Start an LLC in Kentucky

If you’re a new entrepreneur wondering how to create an LLC in Kentucky with a more applied approach, this guide might be just for you. Regardless of whether you plan to do it by yourself or using an online formation service, it won’t be remiss to examine the very basics of what goes into starting a business.

It’s safe to say that limited liability companies in Kentucky don’t work with the most lenient tax rates compared to other areas, but the state’s law is rather favorable regarding running an LLC under the S-corp system or a Professional LLC in Kentucky.

Name Your Kentucky LLC

According to the Kentucky Revised Statutes, specifically the chapter KRS 14A.3-010(3), all Kentucky LLCs must choose a name distinct from those already in use.

A Kentucky LLC name must also:

  • Include its designation in full or abbreviated form;
  • Avoid words that imply activity outside its professional field or business structure, for example: “cooperative”, “incorporated,” “partnership,” or “trust” etc.
  • Use only the letters of the English alphabet, Arabic or Roman numerals, and symbols that the SOS can replicate.

These regulations do not apply to assumed names in the same way. PRC boards may also impose other rules on entities that operate in specific professional fields.

Check an LLC Name

If you have your eye on a specific name, it might still be too early to form an LLC in Kentucky. To ensure the application won’t be rejected, do a thorough Kentucky name availability search. You can do so by:

If the search determined your pick to be unavailable, it should be either replaced or appropriately amended. Note that not all amendments are considered viable, so simply changing articles, conjunctions, punctuation, or letter casing won’t affect the business name’s availability. 

Reserve Your LLC Name

To secure name availability, the state gives you an opportunity to reserve an LLC name in Kentucky for a 90-day period, meaning that you will have to launch your company within that period starting from the filing date of your reservation application.

Mail

To send your application by mail, direct the completed Reservation or Renewal of Reserved Name form to:

Office of the Secretary of State
PO Box 718 
Frankfort, KY 40602-0718

In Person

Frankfort residents and visitors can also submit the form at:

Room 154 of the Capitol Building at 700 Capital Ave, Frankfort

Both filing methods also need a duplicate or certified copy along with the $15 service fee made payable to the “Kentucky State Treasurer.”

Prepare an Operating Agreement For a Kentucky LLC

An operating agreement is a set of rules, written or oral, aimed to regulate the conduct of a company, its members, and other internal processes. Though the state doesn’t make it a requirement, creating a Kentucky LLC operating agreement is a vital part of any business.

It establishes a secure working environment, safeguards an entity from Kentucky default laws in case of litigation or dissolution, and generally helps regulate the operating procedures of an LLC in Kentucky.

The document may outline:

  • Delegation of powers;
  • Member rights and responsibilities;
  • Voting procedures;
  • Allocation of Kentucky LLC’s assets between members;
  • Dissolution process and more.

Drafting an effective agreement can sometimes be tricky since the state has no singularly approved form. However, you can find dozens of free samples online or get one as part of your service bundle. Companies like ZenBusiness provide templates for various contracts, including an operating agreement sample.

Choose an LLC Registered Agent

Just like other jurisdictions, Kentucky mandates every entity to employ a registered agent in order to conduct affairs in the Commonwealth. This is done to maintain reliable communication between the state and the entity, in which the agent acts as a delegate.

To officially assign a registered agent in Kentucky, you’ll have to go a bit further than mentioning them in your Articles, which is the case for many states. Here, the candidate must also sign the Statement of Consent of Registered Agent, otherwise, their appointment won’t take effect.

According to Section 14A.4-010 of the KRS, the duties of a Kentucky LLC registered agent may be delegated to:

  • An individual;
  • An entity with the permit to conduct business in the Commonwealth.

Individual as Kentucky Registered Agent

Often, it’s much easier to appoint a natural person as your agent, whether it’s due to the cost or general convenience. This is why so many small startups choose to designate someone they know, like a family member or friend. A candidate is considered viable as long as they:

  • Are a resident;
  • Have a valid business address that matches the one in the Articles;
  • Can be present at that address during all business hours.

Hiring Registered Agent Service 

A reliable alternative to individual agents or costly attorneys is to solicit this service with an LLC provider. While not all formation services have this feature, companies like Northwest Registered Agent are valued for their thorough approach to this aspect of the process. A handful of the Best Registered Agent Services in the industry offer free startup plans and a free year of this service.

Open a Business Bank Account

Starting a business checking account is one of the first things a new owner is advised to do when they set up an LLC in Kentucky, and it’s not just to be fancy. This is done to separate personal and LLC assets which will be vital in the event of any credit-related litigations.

Without a clear division of capital, the corporate veil of your entity becomes extremely vulnerable which puts your securities at greater risk. Moreover, a separate financial account helps manage your payroll and other vital transactions.

When choosing a bank for your business, pay close attention to branch locations and general accessibility. Most banks will ask you to provide:

  • LLC’s Articles of Organization;
  • Owner’s personal ID;
  • EIN;
  • Banking resolution;
  • Business licenses if such apply to your entity.

