Starting a new venture, whether it is a tech startup or e-commerce store selling homemade goods, you will need to make sure to protect your business. from picking a business form to adopting bylaws or operating agreements that determine how your company will work, laying the right legal framework at the outset is critical.
Choosing A Business Structure
Choosing the appropriate business structure that best fits you or your team’s vision for your venture is essential. There are a number of business forms to choose from, all with different liability and tax consequences. Under Kentucky law, individuals may choose to form a limited liability company, C corporation, S corporation, or a cooperative company just to name a few. Understanding the ins and outs of the laws governing each of these types of structures can help you pick the one that best fits your needs.
Multi-member Operating Agreement
If you are seeking to open a limited liability company with one or more members, an operating agreement is absolutely essential. I find individuals often come to me seeking to divide up ownership in a company equally among the owners, but this can lead to a deadlock when members can’t agree. Operating agreements help avoid these types of problems from arising and can act as a roadmap in helping resolve them when they do occur. Operating agreements outline how decisions will be made in the company and how profits will be divided among owners. If you are planning to open a company with other individuals, you can head off future problems with an operating agreement. Check out my blogs on what goes into an operating agreement here and here.