Unjust Enrichment Claim Not a Viable Alternative to Piercing Corporate Veil
The members of a limited liability company are protected from personal liability to the company’s creditors absent the elements necessary to pierce the corporate veil. In Langford Tool & Drill Co., v. The 401 Group, LLC, et al., A14-0507 (Minn. Ct. App. Jan. 12, 2015), the Minnesota Court of Appeals reversed a Hennepin County District […]
Breaking the Bank for a Minority Shareholder Buyout
In Lewis v. Borchert, A14-0379, 2015 WL 133992 (Minn. Ct. App. Jan. 12, 2015), the Minnesota Court of Appeals affirmed a Le Sueur County District Court ruling that two shareholders acted in bad faith when they refused to buy out a minority shareholder’s interest in one company unless he agreed to sell his interest in […]
The Trouble with Equality: 50-50 “Partnerships” and the Dangers of Impasse
One of the most difficult issues facing business founders is determining how to apportion ownership interests in a new entity. In an effort to keep things cordial, entrepreneurs often elect an equal ownership split. Unfortunately, a decision to make ownership percentages equal can lead to disputes among the business owners, some of which may emerge […]
Stock Transfer to Spouse to Dilute Stock Levied Against by Creditors Violated Minnesota Uniform Fraudulent Transfer Act
The Minnesota Court of Appeals recently affirmed a Ramsey County District Court ruling that a corporate director violated the Minnesota Uniform Fraudulent Transfer Act (“MUFTA”), Minn. Stat. §§ 513.41-.51, when he directed a closely-held corporation to sell newly-authorized company stock to his spouse. The result of the sale was a dilution in the value of […]
Annual Business Renewals Will Prevent Administrative Dissolution by Secretary of State
In Minnesota, corporations and limited liability companies must meet annual renewal requirements administered by the Minnesota Secretary of State or risk administrative dissolution. If an entity fails to file its annual business renewal, the Secretary of State will promptly file a certificate of administrative dissolution. While this dissolution may not be fatal, it can hinder […]
How to Avoid Exposure to the 3.8% Passive Investor Tax
Effective January 1, 2013, Section 1411 of the Internal Revenue Code imposes a 3.8% income tax (“Passive Investor Tax”) on investors who do not materially participate in the operations of a partnership or S Corporation. The Passive Investor Tax applies to any individual making over $200,000 of net investment income in a tax year, or […]
Governor Dayton Approves Minnesota Adoption of Revised Uniform Limited Liability Company Act
On April 11, 2014, Minnesota Governor Mark Dayton signed into law the Minnesota Revised Uniform Limited Liability Company Act (“Revised LLC Act”). Minnesota is the tenth state to adopt the Revised LLC Act. The adoption of the Revised LLC Act brings Minnesota limited liability company law more in line with the laws of Delaware and […]
Even in Egregious Cases, “Piercing the Corporate Veil” Difficult at Summary Judgment Stage
A recent Minnesota case demonstrates the difficulty of holding corporate officers and directors liable for the debts of the corporation. In Corporate Commission of the Mille Lacs Band of Ojibwe Indians v. Money Centers of America, Inc., No. 12-1015 (D. Minn. Feb. 18, 2014), the Minnesota federal district court, applying Delaware law, analyzed the standards […]
Minnesota Non-Compete Agreement Declared Unenforceable and Ineligible for “Blue-Pencil”
In Gavaras v. Greenspring Media, LLC, 994 F.Supp.2d 1006 (D. Minn. 2014), the United States District Court for the District of Minnesota issued a declaratory judgment finding a non-compete agreement unenforceable because its terms were unclear, vague, overly broad and incomplete. The court also declined to apply the “blue-pencil doctrine” to make the non-compete agreement […]
Court Holds That Directors Owe Fiduciary Duties to Creditors of Insolvent Corporation
The Minnesota Court of Appeals affirmed a Ramsey County District Court ruling that a corporate director violated the Minnesota Uniform Fraudulent Transfer Act (“MUFTA”) when she transferred proceeds from the sale of real estate to herself as a judgment lien holder, instead of satisfying corporate creditor obligations. In Alerus Financial, Nat. Ass’n v. Martin Holdings, […]