Protecting a business through structuring: key aspects – Mykola Pushynskyi

At the initial stage, entrepreneurs usually opt for a simple model to launch and run their business: they register the company, reach basic agreements with partners and commence operations. For a small business, this is sufficient. However, as the business grows, the need arises to regulate many aspects: the formalisation of assets, business protection strategies, the definition of decision-making powers, profit-sharing mechanisms and the resolution of potential disputes.

An effective business model requires a clear legal structure that governs all elements: the business’s assets, their protection, operational activities, partnerships, procedures for resolving disputes between owners, intellectual property, and proper engagement with regulatory and law enforcement bodies.

One of the key aspects is control over assets. In the traditional model, a single company both owns the assets and carries out business operations. This approach is straightforward from the perspective of operational activities and, in particular, accounting. However, from a risk management perspective, this approach is not always optimal. In practice, a separation of functions is often employed: one entity is responsible for asset ownership, whilst another handles operational activities and interactions with counterparties. This helps to limit the impact of business risks on key assets. This is one simple example of asset protection that can make it more difficult for third parties to unlawfully take control of your business. This mechanism is not a one-size-fits-all solution and is presented as an illustrative example to provide a general understanding of the importance of this approach.

Equally important is ensuring that operational activities are carried out in a legally sound manner. Procurement, working with contractors, leasing assets, dealing with clients, tax planning, and maintaining proper legal relationships with employees. Despite the widespread perception of documents as mere formalities, it is precisely these that play a decisive role in the event of audits or disputes. Relationships based on trust without legal protection (formalisation) will break down at the very first sign of conflict. Even a single unprotected (legally unregulated) aspect of operational activity can put the entire business at risk.

Particular attention should be paid to digital assets. These include, in particular, advertising accounts, marketplace accounts, domain names and social media pages. For many companies, these very tools are the primary sales channels. Consequently, control over access to and rights in such resources must be properly organised. Intangible assets that have not been properly legally protected within the framework of business operations most often become ‘weapons’ in corporate disputes once hostilities arise between business partners. Whoever has access to or owns the intangible assets usually emerges victorious in such corporate conflicts.

Intellectual property is an essential element of a business’s structure. Trademarks, technologies and software solutions account for a significant portion of a company’s value. In the absence of proper legal documentation, there is a risk of losing control over these assets.

At the same time, the area posing the greatest risk remains the relationships between partners. These are often based on verbal agreements, but as the business develops, the parties’ interests may change. It is therefore advisable to define the key principles of cooperation in advance. In practice, this is achieved through structured discussions or strategic sessions, during which the partners agree on the division of roles, the decision-making process, the principles for profit distribution and exit scenarios. The agreements reached are formalised in partnership or corporate agreements, which establish a clear and predictable framework for cooperation. In addition, based on the outcome of the negotiations, the partners identify and allocate ‘checks and balances’ over the business’s key assets. These measures enable the legal and practical regulation of relations between partners and ensure the business’s resilience during periods of corporate disputes.

Thus, the legal structuring of a business goes beyond formal procedures. It involves a systematic approach to organising a business, ensuring its manageability, the protection of its assets and its resilience in the event of changes or crises. It is worth bearing in mind that the earlier such a comprehensive legal structure is established, the fewer risks arise in the future.