By: Lucas W. Humble
Many individuals have a dream to operate their own business. However, they are unaware of the steps required to start the business, as well as the considerations that become relevant as the business grows. This article is intended to provide a general summary of considerations for owners of both start-up and growing businesses.
When starting a business, the first step is to determine what type of business it will be. Our clients often approach us and advise that they have a “partnership” or “d/b/a” without knowing what these legal phrases actually mean. Very often, the business structure that is being used is not serving the client’s best interests and may be failing to take advantage of the limited liability protections Kentucky law provides. A business attorney can advise regarding what type of entity should be used and can assist in converting an existing business to the appropriate type of entity, if necessary.
Another important question for start-up business entities is how the business will operate. Will it be manager-managed or member-managed? How will ties be broken? And what will happen if the owners decide they no longer want to continue operating the business? Documents such as operating agreements (for limited liability companies) and bylaws and shareholder’s agreements (for corporations) allow business owners to address these issues and curtail potential pitfalls before they ever arise.
Along with organizing the business entity, there are various other filings that should be made concurrently with the organization of the business. Such filings include applying for an employer identification number, registering the business with appropriate taxing authorities, and obtaining necessary permits and licenses on a federal, state and local level. Completing the necessary filings – and keeping those filings up to date – will help a business owner avoid potentially time-consuming and costly corrective measures down the road.
In addition to these organizational considerations, various other issues might be relevant, depending on the nature of the business. A business owner that simply signs a lease or contract without having an attorney review it runs the risk of locking themselves into an unfavorable situation for years to come. Often the cost of retaining an attorney to draft or review documents is a fraction of the expense that may be incurred to unwind a bad lease or contract, if it can be unwound at all.
As businesses grow, additional considerations become relevant. Documents such as an employee handbook can help protect a growing business from discrimination claims and assist in giving employees guidance regarding what is expected from them in fulfilling their employment obligations. Additionally, business owners often wonder how best to address the issue of troublesome employees and whether they run the risk of a lawsuit by terminating the employment relationship. There are a litany of day-to-day issues for which an experienced attorney can offer assistance.
Our attorneys at Bell, Orr, Ayers & Moore, collectively have decades of experience advising owners of both new and established businesses. We are well-equipped to provide the guidance necessary to ensure that your business is legally availing itself of the benefits and protections available under Kentucky law.