Forming an LLC in Kentucky

By Jordan Walker, J.D. | Legally reviewed by Ally Marshall, Esq. | Last reviewed December 30, 2022

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A limited liability company (LLC) is a type of business structure often chosen by small business owners because of the liability protection, tax treatment, and convenience it offers.

If you think an LLC's limited personal liability, simplicity, and pass-through taxation is the best option for your business, you can create a Kentucky LLC by following the simple step-by-step process below.

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Table of Contents

Steps to Form an LLC in Kentucky

1

Name Your LLC

You need to choose a business name that complies with the Kentucky Business Entity Filing Act. Your Kentucky LLC name must:

  • Be unique: You must choose a name that no other Kentucky business has registered with the state. To find out if your name is available, you should conduct a name search on the Kentucky Secretary of State's business entity database. If there are any matches, you will need to choose a different LLC name.
  • Make it clear that your company is an LLC: Your name must include the words “limited liability company", “limited company", the abbreviation “LC", or “LLC". If you would like to shorten the “limited liability company" designation, you may abbreviate the word “limited" to “Ltd." You can abbreviate the word “company" to “Co.", too.

Next, you should perform a simple internet screening search to see if another business is using your desired name. To do this, type your name into your favorite search engine. If there are no matches for your name, you should also make sure that your name isn't trademarked by another company. If you have a name in mind but aren't ready to officially form your business, you can file a business name reservation with Kentucky Secretary of State. The fee is $15.

Finally, you should check for domain name availability. This is a good idea even if you don't want to start your website immediately. Starting your website will be a lot easier if you have a memorable web address ready to go when the time comes.

2

Get a Registered Agent

Under Kentucky law, you must have a registered agent for your LLC. A registered agent is an individual or business entity that agrees to accept legal paperwork on behalf of your company. This will include service of process if someone sues your company.

Your registered agent must be one of the following:

  • An individual who is a resident of Kentucky
  • A business entity that's registered to do business in Kentucky

Your Kentucky registered agent cannot have a P.O. Box address. They must have a physical street address within the state and generally be available at that address during standard business hours. Further, they must either sign your articles of organization or a statement of consent. This statement makes it clear that they accept the responsibility of acting as registered agent.

Many LLCs choose one of their members to act as the company's own registered agent. However, if none of your LLC members are willing and able to perform this task, you should consider a registered agent service. With a registered agent service, you pay a small fee to another business or individual. In exchange, they agree to receive your LLC's legal papers on your behalf. You can easily find many registered agent service options by conducting a quick search on the internet.

3

File Your Articles of Organization

To formally start your Kentucky LLC, file your articles of organization with the Secretary of State. The articles of organization form a legal document that contains the fundamental information about your company. You can think of it as a formal charter that establishes your LLC as a legal entity. This is not a difficult document to create. In fact, Kentucky offers a fill-in-the-blank form for this purpose. To complete the form, you need to provide basic company details such as:

  • LLC's name
  • LLC's registered office address
  • LLC's principal office address
  • Registered agent's name, address, and signature
  • Whether your LLC will be member-managed or manager-managed

It may seem redundant to require a registered office and a principal office, but there is a difference in the Kentucky articles of organization. Your principal office is the one where the Secretary of State will send your business correspondence. This can be in Kentucky or out of state. You must also list a registered office, which has to be located in the state of Kentucky to receive legal notices.

You can file your articles of organization online or by mail. To file online, you will need to create an account with the Kentucky One Stop Business Portal.

4

Draft an Operating Agreement

Although it is not required by law, it's a good idea to create an operating agreement. An operating agreement is an important legal document for every LLC. Similar to corporate bylaws, an operating agreement forms key agreements among members on essential issues.

You can use your LLC operating agreement to make a record of ownership percentages, members' rights and responsibilities, profit and loss allocation, rules for adding and releasing members, and any other agreements that are important to your business. Putting these agreements into writing is an important step to prevent future conflict among LLC members.

5

Get an EIN

Unless you have a single-member LLC with no employees, you will likely need an Employer Identification Number (EIN). An EIN is a unique number that the Internal Revenue Service (IRS) issues to businesses to identify them for tax purposes. You can think of an EIN as a Social Security number for your business for federal tax purposes. You will need to use your EIN for:

  • Employee payroll
  • Opening a business bank account
  • Applying for a company credit card

You can apply for an EIN by mail, fax, or online through the IRS website. This is free and easy to do.

