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How to Form an LLC in Kentucky – Step-By-Step Guide

How to Form an LLC in Kentucky
(Last Updated On: April 19, 2024)

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Embarking on the path to entrepreneurship in Kentucky begins with the strategic formation of a Limited Liability Company (LLC). This business structure offers a blend of liability protection and operational flexibility, making it an ideal choice for many. 

In this guide, we will navigate through the essential steps to start an LLC in Kentucky, from choosing a unique and compliant business name to filing the necessary paperwork with state authorities. Whether you’re a seasoned entrepreneur or a first-time business owner, understanding the intricacies of the process is crucial. 

By following this comprehensive guide, you’ll be equipped with the knowledge needed to establish a solid foundation for your LLC and set the stage for a successful business venture in the heart of the Bluegrass State.

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Considerations Prior to Filing for a Kentucky LLC

While the eagerness to launch your business is understandable, taking the time to plan ahead can prevent future complications. Two crucial elements in initiating your business involve conducting thorough market research and creating a comprehensive business plan.

Research

Before proceeding with your business venture in Kentucky, it’s essential to conduct market research to ensure the viability of your business concept. The Kentucky SBDC recommends delving into three overarching areas:

  • Identifying your target market
  • Analyzing market trends
  • Understanding your competitors

Business Plan

While not obligatory for filing LLC paperwork in Kentucky, having a business plan offers numerous advantages. Potential investors or lenders may require a structured plan before providing funding, and a well-crafted business plan serves as a valuable organizational tool to keep you focused and on course. Explore Kentucky’s available resources for assistance in drafting a business plan.

How To Start an LLC in Kentucky: 9 Steps

Embarking on the establishment of an LLC in Kentucky involves a straightforward six-step process, particularly if you’ve conducted thorough research and devised a comprehensive business plan. Streamlining the filing procedure, the Kentucky Secretary of State offers the Kentucky One Stop business portal, a centralized platform where all necessary documents can be conveniently submitted after creating an account.

Here are the sequential steps to efficiently start your LLC in Kentucky:

1. Choosing a Name for Your Kentucky LLC

Choosing a name for your LLC is a crucial step with legal implications you might not fully grasp. Legally, your chosen name must not closely resemble that of another business in the state. To ascertain the availability of your preferred name, perform a Kentucky LLC search on the business portal or contact the Secretary of State’s office at 502-564-3490.

Whether your LLC is domestic or foreign, it must include one of the following indicators:

  • Limited Liability Company
  • Limited Company
  • LLC (or L.L.C.)
  • LC (or L.C.)

For those establishing a professional LLC, the business name must conclude with one of the following indicators:

  • Professional limited liability company
  • Professional limited company
  • PLLC
  • PLC

In either case, you can use abbreviations such as “Ltd.” for “limited” and “Co.” for “company.”

Once you’ve finalized an available name, you can reserve it for future use if you’re not prepared to complete the filing immediately. This safeguards your chosen name during the planning stages of your Kentucky LLC. To reserve the name, submit a reservation or renewal of a reserved name to the secretary of state through one of the following methods:

  • Online via the portal
  • By mail to the Office of the Secretary of State, P.O. Box 718, Frankfort KY 40602
  • In person at Room 154, Capitol Building, 700 Capital Avenue, Frankfort KY 40601, between 8:00 a.m. and 4:30 p.m.

The filing fee is $15, payable online or by a check addressed to the “Kentucky State Treasurer.” The name reservation lasts for 120 days from the filing date.

Guidelines for Choosing Your Kentucky LLC Name:

A name might sound appealing, but there’s always room for improvement. Consider your business’s future plans, especially if you intend to broaden your services; in such cases, a less specific name might be preferable.

Factor in your online presence and broader marketing strategy. Ensure that a matching domain name is available, as a cohesive online and offline presence enhances your business’s chances of success.

