Kentucky is enjoying huge upward momentum when it comes to new business ventures. The “Bluegrass State” saw a 21% increase in new businesses in 2021. Now could be s a great time to create your own Kentucky limited liability company (LLC) as well.
Learn how to set up an LLC in Kentucky with our simple guide. We’ll walk you through the basics of establishing LLCs and the formation requirements specific to the state.
Before You Set Up an LLC in Kentucky
The following sections provide crucial details on steps to take ahead of establishing your Kentucky LLC.
Research and Reserve Your Business Name
It is always good to check and even double-check your business name’s availability before filing any LLC paperwork. You will avoid wasted time and rejected paperwork by performing a name availability search on the Secretary of State’s website.
After confirming your desired LLC identity is available, remember that by law, it must also include the words “limited liability company” or “limited company” or an acceptable abbreviation such as “LLC,” “L.C.” or “Ltd. Co.”
Although not required, if you are not immediately ready to go forward with LLC registration, Kentucky lets you hold a name for up to 120 days. Name reservations are renewable for additional 120-day periods. To reserve a name, submit a Reservation or Renewal of Reserved Name form. The filing fee is $15.
Hire a Registered Agent
Kentucky requires LLCs to have a registered agent and registered office. The registered office must be a street address (not a P.O. box) in Kentucky. The agent must be a Kentucky resident or a company authorized to do business in Kentucky. The agent must be located at the registered office and must consent in writing to being the appointed agent.
You can be your own agent or appoint an LLC member or employee. The LLC cannot act as its own agent. You can also hire a person or business to act as your agent, if necessary. The fee for registered agent services typically ranges between $40 and $300, with the average hiring cost of around $100. You should carefully read reviews and ask questions to ensure your money will be well spent.
Submit Your Kentucky Forms
When you are ready to move forward with creating your new business entity, you should know that Kentucky uses three different forms for three types of domestic LLCs:
No matter which form you file, the fee will be $40. You can form your LLC online, or you can submit a paper form with a check payable to the “Kentucky State Treasurer.”
Alternatively, foreign entities must complete and submit a Certificate of Authority for LLC formation. The associated filing fee is $90; make checks out to the “Kentucky State Treasurer.”
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What To Do After Establishing Your LLC in Kentucky
Once you form your Kentucky LLC, you can now focus on maintaining its good standing and handling any annual fees or tax obligations. You can learn more about LLC post-formation responsibilities in the sections below.
Submit an Annual Report
All Kentucky LLCs operating within the state must hand in a yearly report. LLC owners can complete the process online or print out a copy of the annual report and mail the documents or submit them in person. Kentucky charges a $15 fee for annual reports.
Build a Website
If you do not already have one, setting up a company website would be a great idea. Potential customers often research brands online; having your business site will make it easier to learn more about your company and contact you about your goods or services. A website can also offer the chance to raise brand awareness and credibility.
Obtain an Employer Identification Number (EIN)
EINs are required for most businesses, though single-member LLCs with no employees are a notable exception. They can instead use the owner’s Social Security number. Even so, an EIN might be a good idea as it protects your privacy and can help avoid issues related to identity theft.
In some instances, you might see an EIN get referred to as a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN). An EIN is free, and you can get one through the IRS website.
Pay the Limited Liability Entity Tax (LLET)
Kentucky LLCs may not have to pay taxes in the same way as corporations; however, you will need to pay the LLET, a tax on pass-through entities. If your business makes less than $3 million annually, you must pay a minimum of $175. For companies that gross more than $3 million in a year, the LLET is the lesser payment between $0.095 per $100 of gross receipts or $0.75 per $100 of gross profits.
Create an LLC Operating Agreement
Kentucky does not require LLCs to have operating agreements to conduct business. Even so, it is a good idea to develop one. They are not only crucial for outlining how your business entity will operate, but they can help avoid confusion and conflict later on.
These agreements feature information on day-to-day operations, member contributions and even how LLC members rank in voting power. Their existence provides a guideline for operating your business and a sense of legitimacy for your company.
LLC State Guides
Frequently Asked Questions
What is an LLC?
An LLC balances the relative ease and flexibility of a partnership or sole proprietorship structure with the increased risk protection of a corporate structure. Like corporate shareholders, LLC owners (known as “members”) enjoy limited liability, meaning personal liability to the company includes only what members have invested and does not extend beyond it to cover corporate losses or debts.
By default, members of an LLC pay taxes as a share of personal income just as owners of a sole proprietorship or general partnership would—this is often referred to as a “pass-through” tax structure. An LLC can elect to be taxed as a C corporation (C-corp) or S corporation (S-corp) if it meets certain requirements. Many small business owners choose LLCs for their simplicity and flexibility.
How much does it cost to form an LLC in Kentucky?
Domestic LLCs pay a $40 filing fee. Out-of-state LLCs registering in Kentucky get charged $90.
Do Kentucky LLCs have to submit an annual report?
Yes. It can be done online, by mail or in person. The filing fee is $15.
What are the benefits of forming an LLC?
LLCs are more flexible and easier to maintain than corporations. They provide some liability protection for personal assets and yet have pass-through taxation.
Can I set up an LLC by myself, or should I hire someone?
You may be able to set up an LLC by yourself, especially if you’re a single-member LLC. Do your research and head to your state’s business formation website to determine the exact paperwork you need. However, before establishing any kind of business, it’s a good idea to get professional advice to make sure you’re making the best decision for your situation.
What are the different types of LLCs to set up?
When determining how to start an LLC, there are several types of LLCs to choose from. Knowing the LLC structures available is essential for selecting a business model that most closely aligns with the nature of your company and how you intend for it to operate. These LLC structures include:
- Single-member LLC: This LLC is owned and operated by a single person. While similar to a sole proprietorship, this LLC provides additional tax benefits and liability shielding.
- Multimember LLC: Standard LLCs with more than one member, often divided into manager-managed or member-managed entities.
- L3C: These entities, also known as “low-profit liability companies,” act as a bridge between nonprofit LLCs and for-profit LLCs where the business cause remains the primary focus rather than earnings.
- Series LLC: Series LLCs are tiered business structures where the topmost LLC owns a series of lower-tiered LLCs through limitless segregation. Each LLC in the series operates mostly independently of one another; their assets are also primarily separated.
- PLLC: A specialized LLC, this business formation type is only available to certain licensed professionals.
- Restricted LLC: Restricted LLCs are not taxed during the first 10 years of formation. Likewise, they cannot make distributions to members. It must be stated in the articles of organization that the LLC will be restricted.