4

Set Up Business and Tax Accounts

Your tax and licensing requirements will depend on the type of business you operate and your location. You can set up an online account with the Secretary of State to make it more convenient to maintain your business.

You can also set up an account with the Kentucky Department of Revenue's One Stop Business Portal to register for any necessary state taxes. The tax forms you need to file depend on the type of business you operate and your business structure. Below, we cover the tax requirements for a Kentucky LLC in more detail.

Business and Tax Requirements in Kentucky

As a new business in Kentucky, you may have to file several types of business taxes. Here are some possibilities, depending on the type of business you open.

State Business Tax

Kentucky imposes a gross receipts tax, known as the Kentucky Limited Liability Entity Tax (LLET) on every business that is protected from liability by state law, including LLCs.

LLCs with total gross receipts or total gross profits of $3 million or less qualify for a small business exemption and just pay the minimum $175 LLET. Other businesses pay a rate based on a sliding scale.

State Employer Tax

All Kentucky businesses with employees must pay state unemployment taxes. Unemployment taxes are paid on each employee's wages up to a maximum annual amount, known as the taxable wage base. For 2022, the wage base is $10,800 per employee. All new businesses in Kentucky pay a SUTA rate of 2.7% in their first year. After that, rates range from 0.3% to 9.0%.

Sales and Use Tax

Kentucky charges a sales and use tax at a rate of 6% of the purchase price. The sales tax applies to retail sales of tangible personal property, digital property, and certain services. The use tax generally applies to property purchased outside the state for storage, use, or consumption within Kentucky. There are no local sales or use taxes in the state.

Business Licenses and Permits

Kentucky doesn't have a statewide business license, but certain types of businesses may need to have a special license or permit. To determine whether you need a special license or permit, search the occupational license/permits database on Kentucky's One Stop Business Portal.

If you think you may need a federal business license, you can learn more about this on the Small Business Administration (SBA) website. There, you will find a full list of business activities that require federal licenses.

Registration in Other States

If you are an online seller in the e-commerce space, you may need to collect and pay sales taxes in other states. If you're doing business in states outside of Kentucky, you also need to register in those states, probably as a foreign LLC.

Annual Requirements in Kentucky

To maintain your LLC's good standing, you need to file a yearly report with the state of Kentucky. You need to file your first report between January 1st and June 30th of the calendar year following your LLC's formation. You must file another report every year thereafter between January 1st and June 30th. The annual report is a simple document to complete. You will need to provide:

  • Your company's name and address
  • The registered agent's name and address
  • Names and addresses of LLC managers

This information will likely confirm the details you gave in your articles of organization. You will probably find it easy to complete this form. You can file your LLC annual report online at the Secretary of State website.

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Kentucky LLC Formation FAQs

    • You may have to pay various fees to startup and maintain your Kentucky LLC and ongoing fees, taxes, and other business costs can vary depending on what kind of business your LLC does and where it is located. A list of common LLC forms and fees can be found on the Secretary of State's website.

    • Domestic LLCs must pay a filing fee of $40 when they submit articles of organization to the state. For foreign LLCs, the fee is $90.

    • You must pay a $15 annual report fee each year to maintain your LLC in Kentucky. If your LLC is required to have any licenses and permits, you also need to pay their renewal fees.

    • A few different types of LLCs can be created in Kentucky.

      • Single-member LLC: A single-member LLC is an LLC with only one member. For tax purposes, single-member LLCs are considered disregarded entities. This means the owner doesn't file a separate business tax return and instead pays any taxes owed on business profits on their individual income tax return.
      • Multi-member LLC: A multi-member LLC is an LLC with more than one member. For tax purposes, multi-member LLCs file and pay taxes like partnerships.
      • Professional LLC: A Professional LLC is an LLC designed specifically for businesses that provide licensed professional services, such as doctors, dentists, psychologists, occupational therapists, veterinarians, engineers, architects, accountants, physical therapists, and attorneys.

    • A certificate of formation is like a charter document for an LLC and confirms it's authorized to do business in the issuing state. While Kentucky doesn't require businesses to have a certificate of formation, the articles of organization filed to form your LLC can verify that your business is a valid legal entity in the state. You may need your articles to open a bank or merchant account, get a business loan, or handle other tasks.

      You should have your articles of organization from your initial business formation filing with the state. You can request a certified copy from the Kentucky Secretary of State online for a $10 fee.

