Having a Kentucky LLC is a better and cheaper option than having other business structures. A limited liability company (LLC) reduces the owners’ personal liability and protects their personal assets. One can start an LLC in two ways, domestic LLCs or foreign LLCs (LLCs in more than one state). By following some basic steps, you can easily form an LLC in Kentucky.
On this page, you’ll learn about the following:
- How to Start an LLC in Kentucky
- After Starting your Kentucky LLC
- Kentucky Foreign LLC
- Why an LLC in Kentucky
- Top Industries Operating in Kentucky
- Kentucky LLC Formation Review
How to Start an LLC in Kentucky
An LLC or a Limited Liability Company is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection. This section gives you a step-by-step guide on how to start an LLC in Kentucky.
Step 1: Decide a Name for Your LLC
Deciding on a business name is the first step to start an LLC. In Kentucky, before you name your LLC, it is important to note a few things. Firstly, make sure the name is available to use. If the name is available, then check if the name complies with all the Kentucky business naming requirements. Once you pass through them, you can successfully name your business.
Why do you need a proper business name?
If you want your LLC to have special identification, your company name is essential. However, many people face lots of issues by avoiding focus on choosing a business name for their LLC business formation filings.
Because of this, here are some of the major benefits of choosing the best LLC corporate names.
- To help establish a company’s presence in the market before your registration process, a proper corporation or business entity type will help you. This also creates a new identity that will resemble your LLC.
- After you’ve properly chosen the name for your LLC, you will have no problems finishing the registration process.
- You can only get the EIN number when you have your name registration certificate with you.
Requirements when deciding a name for your LLC
LLC Name Search: A business name search is required to check if the desired name is available or not. If the name is available then the business owner has to fill up a name reservation form and send it to the Secretary of State, Kentucky. To do the name search, one has to visit the Business Entity Search page on the official Secretary of State website. Send the name reservation form to the below address by mail to reserve your LLC name in Kentucky. The cost of a name reservation is $15.
Important Quick Links:
Division of Business Filings
P.O. Box 718
Frankfort, KY 40602
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Step 2: Assign a Registered Agent in Kentucky
A registered agent, or business entity, is a person that will act or work on your behalf and provide you with registered agent services like filing services, etc. This person or business will receive significant tax forms, government filings, formation documents, a notice of lawsuits, and other official government correspondence in Kentucky. Choosing a Kentucky registered agent for service for your LLC is required.
Make sure your registered agents are residents of Kentucky. It could also be a business. Here are the recommended agents and employees for you:
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Note that availing of the services of professional registered agents would be your best option since you are guaranteed that whoever is handling your legal affairs knows their stuff well. You will enjoy peace of mind and focus only on running your business, as the ‘professionals’ take care of all legal matters.
These LLC formation services are recommended registered agent services as they are authorized to conduct business in Kentucky. Compare them to check the best yet cheapest option for you. Besides, they can guarantee you professional service because they have been in the business for years.
Step 3: File Articles of Organization in Kentucky
A Certificate of Name Reservation is needed to file Articles of Organization, as other states call it. You need to report this certificate to the Kentucky Secretary of State, which costs $40. LLC cost in Kentucky includes annual reports and yearly sales tax along with filing fees. You may file them online.
This Kentucky Certificate of Formation is a legal document needed to form your business officially. It will indicate details about your LLC in Kentucky, like if it is a member-managed or managers-managed.
Before you start filings, you must already have your LLC name and registered agents or employees. You will attach a copy of your Name Reservation Certificate along with a list of the services that your Kentucky LLC will offer.
How to File Online
Go to the Secretary of State Online Service. Select “non-subscriber.” Fill out the online form. The website will alert you if your county does not support online filings after selecting your principal county. Once you have your account, choose file Articles of Organization and fill out the form completely before submitting it. To know more about online filing, visit the Kentucky Certificate of Formation.
How to File by Mail
If you prefer filing real-life forms for your Kentucky LLC registration, then you can download the Kentucky Limited Company Certificate of Formation. Read the form thoroughly and fill it out. It will have to fill, among others, your name, city, state, zip code, and signature. You may also file in person by visiting the office on business days.
Mail To: Michael G. Adams
Office of the Secretary of State
P.O. Box 718
Frankfort, KY 40602
In-person Drop-off: Room 154, Capitol Building
700 Capital Ave.
Frankfort, KY 40601
Step 4: Create Your Kentucky LLC Operating Agreement
An operating agreement is an internal document that legally outlines the proprietorship and operating procedures of your LLC This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
When it comes to an LLC operating agreement Kentucky does not require you to have a comprehensive operating agreement, but it is ideal to have one that contains all your details of business operation. This document would be useful if you decide to dissolve Kentucky LLC later.
Step 5: Filing a Kentucky LLC EIN
The Employer Identification Number or, simply, the E.I.N. is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify types of business for tax purposes and taxes in general. It is like a Social Security number dedicated to a business’ taxes. The EIN is necessary for any active business or any form of business for that matter.
To obtain EIN (aka FEIN) one has to fill up a form (Online or by mail) and submit it to the IRS. Before sending the form, ask for EIN Assistant. Enter details of your LLC, and finally complete the form and send it to the address given.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
And that’s all! Congratulation, you are now done with all the necessary steps to form your Kentucky LLC. If you still haven’t used a professional service from here, I strongly recommend having one to handle the remaining tasks.