Obtain an EIN For an LLC in Kentucky

The Federal Employer Identification Number (FEIN/EIN) is assigned by the IRS to legal entities to keep records of their financial activities in the state and to make sure these businesses are paying taxes in Kentucky.

Although not strictly mandatory, this number is a fundamental part of many procedures, including:

  • Establishing a payroll;
  • Managing company finances;
  • Paying taxes;
  • Applying for loans.

There are three ways to obtain it: through the post, by fax, or online. The IRS does not charge for this service.

Mail

With this method, it’s recommended to send your Form SS-4 at least 4-5 weeks prior to entity launch due to the fact that the office may take up to 4 weeks to process mail applications. All documents should be addressed to:

Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999 

Online

If you wish to get an EIN as soon as possible, your best option is to file online since these applications are reviewed immediately, and the number is issued right after. You can apply at any time from Monday to Friday between 7 a.m. and 10 p.m. EST, but remember that you have to get it done in a single session. 

Fax

As the second-fastest option, fax applications are ideal for those who prefer physical documents. To apply for LLC EIN, simply send the Form SS-4 to:

(855) 641-6935.

This method usually takes up to 4 days. Faxing outside the local area may involve additional long-distance fees.

File the LLC Formation Documents With the Commonwealth

Launching an LLC in Kentucky starts when the Secretary of State approves your registration. An entity legally begins its existence as soon as the office approves it unless the Articles of Organization provide a specific launch date.

They should contain the following:

  • Entity name;
  • Registered agent information;
  • LLC’s principal office address;
  • Manager information (if applicable);
  • Company duration period (if applicable); 
  • Statement of nonprofit purpose (if the LLC falls under Section 501(c)(3) of the IRC).

The cost of LLC registration is $40.

By Mail

Once everything is in order, direct the paper application to:

Office of the Secretary of State
Division of Business Filings 
P.O. Box 718
Frankfort, KY 40602 – 0718

It takes about 2-3 days to review these filings.

In Person

If you live nearby and want to get your document approved within a single day, it’s possible to submit your application at this address:

Room 154 of the Capitol Building at 700 Capital Ave., 
Frankfort, KY 40601.

Online

The fastest method is to create an account with the Kentucky One Stop Business Portal and go through the online application. The approval time is normally 24 hours.

Meet Kentucky LLC’s Additional Legal Requirements

Although you don’t need a general license for doing business in Kentucky, most entities will still be tasked with acquiring various licenses and permits based on location, industry, or occupation.

Licensing for an LLC

There is no universally applicable list of Kentucky LLC permits and licenses since every venture differs in structure and purpose. The state’s One Stop Portal provides a license database search tool for checking occupational, local, and environmental licensing requirements as well as instructions regarding the application. 

Almost every LLC license must be regularly renewed, though the duration of their validity varies. To learn more about licensing, contact the local government as well as representatives for the jurisdictions in which you intend to do business.

Business Taxes in Kentucky

You can start by submitting the Kentucky Tax Registration Application that covers the most pertinent local taxes.

Commonwealth Taxes

As mentioned before, the state application will cover such Kentucky Commonwealth Taxes as:

  • Withholding tax;
  • Sales and use;
  • Consumer’s use;
  • LLET;
  • Utility gross receipts license;
  • Telecommunications;
  • Transient room;
  • Motor vehicle tire;
  • Coal processing/purchase.

Federal Taxes

Unlike most states that have no state tax for LLCs, allowing the owners to register any revenue on their personal reports, Kentucky imposes a Limited Liability Entity Tax (LLET) on all LLCs.

Its rate is connected to an entity’s individual gross: entities with annual gross below $3 million pay at least $175 per annum, while companies with over $3 million in yearly earnings pay at the rate of the lesser of 9.5 ¢ per $100 or 75 ¢ per $100.

Those who elect an S-corp taxation system must pay FIT. The current rate is 5%.

Additional Taxes

Some jurisdictions may impose individual taxes, some of which are consistent with the state-wide taxes in Form 10A100. It will be much easier to handle your LLC taxes after you register online.

You might also have to obtain a Commonwealth Business Identifier (CBI) which is a ten-digit number attributed to business entities that allows state agencies to monitor entity activity.

Income Reporting

All entities must file an annual report to keep the state updated on the changes or lack thereof that have occurred since the previous report.

The deadline for Kentucky annual reports is June 30, but the filing period technically starts on January 1. The fee is set at $15.

Online

You can file online on the official state website. The payment can be made electronically. 

Mail

It’s also possible to deliver it in person or by mail at:

Kentucky Secretary of State
P.O. Box 1150
Frankfort, KY 40602-1150

Failure to report in the allotted time may lead to the revocation of your good standing which could later turn into an administrative dissolution if you don’t rectify your status in the following 60 days. You can file a Reinstatement Application and delinquent penalties to restore your good standing.

To Conclude

Although it’s possible to register an LLC in Kentucky on your own, the venture can be pretty stressful and time-consuming. There are also dozens of online LLC services that can assist at every stage. Some of them even offer free LLC bundles, making it more affordable for small startups.