    • A certificate of good standing is another document that confirms your company is legally registered with the state and in compliance with its laws. In Kentucky, it's known as a certificate of existence or authorization. You may purchase a certificate of existence or authorization online or by mail/fax for a $10 fee.

    • To form your Kentucky LLC, you must choose a valid business name, select a Kentucky registered agent, and file your articles of organization with the Secretary of State. You don't need to file an operating agreement to form your LLC, but it's helpful to have one to protect your company's status, ensure members agree on expectations, and avoid issues or misunderstandings that might arise between LLC members.

    • One of the main reasons business owners create LLCs is for the advantage of limiting their personal liability. This feature protects LLC owners' personal assets from their company's liabilities. In other words, your cars, home, and personal accounts will not be on the line if someone sues your LLC or collects business debts. You do not receive this benefit with all business entities. With a sole proprietorship, for example, your personal assets could be in jeopardy if your business becomes unable to pay its debts.

      Further, LLCs have the benefit of pass-through taxation. With pass-through taxation, LLC members pay taxes on the company's profits through their own personal income tax returns. This is similar to partnership business taxation. Pass-through taxation can be preferable to the way corporations are taxed, which can result in double taxation. Double taxation occurs when a corporation pays taxes on its profits at the corporate level and then stockholders pay taxes on their dividends.

      Finally, the LLC structure is simpler and more flexible than that of a corporation. You will find that there are fewer formalities with an LLC and that it is easier to maintain. Unless you plan to have many investors or issue stocks, an LLC is often a good choice for small businesses.

    • To maintain your Kentucky LLC, you need to file an annual report with the Secretary of State's office and pay a $15 fee by June 30 of each year. You can file online or print your annual report and return it by mail or in person. You also need to renew any required business licenses or permits and pay local, state, and federal taxes.

    • No. Articles of organization are what you file with the state to establish your business as a domestic LLC in Kentucky. An operating agreement is an internal company document that you use to form key agreements among your LLC members. It's an optional agreement that is not required to be filed with the state. But you should keep it on record with your important company paperwork. You may need to show your operating agreement to certain professionals like accountants and lawyers before obtaining services.

    • Yes. You can do business under a name other than your LLC's name but need to register this name with the Secretary of State. In Kentucky, this is called an assumed name. You may hear people refer to it as a fictitious business name or a DBA (“doing business as") name in other states.

      Businesses commonly use an assumed name when they would like to offer a different type of product under a new name or branch into another line of business. As with your LLC name, your assumed name must be distinguishable from all other registered Kentucky business names.

      To legally operate under an assumed name, you need to file a certificate of assumed name with the Secretary of State and submit a $20 filing fee.

    • Certain types of businesses may need to have a special license or permit if they offer professional services. You can find out whether you need a special license or permit by searching the Occupational License/Permits database on Kentucky's One Stop Business Portal. Depending on where your LLC does business, you may also need to apply for local licenses or permits. You should contact the city or county government where your LLC is located to find out what's required.

    • The mailing address for the Kentucky Secretary of State is:

      Division of Business Filings
      P.O. Box 718
      Frankfort, KY 4060

      The physical office is located at:

      Secretary of State
      700 Capital Avenue, Suite 152
      Frankfort, KY 40601

    • Yes. If none of your LLC members are willing and able to act as the registered agent, you can use a registered agent service. With a registered agent service, you pay a small fee to another business or individual. In exchange, they agree to receive your LLC's legal papers on your behalf.

    • A domestic LLC is any LLC formed within the state of Kentucky.

    • Entrepreneurs looking to do business in states outside of Kentucky should register as a foreign LLC in those states. Foreign LLC filing requirements vary by state, so check each state's Secretary of State's website for instructions and filing fees. You will also be asked to submit proof of your LLC's good standing in its home state of Kentucky, usually by providing a copy of your LLC's certificate of existence or authority.

    • You can register a foreign LLC in Kentucky by completing a certificate of authority and paying a $90 state fee. You file with the Secretary of State but if you pay the fee by check, make it payable to the Kentucky State Treasurer.

    • An anonymous LLC shields the identity of the LLC members and managers. Kentucky does not currently allow anonymous LLCs. The only states that permit the formation of anonymous LLCs at this time are Delaware, New Mexico, Nevada, and Wyoming. If you have privacy concerns, you can use a professional registered agent service to receive service of process instead of your own address.

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