Business Law FAQs
Below are answers to questions the business lawyers at John H. Ruby & Associates frequently encounter as we advise and represent business owners in Louisville and throughout Jefferson and Oldham counties. If we can be of assistance in entity formation, business transactions, or the resolution of a commercial dispute, please contact our office to speak with one of our experienced business law attorneys.
Is it better to form a corporation or a partnership?
Each type of entity has different advantages and disadvantages, so a lot depends on your overall needs and goals. There are also many different types of corporations and partnerships, including general partnerships, limited partnerships, limited liability partnerships, professional services corporations, nonprofit corporations, subchapter S corporations, and C corps.
A couple of the main ways corporations and partnerships differ are in regards to taxation and liability. Broadly speaking, corporate officers are subject to double taxation, since they must pay corporate income tax and personal income tax. In contrast, there is no double taxation for partners in a partnership. However, partners can be personally liable for actions of the partnership, while corporate officers are generally shielded from personal liability for acts of the corporation.
Another option you may want to consider is a limited liability company. Members of an LLC enjoy the favorable tax structure of a partnership while also being protected from personal liability for debts like a corporation. Call our office to schedule a time to sit down with an experienced Kentucky business attorney who can help you decide which entity is right for you and can draw up all the necessary documents and agreements to get your business up and running.
Is a covenant not to compete enforceable in Kentucky?
Business sometimes ask their employees to sign non-compete agreements, usually when they hire them on but sometimes years into their employment. It is reasonable to expect companies to want to protect their trade secrets and keep their customers from competition from people they hired and trained and who are intimately familiar with their business processes. Yet at the same time, individuals have a right to seek employment and make a living however they see fit.
Non-compete agreements and other restrictive covenants are enforceable in Kentucky, but they should be carefully drawn up to make sure they are reasonable in the time period imposed, the geographic area covered, and the types of activities which are restricted. Also, a recent Kentucky Supreme Court decision emphasized that some form of valuable consideration must be given by the employer in exchange for the employee’s assent to the non-compete. Given the murky nature of the law in this area, it is strongly recommended that you get help from experienced Kentucky business lawyers in drawing up or negotiating covenants not to compete.
Should I agree to arbitration?
Arbitration is a popular way to settle business disputes and offers advantages of being quicker and cheaper than litigation. Also, frequently the arbitrator has special knowledge of the industry, either from having worked in the industry or from having arbitrated innumerable cases similar to yours. Although arbitrators are trained to be neutral, the arbitrator’s experience and record may be viewed as a positive or negative in your case, depending upon which side you are on.
There are also different forms of arbitration to be considered, including binding arbitration, non-binding arbitration, and hybrid forms of dispute resolution combining mediation and arbitration (med-arb). Choosing the right form of arbitration may help you settle your dispute and avoid litigation, or at least narrow the issues and help you prepare for any litigation which may be unavoidable.
How do I exempt an employee from overtime?
The Fair Labor Standards Act recognizes several exemptions from the overtime requirement for professional, executive and administrative employees. An exempt employee must be paid at least $455 per week on a salary basis and must meet the criteria for the particular exempt classification. The employee’s actual job duties are what counts, not just what is on paper in a job description or other document. Certain computer or high-tech workers are also exempt from overtime, as well as certain outside sales and commission workers. Independent contractors are also exempt, although there are several factors which must be considered in determining whether a worker qualifies an employee or an independent contractor.