Business is booming in Kentucky. The U.S. Small Business Association (SBA) reports that small businesses represent 96.7 percent of employers in the state and employ 47.8 percent of those working in the private sector. The Region 4 Regional Administrator of the SBA, who covers Kentucky along with Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee, reports Kentucky has over 339,700 small businesses or self employed individuals.
Considering starting a small business in Kentucky?
Entrepreneurs move forward with a business for a variety of reasons. Some enjoy the flexibility of setting one’s own schedule and the independence to pursue the full range of one’s professional strengths as well as potential tax advantages.
Starting a small business comes with risks, but those risks can be mitigated with careful planning. Part of this planning process involves determining the best way to incorporate a business. Those considering starting a small business in Kentucky are likely considering establishing the business as either a
sole proprietorship or an LLC (limited liability company).
What is the difference between a sole proprietorship and an LLC?
It is important to carefully review the various business formations that are available before moving forward with a designation. The choice will impact liability protection as well as how the business is taxed. Here are some key differences between a sole proprietorship and an LLC:
- Sole proprietorship. This formation is likely the easiest and cheapest. No paperwork is required; an entrepreneur simply needs the required business licenses and permits. The entrepreneur and business are viewed as one entity, leaving the entrepreneur liable for any debts incurred by the business.
- Limited liability company. The primary benefit of an LLC is in the name – limited liability. Simply put, this type of formation allows an entrepreneur protection against liability by setting apart the business as its own entity. Any lawsuit or debt against the business is generally limited to the assets of the company, providing a type of shield to the entrepreneur’s personal assets.
Forming an LLC requires paperwork, such as choosing a name, registering the business with the state and getting a tax number.
What is the benefit of an attorney?
Those who are considering going into business on their own are wise to seek the counsel of an experienced business contract lawyer. This legal professional can help better ensure the future success of the endeavor by guiding an entrepreneur through the formation process, reviewing the benefits and risks of using a sole proprietorship, LLC, limited partnership (LP), limited liability partnership (LLP) or corporation. In addition, a business formation lawyer can also assist in future needs, including structuring contracts, business succession planning and any potential litigation issues that could arise.