The answer to this question is as unique as the business you intend to start.
While you aren’t legally required to have an attorney to start a business in Kansas, it’s often wise to have one. As a rule of thumb, the more complex your business, the better it is to have an experienced business attorney’s help.
What legal structure will your new business have?
Whether you need an attorney depends in large part on the type and structure of Kansas business you’re starting. Let’s look at some of the common business structures
and their legal considerations.
If you’re forming a Sole Proprietorship
A Sole Proprietorship is the simplest business structure; there is no registration to file with the State of Kansas to set it up. If you provide a product or service to customers, don’t have any business partners, and haven’t set up a separate legal entity for your business, you’re automatically a Sole Proprietor. Depending on the nature of your business, you may need a local business license.
In most cases, you don’t need an attorney when starting a Sole Proprietorship. However, there are exceptions to consider.
Under a Sole Proprietorship in Kansas, there is no difference between personal and business liability. You are personally liable for any debt or damages the business incurs. That could put your savings, car or other personal assets at risk if something goes wrong.
Depending on the nature of your business and the risks that accompany it, it may be prudent to consult with an attorney about your liability. For example, if you’re starting a pet sitting business in your home, an attorney could help you understand your potential liability if a pet were injured in your care, and assist you with liability releases and other solutions. You may be better off with a different business organization to protect your personal assets.
If you’re forming a Partnership
There are three types of Partnerships under Kansas law: General, Limited and Limited Liability. The latter two are advanced options and usually involve an attorney for setup.
A General Partnership is common for startups where, for example, two friends want to start a restaurant together. As with a Sole Proprietorship, you are personally liable for any business debt or damages under a General Partnership, so it’s smart to have an attorney help you analyze your potential exposure.
If you’re in a business partnership of any type, it’s prudent to have an attorney help you draw up a legal partnership agreement. This document should lay out the roles and responsibility of each partner, how the business will be run, procedures for ending the partnership and/or selling the business, and other crucial matters. An attorney will make sure it meets all legal requirements.
Some people are hesitant to draw up these types of contracts when they’re going into business with a spouse, family member or friend. They trust this person and worry that a contract sends the opposite message. The truth is that a contract—that clearly and objectively lays out everyone’s role—is the best thing that can be done when blending personal and business relationships. It will help prevent misunderstandings and could even save your business AND relationship should a disagreement arise.
If you’re forming a Limited Liability Company (LLC)
An LLC structure is the choice of most Kansas entrepreneurs because of the tax efficiencies, flexible organization, and the protection it offers in terms of limited liability. An LLC is also simple to register in Kansas. The process includes filing Articles of Organization with the Secretary of State and paying the filing fee.
It is possible to start an LLC in Kansas without an attorney’s help, provided you do some research. Again, though, there are situations where seeking legal guidance is wise. These might include:
Your LLC has more than one member. LLCs in Kansas aren’t required to submit a company operating agreement to the state, but it’s strongly advised that you have one if your LLC has more than one member. An operating agreement is a governing document that lays out the terms entered into by the members of the LLC. It covers the roles and responsibilities of each member, voting rights, procedures to add and remove members, the terms under which the LLC can be dissolved, and other essential matters. An attorney can ensure the agreement is done correctly so it’s legal and binding.
Your LLC’s membership structure is complex. LLCs can have any number of members, and can include individuals, corporations, other LLCs and even foreign entities. The more complex your membership, the better it is to have an attorney involved to ensure filings are correct and terms are understood.
You may take your company public and/or try to raise large amounts of outside capital. Entrepreneurs often choose an LLC structure over a Corporation because of its simplicity. However, corporations are generally viewed as more favorable to big investors. You can change from an LLC to a Corporation later on, but it’s much more complicated and expensive. A business attorney can help you understand your options when deciding between an LLC or Corporate structure.
Other areas where an attorney can assist include:
- Patents, copyrights and trademarks
- Helping you understand your LLC’s continuing legal obligations (annual reports, tax filings)
- Hiring and employment law
- Helping you understand regulations specific to professional service LLCs (accountants, financial advisors, doctors, etc.)
- Drawing up or reviewing leases and other contracts
If you’re forming a Corporation (S-corp or C-corp)
A Corporation is the most complex business structure. As a separate legal entity, it offers liability protection for shareholders and owners. This, along with their stock structure, makes Corporations more attractive to investors.
It is possible to incorporate without an attorney, but it’s advisable to have one. Incorporation can be a complicated process, especially if you have many shareholders. Mistakes can lead to higher costs down the road if the business comes under legal inquiry.
There’s more paperwork involved than just the Articles of Incorporation you file with the state. You must draw up bylaws, as well as legal and binding shareholder and/or partnership agreements. You also need to decide on the Corporation’s tax structure. A corporate attorney can guide you through these processes.
If you’re not sure
If you’re not sure what type of legal structure is best for your startup, it’s wise to consult with an experienced business attorney. The structure you choose has a long-term effect—from the taxes you’ll pay to your liability should anything go wrong.
Changing your business structure down the road may be possible but will be far more complicated and expensive than an a proactive consultation.
Will you have other people working for you?
Many small businesses in Kansas are one-person operations. When you’re hiring others, though—whether as employees or independent contractors—it’s smart to have an attorney on board to help you understand your legal obligations. An ounce of prevention is worth a pound of cure when it comes to anti-discrimination law and workplace policy.
Areas a business or employment law attorney can assist with include:
- Federal and state anti-discrimination laws
- Employment contracts and policies
- Independent contractor and third-party vendor agreements
- Questions of employee vs. independent contractor status
Other benefits of having an attorney when starting a Kansas business
- Peace of mind knowing your business startup is done right
- Frees you from figuring out paperwork and legal processes so you can focus on getting your business up and running
- Helps you avoid legal pitfalls later on
The bottom line? You don’t always need an attorney to start a business in Kansas, especially if it’s a simple one-person operation. But if your startup is in any way complicated, having an attorney’s help can save you money and help your business thrive in the long run.
The general information contained in this article is not a substitute for legal advice. For assistance with legal issues related to business law in Kansas, including starting a business, contact Fleeson Gooing today.