Owning your own business is part of the American dream. There are approximately 355,000 businesses registered in the State of Kentucky. No matter what kind of business you want to launch, you can expect some level of healthy competition.
Although you can tackle the paperwork required by the Secretary of State’s Office in Kentucky to form your business, it’s wise to consider hiring a skilled business law attorney who has experience in everything from business formation and operating agreements to contracts drafting and negotiation.
The attorneys at Bland & Birdwhistell, PLLC have worked with a number of clients to help get their businesses in Elizabethtown and throughout Kentucky off the ground. Our firm is committed to helping them build a solid foundation for their piece of the American dream.
What Steps Are Involved in Forming a Business?
There are several types of business structures you can use when forming a new business in the state of Kentucky. These various forms include a limited liability company (LLC), a sole proprietorship, a partnership, and a corporation. Most small businesses find that a limited liability company is a great fit for their needs. Forming an LLC may seem like a convoluted process, but when done correctly, it can protect your personal assets from litigation involving your business.
If you’re thinking about forming an LLC, there are five steps involved in the business formation process. These steps include:
Give It a Name. The business name must be unique in Kentucky and appear with the letters “LLC” or “L.L.C.” For example, Acme Auto, LLC. You can use the Kentucky Secretary of State’s online business search tool to make sure the name you want is not already in use. If you’re planning to have a website, you might also want to search the name on the internet to see if that domain is available — for example, AcmeAuto.com.
Choose a Registered Agent. The registered agent is the person designated to receive all official communication for the LLC. This could be you or another member of the LLC, your attorney, or a registered agent services company. The agent must be a resident of (or a company registered to do business in) the state of Kentucky. The registered agent must also have a physical street address other than a post office box.
File Articles of Organization. This requires completion of a form to be filed with the Secretary of State’s Office, accompanied by a $40 fee. The form requires the name and street address of the LLC and the registered agent, the primary business address, whether the LLC is managed by a member or a manager, the date the Articles take effect, the size and general nature of the business, and signatures of the organizer and registered agent.
Draft an Operating Agreement. The Operating Agreement is not filed with the Secretary of State; however, it is a vital document for any LLC with more than one member. It establishes the terms of investment, operations, member roles and responsibilities, and the division of profits for the LLC.
Obtain an Employer Identification Number (EIN). If the LLC has any employees or more than one member, it will need to have an EIN. EINs are issued by the IRS. If your LLC has only one member and no employees, you can use your Social Security Number for tax purposes.
Establishing a Strong Foundation For Business
The foundation of starting a business doesn’t end with filing an LLC. Depending on the nature of your business, you will need to create documents that are legally sound and enforceable. Those may include partnership agreements, non-compete and nondisclosure agreements, vendor or supplier contracts, or leases and other property agreements.
As you launch your business, individuals, contractors, suppliers, and other businesses will be asking you to sign legal documents over the course of conducting business. These documents are designed to serve their best interests, not yours. Having an experienced business law attorney on your side to review them will help ensure that your rights as a business owner are protected and your best interests are being served.
Potential Pitfalls When Forming a Business
There are some potentially serious pitfalls that you can run into when forming your own business without consulting with an experienced attorney. Some of those pitfalls include:
Choosing the wrong corporate structure;
Failing to protect your personal assets;
Failing to comply with tax laws, compliance, and filing requirements;
Drafting operating agreements and contracts that don’t provide legal protections;
Failing to coordinate business assets and partnerships with your own estate plans, marital and divorce agreements, and other life issues.
