantages and disadvantages should always be considered.

Bringing Conciliation Court Cases

Conciliation court was created to allow citizens to bring legal actions for smaller claims that would normally be difficult to bring due to the expense and knowledge needed to bring a suit in district court. Generally, these courts allow individuals to bring claims of up to $7,500 ($4,000 in cases involving commercial consumer credit transaction), or order the return of property. However, these claims may not include claims for title to real estate, libel or slander, class actions or medical malpractice.

Additionally, since these are state courts, they can not hear matters of federal law such as disputes over copyright ownership. They can, however, hear cases involving breach of contract that involves copyrighted material. This means that the conciliation court can not hear a case involving ownership of a copyright, but it can hear a case involving whether a party has paid what they owe for the creation of copyrighted material.

An important thing to remember before you file a conciliation court matter is whether you will be able to collect anything in the event that you win your case. If a person has no money, collecting the judgment may be next to impossible. However, keep in mind that judgments are good for a period of ten years.

In the event you do decide to sue and you win the court will not automatically collect the money from the defendant. In order to collect your money you will be required to get a writ of execution from the court. A writ will not be issued until after the time for the defendant to appeal has passed and until certain documents are provided to the court.

Once the writ has been issued, plaintiffs need to locate property to be seized and inform the sheriff’s office where the property can be found so that they can carry out the writ. Defendants can be forced to disclose assets when a plaintiff files an order for disclosure. This process will take approximately thirty days. In the event that a defendant has been sued by other people, the sheriff will first execute writs on behalf of the prior plaintiffs.

Additional information on the conciliation court process can be obtained from your local county court office and at http://www.mncourts.gov/.

Election Judge

I had the fortune to serve as an election judge last Tuesday. Even though the day is long (16 plus hours), performing that service is one that I enjoy every time I do it. Not only is having the opportunity to serve the community a positive experience, but having the opportunity to see my neighbors come through the door to exercise their civic voice is a joy that I can recommend to everyone. This year was no exception and in many ways it was even more enjoyable as the number of first time voters was high.

In many ways the outcome here in Minnesota is illustrative of the importance of exercising that civic voice. The presidential race was one in which, through the power of many first time voters, an “improbable” candidate was elected and a milestone in our nations history has been reached – regardless of your opinion of the outcome, there can be no denying that this election was different.

In contrast, even though the presidential election was decisive in Minnesota, the race for the Senate remains hinged on a scant few hundred votes. I mention this, because this result also illustrates that while your vote is often just one of many and it is easy to feel that it does not matter, the closeness of this election highlights that if just a small number of people can have an impact.

Non-compete is based on customers, not location.

While worker non-competes have are generally construed against the employer, the standard of enforceability in the sale of a business in more liberally interpreted in favor of the party seeking to enforce, as it is focused on whether the restriction is reasonable to protect the goodwill of the business that was sold.

When selling his optometry business, Jay Peterson agreed not to “participate, compete or be engaged in the business of optical goods . . . within a five-mile radius of . . .” the location of his former business. After a dispute arose concerning the terms of the sale, Peterson opened a new practice ten miles away, which would have been fine except for the fact that he then took out advertising in the newspaper located in his old town encouraging clients to come and see him at the new location. In February, the Minnesota Appellate court ruled that the Peterson could be prevented from placing those advertisements even though the business itself was outside of the designated geographic area. Interestingly, the court noted that while they felt a limited restriction was appropriate, it should not be seen as placing a general ban on advertising that may have incidental exposure to the geographic area. In relevant part the court noted –

. . .the Court will not restrain publications with large circulation areas that happen to enter the five mile area (e.g. Minneapolis Star and Tribune). We agree with the district court’s reasoning. Advertising in the Yellow Pages and the Internet, which have large circulation areas that only incidentally enter the restricted geographic areas, therefore, would not be prohibited by the non-compete agreement. Rather, the prohibition is limited to advertisements “specifically targeted” at persons in the restricted geographic areas.

Sealock v. Petersen, No. A06-2479 (Minn. App. 2/5/2008) (Minn. App., 2008).

This case provides a nice illustration of how you should look at the intent of the agreement to not solicit customers, rather than trying to circumvent the intent based on the literal geography of the agreement. However, in this age of mass circulation, this decision highlights a distinction that the court is willing to make between specifically targeted marketing efforts and marketing nets cast by much broader means.