KY Business Formation and Corporate Documents
Lexington Corporate Documents Lawyers
When you decide to start your own business, you are becoming part of an amazing history championing the American dream.
Small businesses in the U.S. drive the economy by being major employers, job creators, payroll funders and product exporters. Perhaps the most important issue that entrepreneurs must decide upon is what type of business structure will best suit their needs – and the Fayette County business lawyers at Bunch & Brock can help.
We have over 35 years of experience counseling Kentuckians who are working to transform their business visions into reality. We are dedicated to helping those who are taking the exciting first steps of forming a business, and we take the time to fully understand your situation and discuss your options. We encourage you to contact our office by calling 859-254-5522 or filling out this online form.
Types of Business Structures
There are four major types of business formation. Each one has its advantages and disadvantages that must be carefully weighed to determine which is best for your situation.
Sole Proprietorships are the simplest kind of business entity. They have only one owner, minimal start-up requirements, and less government involvement than other types. The fact that the law sees no distinction between the individual and the business can be both good (income is taxed once) and bad (personal assets can be jeopardized if the business has financial problems).
In a Partnership, two or more people or businesses agree to operate a business together. Partnerships are fairly simple and inexpensive to establish. While it can be beneficial to share responsibility for raising capital and managing operations, sharing can also be detrimental – one partner’s financial or legal issues can cause problems for the whole business.
Corporations are the most flexible types of businesses, although they have a high level of accountability and government oversight. Corporations are state-chartered, have their own legal standing and limit their owners’ liability. However, income is subject to taxation as both personal and business revenue (unless the owners elect to be treated as a Subchapter S corporation), and ownership can be transferred through the sale of stock or conveyance of a controlling interest.
Limited Liability Companies (LLC) combine the limited liability features of a corporation with the tax efficiencies and operational flexibility of a partnership. They are not obligated to hold annual meetings or record minutes of other meetings. There is no corporate tax return to file, and owners do not have to be U.S. citizens. However, LLCs cannot engage in corporate income splitting to lower tax liability and cannot issue stock.
To form any of the business models mentioned above, you must choose an original name, and you must file the necessary licenses and permits (which vary by industry, state and locality). You do not have to take any additional formal action to establish a sole proprietorship. You must register your business with the Kentucky Secretary of State to form a partnership.
A corporation officially exists as soon as you file its articles of incorporation with the Kentucky Secretary of State, unless the articles specify a later date. Filing requires a fee.
The articles of incorporation must include:
- Name of the corporation
- Mailing address of the corporation’s principal office
- Stock structure
- Name and address of corporation’s registered agent
- Names and addresses of incorporators
- One or more incorporator signatures.
Although bylaws are not filed with the Secretary of State, they must be adopted by the directors or incorporators. Bylaws are drafted to guide the directors, officers and shareholders on how the corporation is structured, how meetings are held and how votes are taken. Bylaws may include any provisions for managing the corporation’s business and regulating its affairs, but cannot include anything that is inconsistent with the law or the articles of incorporation. Bylaws should be reviewed periodically to ensure they are meeting the corporation’s needs.
To form an LLC, you must file articles of organization with the Kentucky Secretary of State and pay a filing fee. The articles of organization must include:
- LLC name and mailing address
- Name, address and dated signature of registered agent
- Type of management, i.e., member-managed or manager-managed
- Delayed effective date, if applicable
- Organizer’s name, title and dated signature.
An LLC should also have a limited liability operating agreement among its members, describing how the company will carry out its business obligations. Operating agreements govern such critical items as the roles of each member, voting rights, who manages the LLC, how members are admitted or removed, dissolution of the LLC and procedures for amending the LLC operating agreement itself. Operating agreements should be reviewed every so often to make sure no revisions are necessary.
Forming a Business Requires Legal Guidance
Anyone who has ever contemplated setting up a business was likely overwhelmed by the vast number of decisions that must be made. The Lexington business lawyers at Bunch & Brock are committed to providing each of our clients with a high level of personal service, and we will walk you through each of the steps that must be taken. We have decades of experience in successfully navigating the various stages of business development, and we can help you. To schedule an initial consultation, please call 859-254-5522 or fill out this online form.