While your original paperwork specifies your business name, you have the option to operate under a different name. You can apply for a certificate of an assumed name, also known as “DBA” (doing business as), through the business portal. This assumed name essentially serves as an alias for your business.

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2. Locate a Kentucky Registered Agent

Now that the state has identified your business, it requires information on how to reach you. Every business is obligated to designate a Kentucky registered agent, complete with a physical address (excluding P.O. boxes) and contact details where legal documents can be delivered during business hours. Numerous companies offer registered agent services for a nominal annual fee. The registered agent must:

  • Be 18 years of age or older
  • Be authorized to conduct business in Kentucky (if the agent is an entity)
  • Maintain a registered office in Kentucky (not a P.O. box)
  • Provide written agreement to serve as your registered agent

Kentucky diverges from many other states in that it does not permit an LLC to act as its own registered agent. Your chosen agent must either sign the articles of organization, to be filed in the subsequent step or furnish separate written authorization for you to designate them as the registered agent.

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3. Create a Kentucky Online Gateway (KOG) account 

Establishing a Kentucky Online Gateway (KOG) account is essential for the registration and management of your Kentucky-based business. To initiate the account creation process, gather the following details:

  • Full name
  • Email address
  • A password with a minimum of eight characters, comprising at least one lowercase letter, one uppercase letter, and one number
  • Contact information, encompassing your phone number and residential address.
  • Language preference
  • Two responses to security questions, such as the city of your birth or the name of your initial pet

Upon completing all the necessary fields on the KOG account page, select “sign up.” Subsequently, you will receive an email notification. Click on the provided activation link and adhere to the instructions to finalize the account activation, which includes confirming your email address.

4. Submitting Articles of Organization

The pivotal paperwork to submit to the state is the articles of organization. For your Kentucky LLC, the filing fee stands at a modest $40. Payment can be made through one of the methods outlined in the initial step. Your articles must encompass the following details:

  • The name of your LLC
  • The name and address of your registered agent
  • The mailing address of the principal office of the LLC
  • Indication of whether the LLC will be managed by its members (owners) or external managers

Any alterations to this information during business operations necessitate updating via the submission of the relevant form to the secretary of state. Additionally, you have the option to amend your articles of organization promptly after filing if needed.

Choosing Between Member-Managed and Manager-Managed LLCs

It’s advisable to deliberate on this decision prior to submission. A member-managed LLC grants the collective involvement of members in all management decisions. Conversely, a manager-managed LLC delegates management responsibilities either to a hired manager or elected members. 

Managers possess the authority to represent the LLC in significant actions such as entering contracts, making purchases, hiring or terminating employees, and borrowing money.

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5. Drafting an Operating Agreement

Formulating an operating agreement delineates the operational framework of your business. Although not obligatory, it’s prudent to codify these aspects in a legally binding document to preempt potential confusion in the future. Your agreement ought to encompass policies and procedures concerning the following matters:

  • Management
  • Ownership
  • Admission of new members
  • Conducting meetings
  • Voting procedures
  • Member contributions
  • Compensation arrangements
  • Dissolution procedures
  • Distribution of profits and losses

Numerous free and cost-effective resources are at your disposal to assist in crafting an operating agreement. It’s advisable to retain a signed copy at your principal office for reference.

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6. Acquire an Employer Identification Number (EIN)

An EIN serves as your business’s identification with the federal government for tax administration purposes. It plays a crucial role in various financial aspects of your business, such as hiring employees, opening a business bank account, filing federal and state tax returns, and applying for business loans.

Securing an EIN is a rapid and cost-free procedure. To initiate the application, you must be the “responsible party” within your LLC, meaning you own or control the entity. As the responsible party, you’re required to furnish your name and Social Security number during the application process.

The application is completed online and typically takes around 15 minutes. It’s essential to finish the EIN application in a single session, as there is currently no option to save and return. Upon submission, you will instantly receive a confirmation document that can be downloaded and printed for filing with your other crucial LLC documents.