After Starting your Kentucky LLC
After forming your LLC, there are still some things that you will need. Take note of the following:
- Get a company business bank account
- File Kentucky business permits & licenses
- Get liability for business and professional liability insurance with coverage for employees
- File a Kentucky LLC annual report or biennial report
- Already existing LLCs that wish to operate in Kentucky must register as Kentucky foreign LLC.
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including fees for late filings to make sure your LLC is up-to-date.
Kentucky Foreign LLC
To register a Kentucky foreign LLC, one has to file the foreign LLC formation certificate with the Secretary of State, Kentucky. Forming a foreign LLC allows you to operate your business in more than one state in the USA as a single business entity. Check Kentucky Foreign LLC to know more about having a foreign LLC.
Why an LLC in Kentucky
There is a whole list of advantages that a person will encounter if they are thinking of starting an LLC in Kentucky. Out of those detailed benefits, some of them are discussed in brief so that you can adequately make up your mind regarding the opening of your LLC.
The state tax rebate
If a small business is thinking of incorporating Kentucky, their LLC gets enrolled with the Kentucky Small Business Tax Credit (KSBTC) program. It is specially designed to give benefits to the starting-ups. Under this program, the LLC who have to pay the state tax in Kentucky under the KRS 141.0401 act can apply for a tax return.
This value may range from $3,500 to around $25,000, which is more than efficient for a small startup to thrive and pay up its bills for several months.
Sales tax credit through tourism attraction
The Kentucky Tourism Development Act mainly targets the startup LLC’s who are formed in the Kentucky province. If they help the state attract tourists and increase the income through tourism, then the state tax that they have to pay will be paid back to them in the form of an incentive.
A direct loan is given to some essential businesses
According to the Kentucky state, the primary income source is agribusiness, tourist places, and the service industries. That is why they are giving very importance to a program that Kentucky Economic Development Finance Authority starts. The main aim of this program is to provide some long-term finances by providing them a direct loan.
It means that if you are entering the Kentucky LLC, you can also avail of the services of loan, which are not readily available.
Kentucky Business Investment
The KBI benefit is mainly available by the fuel-based industry dealing with energy-efficient fuels and companies producing alternative energy from non-renewable fuels. Such companies are provided an income tax credit under the KBI program. This rebate is that the government thinks that these industries are doing some good work towards environmental improvement.
Top Industries Operating in Kentucky
If you are an entrepreneur looking to start an LLC in Kentucky, you should know about the industry in detail. You should know their contributions and size in the state to take the help of the below-mentioned information.
Coal mining in the state produces more than 100 million tons which is the combined production of underground mining and surface mining. According to the census, 442 coal mines were operating in the state in 2017 with 4,000 registered mine workers, which increased to around 6,257 in the year 2017 who are working in underground mines.
More than 540 logistics centers are currently present in the state, employing more than 75000-80000 people. The logistics trade in Kentucky is the state is at a day drive for 65% of US residents, which makes it a perfect place for planning the logistics and distribution centers by businesses. There is a spend of around $600 billion in the country, out of which 70% is served by Kentucky state.
If you look at the most significant share in GDP, it is of the manufacturing sector that is around 18% recently. In 2009, this value was half, which shows growth in the manufacturing business in the state. The state is raising jobs for more than 14% of the population living in the state currently.
This field has been the best for workers as the pay scale has increased to around $44,000 per capita worker, which is 10-15% higher than other states and businesses.
These are the business industries that are at the top of the state list. If you want to know some low-investment businesses, then here are the options.
- Gift Basket business
- Calligraphy teaching business
Kentucky LLC Formation Review
Time needed: 5 minutes.
Just to recap, here are the simple steps again when forming an LLC in Kentucky. Click on the steps in this list to read the full detail.
- Name your Kentucky LLC
The first thing you must do is to choose a company name, which should be unique, easy to find, and available in the state.
- Choose a registered agent
In Kentucky, it is mandatory to select a registered agent service for your LLC. You can check out our list of our 5 Best LLC Services in the United States.
- File a formation certificate
Filing a formation certificate is necessary when forming an LLC. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create operating agreement
An operating agreement is not a strict requirement but something encouraged when you start an LLC.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
If you are a resident of Kentucky, then you can file your LLC by yourself. However, it is always worth having a professional than doing it yourself to handle legal complexities, paperwork, and other documentation.
Apart from the formation fee of $40 (domestic LLC) and $90 (foreign LLC), LLC cost in Kentucky includes $15 for Annual Reports every year. LLCs are liable to pay sales tax of 6% every year
It takes no time (immediate) to get a Kentucky LLC if you file it online. For the mail filing, it takes 3 to 5 business days to get an LLC.
Every year all the LLC have to submit an Annual Report and pay $15 to the Kentucky Secretary of State and renew the LLC. It is mandatory to renew your LLC every year.
Generally, for the LLCs, it is a default tax structure. Once you will obtain the EIN, you will get the various tax structure options to select. Sometimes LLCs choose S Corp to reduce federal tax burdens.
Having an LLC is easier than other forms of business. LLCs have a ‘pass-through taxation’ advantage for which they are excluded from certain taxes. On the other side, the formation of LLCs requires less paperwork and fewer legal complexities. If you have any questions, leave a comment below.