On its face, it might seem easy to create a business in Kentucky. But the fact is that there are many risks lurking in the shadows, any one of which can derail your business, costing you time, money and peace of mind. Therefore, before diving into your entrepreneurial efforts, you need to fully consider which business structure is right for you. As you’re doing so, you’ll certainly want to contemplate the benefits of each structure option, but you’ll also want to think about what sorts of pitfalls exist out there so that you can work to avoid them.
So, in this post we want to look at some common issues with business formation and compliance that could pose a risk to your business. Hopefully by the end you’ll have a better idea of how to successfully navigate the creation of your business in a way that protects both your short and long-term interests.
Avoid these common business formation and compliance pitfalls
There are several issues to address when you create a business. Here are some of the most common that you’ll want to be sure to avoid as you move forward with your business endeavor:
- Badly written agreements and operating documents: Whether you’re creating a partnership or a corporation, you need certain responsibilities and obligations reduced to writing. When you create documents like a partnership agreement and corporate bylaws, you have to be as clear as possible. If your agreement is missing terms or if the language used is vague or ambiguous, then you’re setting yourself up for conflict later. So, make sure you’re thorough in your written documents and that you leave no room for interpretation.
- Choosing the wrong structure: There are multiple business structure types out there that you can utilize. Each one has its advantages and disadvantages. If you choose the wrong one, then you could lose control of your business or be susceptible to more liability than you can handle. Be sure to do your research so that you can settle on a business structure that’s right for you and that can give you what you want out of your business operations.
- Not understanding applicable laws: Depending on the business structure that you choose, you and your business will have specific laws to abide by moving forward. These can include laws on taxation and corporate reporting. If you fail to remain in compliance with these laws, then you can face penalties that become harmful to your business and its reputation. Without strict compliance, you could also leave yourself susceptible to additional liability.
- Inadequately preparing your finances: It certainly takes money to create your business, so you’ll need to be adept at financial planning. You’ll need resources to secure a commercial space, hire talent and purchase equipment. But you’ll also want enough money on hand to be able to cover emergencies and stay afloat when business isn’t as strongly as you’d like.
Thorough preparation can help you avoid costly business formation mistakes
It can be tough to think through everything you need to do to build an effective business. Yet, if you overlook something or you make a misstep, then you could find yourself at a significant disadvantage moving forward. That’s why now is the time to put in the legwork to thoroughly prepare yourself for the road ahead. If you think you could benefit from some assistance in that regard, then now is the time to educate yourself as much as possible and to discuss the matter with your attorney. Hopefully then you can move through the process confidently and competently while able to make fully informed decisions that protect your business interests.