In Kentucky, you have several options for setting up a business. The first and most basic way to run a business is as a sole proprietorship. Sole proprietorships are not separate legal entities and provide no legal protection to you, and therefore, we do not recommend them. If you are in business with another person, you can set up a partnership. There are many varieties of partnership and the appropriate type will depend on your circumstances. A partnership agreement is recommended to outline the rights and obligations of the partners. General partnerships can, but are not required to be, registered with the Secretary of State. All other forms of partnerships must be registered.

Ordinarily, we recommend setting up either a limited liability company (“LLC”) or a corporation. Each of these entities is a separate legal entity and each provides liability protection. Both are created by registering with the Secretary of State. To create an LLC, one must file Articles of Organization. To create a corporation, one must file Articles of Incorporation. There are advantages and disadvantages of each type of entity. Each of these entities can be owned by a single owner or multiple owners. An operating agreement sets forth the obligations and rights of members of an LLC, while bylaws typically describe how a corporation is to be run. Shareholders agreements are often used to reflect rights and obligations among shareholders.

We have experience in creating all of these entities and would be glad to assist you.

Lawyers cost money, obviously, but they provide expertise. A good corporate lawyer will help you think through and resolve in advance issues you may face in your business. We find that well prepared organizational documents and agreements (e.g. shareholders’ agreements, operating agreements) can save clients money in the long run. How? For instance, a well drafted operating agreement should outline the rights and responsibilities of an LLC’s members, thereby forestalling disputes between the parties. Ambiguity breeds litigation. Failure to have organizational documents breeds even more. While we can assist clients who may not have had legal assistance in preparing their organizational documents, having good documents at the outset of business formation is much, much cheaper, and we would prefer to assist with that!