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7. Fulfill a Kentucky Tax Registration Application

Enroll for Kentucky taxes by completing a tax registration application. Common business taxes covered include employer withholding taxes, sales and use taxes, limited liability entity taxes, and industry-specific taxes. This process also assigns a Commonwealth Business Identifier (CBI), a 10-digit number that identifies your LLC with all Kentucky government agencies, akin to how an EIN identifies your business federally.

To complete the online tax registration form, you’ll need the following information:

  • LLC name
  • Formation date
  • EIN
  • Business address
  • Accounting period (calendar or fiscal year)
  • Business structure
  • Home-based or office-based status
  • Tax election (partnership, corporation, etc.)
  • Information about the responsible party within the LLC
  • Contact person details for state communication
  • Details to determine necessary tax accounts
  • Authorized representative’s signature

The form can be filed online through your Kentucky online gateway account.

8. Apply for Business Permits and Licenses

While Kentucky lacks a universal state business license, certain businesses may still need specific licenses or permits. Examples include occupational permits (e.g., marriage and family therapist, podiatry), environmental permits, etc. To determine your business requirements, contact the Division of Compliance Assistant or check the Louisville Metro Air Pollution Control District permits page if you operate in Jefferson County.

9. Submit an LLC Annual Report

Filing a Kentucky annual report ensures accurate and accessible public information about your business. Failure to file by June 30 annually, may result in the administrative dissolution of your LLC. To file the report, provide:

  • Registered agent’s name and address
  • Names and addresses of LLC officers, directors, members, or managers
  • Credit or debit card information for the $15 filing fee

Complete and submit the form online through the Kentucky Secretary of State’s annual report page by entering your business name, selecting your business from the results, and following the prompts to submit the necessary information and payment.

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How to Start an LLC in Kentucky – Buyer’s Guide

What Is an LLC?

An LLC, short for “limited liability company,” represents a business structure that falls between the informality of partnerships or sole proprietorships and the formality of corporations.

Partnerships and sole proprietorships can be established through ordinary business activities, but forming an LLC requires state registration. Unlike corporations, which must conduct meetings and pay taxes at the corporate level, LLCs are not automatically subjected to business-level taxation.

Types of Kentucky LLCs

Depending on the state, not all businesses may be eligible to form an LLC. For instance, banks and insurance companies are universally prohibited from establishing LLCs. Kentucky’s LLC laws recognize the following categories:

  • Domestic LLC: The most common type, a domestic LLC, is created in Kentucky and can engage in nearly any lawful commercial activity.
  • Foreign LLC: Registered in another state but authorized to operate in Kentucky, a foreign LLC must adhere to naming requirements, ensuring distinctiveness from other Kentucky businesses. If a business is already established elsewhere, certifying it in Kentucky might be simpler than creating a new LLC.
  • Professional LLC: In Kentucky, a Professional LLC (PLLC) is established to provide licensed services. Not all states acknowledge this type, and its formation mirrors that of a regular LLC with an added statement indicating the provision of professional services. Professionals falling under PLLC include physicians, dentists, architects, accountants, attorneys, and more.
  • Nonprofit LLC: Although a nonprofit organization can initiate an LLC in Kentucky, it must apply for 501(c)(3) status with the IRS, maintaining a charitable purpose. Nonprofit entities need to file a distinct form of articles of organization for this purpose.

Resources for Starting Your LLC in Kentucky

For entrepreneurs seeking support in funding or partnerships, the Kentucky Small Business Development Center and the U.S. The Small Business Administration Kentucky district office offers resources such as business plans, financial projections, market research, business models, marketing strategies, analysis, investor presentations, and loan requests.

Is Kentucky a Good State to Start an LLC?

The suitability of starting an LLC in Kentucky hinges on your residence and business operations.

In essence, if you reside in or conduct business in Kentucky, it makes sense to establish your LLC in the state. While various websites may extol the tax advantages of specific states, these considerations are irrelevant unless the state aligns with your living and business locations.

