Dispelling Business Formation Myths
Sept. 30, 2022
Starting a new business in Kentucky often presents several unique challenges. You need to choose the right business structure that best meets your unique needs and goals, draft contracts, and apply for licenses and permits. Likewise, it is important that you establish your business on a solid legal footing to mitigate possible disputes, liability, and pitfalls. An experienced Kentucky business law attorney can enlighten you about the business formation process and help clarify misconceptions.
At Caleb Bland Law, PLLC, we have the resources to guide clients in business formation-related matters. Our knowledgeable lawyers are available to discuss your unique situation, help address your questions and concerns, and provide you with the legal tools you need to start off your company on the right foundation. We're proud to represent business owners throughout Elizabethtown, Louisville, Shepherdsville, Grayson County, and Jefferson County, Kentucky.
Common Misconceptions When Starting a Business
There are lots of collective popular opinions and false assumptions about starting a new business in Kentucky. Here are some of the most common misconceptions about business formation and an explanation of what makes them false.
Myth #1: Choosing a business entity is only important for large businesses.
The business entity you choose determines the legal structure of your company and will have a massive impact on various aspects of your business. In addition, your business structure will determine your ability to raise funds and the amount of business and personal assets that are exposed to liability.
A Limited Liability Company (LLC) or corporation offers greater protections against personal liability. A corporation can also raise operating funds by selling shares. Conversely, partnerships and sole proprietorships provide little liability protection and may have to raise capital through personal savings.
In general, choosing a business entity has little to do with the size of your company. Whether you are a large, medium, or small business, it is important that you choose a business structure.
Myth #2: You have to be a U.S. citizen to own/operate an LLC.
This is not true. Forming or operating an LLC or corporation in Kentucky is possible, even as a non-resident. There are no restrictions in the Bluegrass State that prevent foreign companies or non-U.S. residents from doing business. However, it is important that you follow the established procedures and guidelines to form your LLC.
Myth #3: You won't have to pay taxes if you form an LLC in another state.
It can be tempting to establish your Limited Liability Company in a "tax haven" state. Nevertheless, you must still fulfill your tax obligations in the state where your LLC operates. Even if your business is physically located in Wyoming, but you carry out business operations and have employees in Kentucky, you must pay taxes on your Kentucky-based transactions. Likewise, you must honor Kentucky employment laws and other applicable rules in the state.
Myth #4: A sole proprietor can't have employees.
This is another common misconception. In a sole proprietorship, the business owner is allowed to hire workers. In fact, there are no restrictions on the number of employees a sole proprietor can retain. Being the sole proprietor or employer, they will oversee day-to-day business operations, coordinate the employees, and file taxes.
Myth #5: LLCs cannot be publicly traded.
Technically, it is impossible to trade a limited liability company (LLC) publicly. An LLC cannot issue stock like C or S Corporation. Fortunately, the tax structures of LLCs are quite flexible, which makes it possible to file taxes as a partnership. Also, due to this feature, it is possible to sell a portion of the limited liability company on a securities exchange or to friends and family members.
Myth #6: You don't need an attorney to help with business formation.
Kentucky business formation involves a lot of complex procedures. These include choosing a business entity, business name, and registering your business. Additionally, you will have to apply for licenses and permits and federal and state tax identification numbers.
It is advisable that you hire an experienced business formation attorney to guide you through the business formation process and handle all the necessary documentation and legal legwork on your behalf. An attorney can strategize an effective approach to protect you from personal liability and mitigate losses.
Knowledgeable Business Advocacy
According to estimates from the Small Business Association (SBA), more than 627,000 new businesses open in the United States every year. When forming a new business, your choice of structure or entity—corporation, partnership, sole proprietorship, or LLC—can have a massive impact on various aspects of the business. Therefore, it is important that you work with a knowledgeable business law attorney.
At Caleb Bland Law, PLLC, our attorney has devoted his career to offering experienced legal services and guiding clients through the complexities of business formation. As your legal counsel, our team can evaluate your personal goals and aspirations and help you select the ideal structure for your business. In addition, we will help put all necessary documentation and legal protections in place to safeguard you and your business from possible damages and set your business up for long-term success.
Contact Caleb Bland Law, PLLC, today to schedule a simple consultation with a trusted business formation lawyer. Our team will work intelligently to ensure the seamless launch of your business and help cover every legal base at different phases of your venture. We proudly serve clients throughout Kentucky, including Elizabethtown, Louisville, Bardstown, Shepherdsville, Grayson County, Breckinridge County, and Jefferson County.