By Linda Thomas, Wednesday, February 2nd, 2011 7:00 AM CST
“STARTING A BUSINESS? CHOOSE BOWLING GREEN!”
Looking to start a business? If so, you could not find a city more business friendly than Bowling Green!
To begin the journey that will make your dream into reality, you should seek the advice of a local business attorney. You want to be prepared for the difficulties which start up will bring; and protect your personal assets from loss if things don’t go as you hope.
Most local business attorneys will be happy to give you a low cost or free initial consultation. Kentucky recognizes multiple types of businesses–sole proprietorships, partnerships, corporations and limited liability companies—but only corporations and limited liability companies will afford protection for your personal assets. With the sole proprietorship, your business is you, and legal liabilities are yours. With a partnership, each partner individually shares liability.
Corporations and limited liability companies (“LLCs”) are entities which are separate from you personally; and as such, can shield your personal assets from liabilities if properly formed and maintained. Corporations have shareholders and Boards of Directors; LLCs have members who may also be managers, and instead of share certificates, ownership of LLCs is evidenced by non-certificated percentages of ownership or membership interests.
Corporations are an older form of legal entity, for which a large body of law has developed; LLCs have a smaller body of law because they are relatively new in Kentucky. Corporations are required to have at least annual written minutes of their Boards of Directors and shareholders; however, these are not required for LLCs. Both corporations and LLCs can act by written “Consents” which memorialize actions agreed to by members or corporate Directors and shareholders shown by their signatures on the consent. Financial institutions require a Consent empowering an officer or member to sign documents in order to make a loan to a business.
Both corporations and LLCs register with the Kentucky Secretary of State; and must have names which are distinguishable from names already in use in the Secretary’s database. Both entities must file an annual report which names the entity’s agent for service of process (the person who receives the complaint if the entity is sued), and identifies corporate officers or LLC management. The filing fee for the corporate or LLC annual report is $15.00; and annual reports must be filed by June 30 of each year. Failure to file a report will result in dissolution of your entity, and an expensive reinstatement process.
Tax wise, both corporations and LLCs can be structured in a variety of ways, including without limitation the entity filing separate tax returns and providing you individually a K-1; or “Subchapter S” so that the entity’s income and losses are shown on your individual tax return. Your business attorney will consult with your accountant to assist you to choose the form of entity which is best for you as a start up business. The taxation of the entity does not affect its ability to shield your personal assets from liability. The tax structure can be changed over time as your business needs change.
Stay tuned for more information on starting your business. You could not choose a friendlier place to begin!
This article was submitted by Linda B. Thomas, local business attorney and owner of Smartcounsel PSC, a business and real property law firm. Please visit our website at www.smartcounsel.biz.