For a Kentuckian who has been considering opening a business of any size or type in the Bluegrass State, the times are looking more prosperous. As the Kentucky Cabinet for Economic Development, a state agency, says, the “land of the thoroughbred” is a great place to do business.
The economic development agency provides several reasons why doing business in Kentucky can be a smart idea:
- Central national location
- Two major shipping hubs
- Third nationally in number of air cargo shipments
- Superior transportation network of interstate, highway, rail, barge and air transport
- Low business costs
- Tax incentives
- Low electrical rates
- Skilled workforce with access to education and training
- Small business loan availability
- Low cost of living and housing
- And more
With all the reasons commercial activity in Kentucky may be a wise choice, there are two important steps that need to be taken prior to making the decision to set up your new business. First, the entrepreneur should find an experienced Kentucky business law attorney to help with important decisions and to execute important legal documents.
Business entity selection
Second, the new business owner must consider which kind of business entity to choose for the new enterprise. The choice of business entity can have a huge impact on the bottom line and on business operations, including issues of management, control, liability and taxation.
Again, knowledgeable legal counsel can educate the new business owner about the legal entities available under Kentucky law and their pros and cons considering the particular goals of the business plan.
The simplest way to do business is to start a sole proprietorship. The sole proprietorship does not involve the creation of a separate legal entity. Basically, the individual proprietor owns the business assets, takes on business debt (even subjecting personal property to that risk), makes management decisions and declares business profits and losses on his or her own tax returns.
Another common business structure is the general partnership, an association of two or more people to carry on a business. While legal documents are not required to establish the partnership, most business law attorneys recommend that the partners enter into a partnership agreement setting out the terms of the partnership. Normally, partners share management responsibilities, profits and losses. Each partner has the power to enter into contracts on behalf of the partnership that bind each of the other partners individually and personally. Taxation is normally to the individual partners, rather than the partnership as an entity.
Of course, the corporate structure is another popular business form in which a separate legal entity is created that takes on management powers through its board of directors and officers, ownership by shareholders, and tax and business liability generally borne by the corporation itself, insulating directors and shareholders from personal responsibility.
In addition, other business entities are available in Kentucky such as limited partnerships, business trusts, franchises, cooperatives, nonprofit corporations, professional service corporations, limited liability companies and more.
Whichever business entity a business owner chooses, legal counsel will be needed to assist in organizational documents, licensing, contracts, business name filings, tax matters, commercial leases, real estate transactions, state and local legal filings, employment matters and much more.