For instance, forming an LLC in Delaware while living and operating in Kentucky necessitates registering the Delaware LLC in Kentucky, incurring additional fees. Eventually, you would still be subject to Kentucky taxes, leading to increased costs and complexities without any discernible advantages.

In conclusion, if your residence and business operations are in Kentucky, it’s indeed a favorable state for starting a business. Conversely, if neither your residence nor business activities are in Kentucky, it’s not an ideal state for launching a business.

Real estate caveat: If your real estate investment extends beyond Kentucky, it’s advisable to establish your LLC in the state where the property is situated.

What Advantages Does an LLC Offer?

The primary benefit of an LLC lies in safeguarding personal assets. In the event of a business lawsuit, personal assets such as homes, cars, and bank accounts are shielded from liability. This protection applies universally to all LLC owners, whether it’s a Single-Member LLC or a Multi-Member LLC. In contrast, Sole Proprietorships or Partnerships lack this safeguard, leaving owners vulnerable to business debts and liabilities.

Another advantage is the pass-through taxation structure of LLCs. Essentially, the LLC itself does not incur federal income taxes. Instead, profits “pass through” to the LLC Members, who then report and pay taxes on their individual tax returns. Kentucky state income tax treatment closely mirrors the federal approach, as the state recognizes and follows the federal tax treatment of LLCs.

Our Picks of the Best-Registered Agent Services

ZenBusiness

Zenbusiness logo

When you team up with ZenBusiness, the burden of paperwork becomes a non-issue. ZenBusiness offers an extensive array of LLC services, focusing primarily on ensuring the accurate establishment of your business and the timely completion and submission of necessary paperwork to the relevant state government office. Although ZenBusiness does have service fees, numerous clients discover that they receive exceptional value for their investment.

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Northwest Registered Agent

Embarking on a business venture entails managing a plethora of state-mandated paperwork, a task that can be particularly daunting for new business owners. Northwest offers a spectrum of business services designed to help entrepreneurs identify the requisite documentation, ensure accurate completion, and submit it promptly to the relevant government agency. 

In addition to facilitating the establishment of an LLC, Northwest provides various supplementary services, including valuable registered agent services that can be particularly beneficial for those new to business ownership.

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Incfile

Incfile offers an invaluable resource library that proves extremely helpful for aspiring business owners who are navigating the process of selecting the most suitable business structure. Subsequently, Incfile provides support with the essential documentation and filing procedures, simplifying concepts such as a registered agent, articles of organization, and EIN. The company is also well-regarded, earning a strong reputation and positive feedback in online reviews.

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How to Form an LLC in Kentucky – FAQs

How Much Does It Cost to Form an LLC in Kentucky?

For Domestic LLCs, there is a $40 filing fee, while out-of-state LLCs registering in Kentucky are charged $90.

Do Kentucky LLCs Have to Submit an Annual Report?

Yes, Kentucky LLCs must submit an annual report, which can be accomplished online, by mail, or in person. The filing fee for the annual report is $15.

Do Kentucky LLCs pay taxes?

Kentucky LLCs pay a limited liability entity tax (LLET). However, LLCs are pass-through tax entities. Therefore, taxes are generally passed on to LLC members based on ownership percentages. In turn, members must pay estimated taxes quarterly.

Can I Set up an LLC by Myself, or Should I Hire Someone?

Establishing an LLC independently is feasible, especially for single-member LLCs. Conduct thorough research and visit your state’s business formation website to determine the specific paperwork required. 

However, before proceeding with any business formation, it’s recommended to seek professional advice to ensure the best decision for your particular circumstances.

Read More: Cost to start an LLC

How Do I Dissolve an LLC in Kentucky?

When you’re prepared to terminate your LLC in Kentucky, initiate the internal dissolution process according to the guidelines outlined in your LLC’s operating agreement. Additionally, it’s essential to submit articles of dissolution to the Kentucky secretary of state and remit a $40 filing fee.

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