Horse Law: Legal Entities For Horse-Related Businesses and Protection Against Personal Liability
You risk your personal assets unless your horse-related business, no matter how small, is organized as a separate legal entity. If you fail to formally structure your business as a separate legal entity, a sole proprietorship or a general partnership will be presumed and your personal assets will be at risk.
Every horse-related business, no matter how small, should be organized as one of the following legal entities:
Corporation (ch. 351, RSMo)
Limited Liability Company (LLC or LC) (ch. 347, RSMo)
Limited Liability Partnership (LLP) (ch. 359, RSMo)
As preliminary matters, you should register the name of your business with the Missouri Secretary of State (MOSOS). In order to find out if your desired business name is available, you should search the MOSOS online database. You should also obtain any necessary business licenses from your local government, your city or county. If you intend to sell any tangible goods at retail, you are required to collect sales tax, and must first obtain a sales tax number from the State of Missouri (Missouri Department of Revenue or MDOR), Form 2643. If your business will only buy or sell at wholesale, you may be eligible for a Sales/Use Tax Exemption, MDOR Form 149. You are generally required to get a Federal Identification Number (EIN) from the Internal Revenue Service, IRS (www.irs.gov ).
If your business is located out-of-state, but you do business in Missouri (or vice-versa), your business must be authorized in Missouri. (For example, I obtain services for my horses from across the river in Illinois. Not very far, but in another state.) Missouri law provides for criminal penalties for foreign businesses that do business in Missouri without a COA (Certificate of Authority) from the Missouri Secretary of State. There are also criminal penalties for doing business in Missouri under a fictitious name that has not been registered with the Missouri Secretary of State.
If you have employees:
You must obtain an EIN.
You must obtain a Missouri Employer withholding number (MDOR Form 2643).
You must register for and contribute to the Missouri unemployment compensation fund. (Missouri Department of Labor & Industrial Relations)
You must arrange for payment of workers compensation insurance (Missouri Division of Workers Compensation).
For each employee you must first:
Have the employee complete a W-4 for the calculation of federal and state income taxes.
Complete an I-9 (U.S. Citizen and Immigration Services).
For each payroll, as an employer you must:
Withhold federal income tax based on the employee’s federal W-4 form.
Withhold state income tax based on the employees W-4.
Withhold 6.2% of the employee’s salary for social security taxes.
Withhold 1.45% of the employee’s salary for Medicare taxes.
File reports with the government quarterly and annually.
Issue each employee a W-2 at the end of each year.
(See, IRS Publication 15, Employer’s Tax Guide.)
As an employer, you should also review OSHA guidelines (probably will not apply), and review workplace safety procedures with each employee.
As an employer, I recommend that you consult with a bank, an insurance agent relating to various types of commercial insurance, an accountant, and a lawyer. You should avail yourself of business services offered by the Missouri Secretary of State, the Missouri Department of Economic Development, and the Missouri Business Portal at www.business.mo.gov, and the federal Small Business Administration. The University of Missouri also offers a Business Extension Business Development Program. Many other educational institutions offer similar business development services.
Mary B. Schultz is a partner in the law firm of Schultz &Associates LLP, www.sl-lawyers.com, 640 Cepi Dr., Suite A; Chesterfield (St. Louis), Missouri 63005, (636) 537-4645. Mary B. Schultz graduated from Northwestern University Law School more than 30 years ago, in 1985, and has been practicing primarily in Missouri ever since. Mary B. Schultz is admitted to practice in Missouri and Illinois.
This column is intended to provide general information only. It does not constitute, nor should be relied upon, as legal advice or a legal opinion relating to specific facts or circumstances.
Reproduction of all or any part of this column is permitted, provided credit is given to Mary B. Schultz.