How to Form an LLC in Kentucky

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Kentucky LLC Quick Facts

Kentucky LLC Costs

Initial LLC Filing Cost – $40

 

Recurring State Fees:

  • Annual Report – $15
  • Limited Liability Entity Tax – $175 (minimum)

LLC Processing Time

It normally takes 1 week for the LLC paperwork to be approved in Kentucky.

 

Expedited processing is also available for an additional fee.

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Let IncFile or IncAuthority guide you through the LLC formation process, so you know everything was done right. Only pay state fees!

Quick Reference

The Limited Liability Company (LLC) is a popular business entity choice structure for many businesses starting in Kentucky.  The LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Kentucky without an attorney.

Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.

Related: How Does an LLC Protect You?

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Guide to Forming an LLC in Kentucky

The simple steps for filing online or by mail are largely the same.  The screenshots show filing online.

Forming an LLC can be both affordable and is something most people can do themselves. Entity formation companies like IncFile or IncAuthority help guide you through the process and make sure there are no mistakes.

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

To get started, register with the Kentucky OneStop Business Portal.  Alternatively, you can download the Articles of Organization PDF and file by mail. If you are starting a business that requires occupational licensing (such as accountants, architects, veterinarians, etc) you will want to instead file for a Professional Limited Liability Company (PLLC).

After registering, select Register a new business.

How to Register an LLC in Kentucky

Step 1: Business Formation

You are asked to select the choice that best describes the business or organization you are organizing.  Most new LLCs will choose “A business that will be formed in Kentucky.”  The other choices are for out-of-state businesses wanting to do business in Kentucky.  Assuming your LLC will be located in Kentucky, choose the first.

Next, you are asked to select the business structure.  Assuming the chosen entity is an LLC, select “Limited Liability Company” in the drop-down menu.

Kentucky LLC Business Formation

Step 2: Disclaimer

Read and agree to the disclaimer and then click on the “Next” button.

Step 3: Registration Contact Information

Enter the Name, email address, and phone number of the individuals representing the business.  Anybody can be the registrant, including a member, attorney, accountant, friend, etc.  Enter the contact information and click on “Add Registration Contact.”

Kentucky LLC Registrant Information

Step 4: Name the LLC

Enter the name you want for the LLC and be sure to follow naming guidelines.  The primary naming guideline is that the LLC’s name also has to differ from other entity names registered with the Kentucky Secretary of State.  Check on Kentucky LLC name availability before filing.

Next, check the box if this will be a veteran-owned business.

Last, the name of the LLC must include one of the following words or abbreviations from the drop-down menu.  Some of the more popular ones are:

  • Limited Liability Company
  • Limited Liability Co.
  • LLC
  • L.L.C.

Kentucky LLC Name Registration

Enter the name of the LLC you would like to use in the “Business Name” field, accept the terms of the disclaimer, and click “Search.”  If the name is available, a message will show up saying the name is available and whether you would like to request that name for the LLC.

Kentucky LLC Business Name Available

If the name is not available, a message saying “Business Name Unavailable or Invalid due to the following reasons.”

If there is a name you want to register but are not ready to form the LLC, a Name Reservation is available.  The Name Reservation will hold a name for 120 days with a filing fee of $15.

You may also want to see if a domain name is also available to have a matching website address.

Step 5: Registered Agent

To have an LLC in Kentucky, a Registered Agent must be identified.  The Kentucky Registered Agent can either be a resident of Kentucky (select “Individual” from the drop-down menu) or a registered agent service (select “Business” from the drop-down menu).  The agent must have a physical address in Kentucky and is available during normal business hours to act as a point of contact to receive legal documents, tax notices, summons, subpoenas, etc. on behalf of the LLC.

Kentucky LLC Registered Agent

When selecting “Individual” if the registered agent will be the same person in Step 3: Registration Contact Information, select the checkbox to copy that information over.  If this is a different person, add their contact information, address, county, email, and phone number.

If you were to hire a registered agent service, their contact information would go in these fields.

In either case, the ATTN field is optional and not used by most when filing the LLC.

You are not required to pay for a registered agent. Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed.  Hiring a company like Northwest Registered Agent to be the Registered Agent will reduce unwanted phone calls and mailings.

Step 6: Principal Office Address

In this section, enter the physical street address, city, state, and zip code of the initial principal office.  This address can be the LLC’s physical address, or it can be the address where the business records are stored.  This does not have to be an address in Kentucky, but you may not use a PO Box for the designated office.

Step 7: Member-Managed of Manager-Managed

This section asks if the LLC is Member-Managed or Manager-Managed.

  • Member-Managed LLCs have members (owners) that are active in the day-to-day operations of the business.
  • Manager-Managed LLCs have managers hired by the members to run the LLC, similar to a CEO of a corporation.

Most LLCs are member-managed.  Select the one that applies and click on “Next.”

Related: What is the Difference Between a Member-Managed LLC and Manager Managed LLC?

Kentucky LLC Manager Member-Managed

Step 8: Business Representative

This section asks for information about the business representative.  If one of the members is filling out the Articles of Organization, most will select “Individual” from the first box and LLC Organizer from the second.  An additional menu will pop up, asking for contact information.  Once entered, click on the “Next” button to continue.

Step 9: Delayed Effective Date

The next step asks about the effective date of the LLC.  By default, the LLC is effective on the date submitted.  If you prefer to have the LLC officially start at a later date (up to 90 days), select “Yes” to the question “Do you want to enter a delayed effective date and time?” and enter the date and time in the following fields. Otherwise, select “No” and click on “Next” to continue.

Kentucky LLC Delayed Effective Date

Step 10: Business Administrators

One business administrator must be assigned to the Limited Liability Company.  Most will select the checkbox to make the business representative be the administrator.  Select the checkbox if that is so, otherwise add a new contact for the business administrator.

Kentucky Limited Liability Company Business Administrator

Step 11: Electronic Signature

Select the name of the business administrator from the drop-down menu and sign the Articles.

Next, the registered agent has to sign as well.

Step 12: Registration Summary

Review that the information is correct.  If so, continue.

Step 13: Pay and File

Pay and file the Articles of Organization.

In approximately 24 hours, if filing online or around a week if filing by mail, your new Kentucky Limited Liability Company will be approved.

If mailing the Articles of Organization, send payment to:
Office of the Secretary of State
PO Box 718
Frankfort, KY 40602

Payment will be made to the Kentucky State Treasurer.

If you have questions, contact the Kentucky Secretary of State at 502-564-3490.

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Tasks After Forming Your LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a Kentucky LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related:  Kentucky operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file tax returns, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you as some entities such as the C corporation may not be the best for many people due to double taxation.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • In some circumstances, a Kentucky Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC 

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start.
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
  • Sales Tax Permit – To sell products and certain services, registration with the Kentucky Department of Revenue will be necessary.

Related: What Business Licenses are Needed in Kentucky?

File Annual Reports

LLCs are required to file an annual report with the Kentucky Secretary of State.  The annual report is due between the 1st of January and the 30th o June and comes with a filing fee of $15 per year.

Additionally, there is a Limited Liability Entity Tax (LLET) that is based on the gross profits of corporations and Limited Liability Companies. The tax is based on the percentage of sales, with a minimum tax of $175.

Related: How to File a Kentucky LLC Annual Report