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Corporations are a popular business type because they are treated as independent legal entities, limiting the liabilities of the owners and allowing the corporation to enter into contracts and maintain stability over time.
Corporations fall into the following three categories:
If you’ve decided that a corporation is the right structure for your business, read on for how to get started forming your Kentucky corporation today.
1Name Your Corporation
2
Appoint Directors
6Draft a Shareholder Agreement
7
Issue Shares of Stock
To start a corporation in Kentucky, you must file the Articles of Incorporation with the Secretary of State office, but there are important decisions to make before doing so in addition to steps you need to take afterward.
To simplify the process of forming a corporation in the commonwealth of Kentucky, we’ve put together 10 easy steps for you to form your business:
Before you can file any paperwork, you need to decide on a business name. This might seem simple on the surface, but there are many factors to consider during the process and regulations to adhere to.
You also don’t want to overlook the importance of choosing a name for which you can reserve a matching website domain name that has not been taken. Additionally, you should consider any “doing business as” (DBA) names or trademarks you may want.
Here are some guidelines to help you through the naming process:
When you reserve your name or register your business, you can also reserve the domain name you plan on using with it at the same time.
A registered agent is a person or entity that receives service of process and other important legal notices and government correspondence on behalf of the corporation. If your business is sued, the court summons will be given in person to your registered agent.
When filing your Articles of Incorporation, you must list a registered agent who is an individual or entity with a street address (not a P.O. box) in the commonwealth of Kentucky. The registered agent must give explicit consent to being your registered agent, typically by signing the Articles of Incorporation.
While you can be your own registered agent, we highly recommend going with a registered agent service for simplicity and protection. ZenBusiness can connect you with a registered agent service in Kentucky with our starter package.
Now that all of the initial puzzle pieces are in place, you are ready to file your Articles of Incorporation to register your business with the commonwealth officially. In this document, you will need to include:
Once you’ve filled out the form, you will mail it to the Secretary of State with a check for $50, made out to the “Kentucky State Treasurer.” $10 of this fee is an organization tax fee for 1,000 shares of stock or less. As long as you don’t have more than 1,000 shares, this is all you pay. If you plan on having more than 1,000 shares, you will need to contact the Secretary of State’s office to determine your total filing fee.
The address to mail the form is:
Michael Adams
Office of the Secretary of State
P.O. Box 718
Frankfort, KY 40602-0718
Alternatively, you can register online using the Kentucky Business One Stop Portal. After the incorporation, one copy of the Articles of Incorporation must be filed with the county where the corporation’s registered office is located.
Before your business can get up and running, the incorporators or the board of directors should create the corporate bylaws. The bylaws establish all of the rules and day-to-day activities of your business. Not only is this a good idea, but it also is required by Kentucky for all corporations.
Your corporate bylaws may include:
While you are not required to file your bylaws anywhere, you are required to keep them in a safe place with any other corporate records. It’s often a good idea when starting to set up a corporate records book where you can keep all of your corporation’s important papers, including bylaws, minutes from meetings, and stock certificates.
Since the bylaws are a legally binding document, it is good to seek assistance when creating them. You can find templates online with ZenBusiness to get yourself started.
The shareholder or stockholder agreement is a document that outlines the rights and responsibilities of all shareholders in the company. It may include the following:
Again, this agreement can be drafted from a template, but you may want to utilize professional assistance. Your shareholder agreement should be kept with your other important corporate records.
One of the requirements for starting a corporation is issuing stock. When you filed your Articles of Incorporation, you stated the number of stock shares that were authorized. The number of shares you issue should always be less than or equal to this number.
It’s a good idea to determine how much capital you need before issuing shares of stock so that you can determine a reasonable value for each share. Shares of stock may also be issued in exchange for services or other noncash value and capital contributions.
Each share is only issued once. However, after being issued, it can be traded and sold. All issued shares must be documented in the company’s annual report. Although it is not typically required, many corporations issue certificates to shareholders, indicating their shares.
Stock may be issued publicly or privately. Privately issued stock is usually issued to the founders or a private group of investors. A public corporation makes a portion of its stock shares available for public purchase.
Companies that issue public stock need to file quarterly statements with the Securities and Exchange Commission (SEC). They must also track how many shares are issued and to whom. You should also check with the Securities Division of the Kentucky Department of Financial Institutions for regulations and requirements at the state level.
Corporations are generally regarded as unique entities separate from the people involved in them. As such, you will need to acquire an Employer Identification Number (EIN). This number acts like the corporation’s Social Security number for tax purposes.
Visit the IRS website and fill out the online form. It only takes a few minutes and is free. Afterward, you will receive your EIN. Keep this number safe, as you will need it for future documentation and filing your business’s tax returns.
Remember that corporations must pay their own taxes separate from any taxes paid on shareholder earnings. This must be done at the federal and state levels by submitting the appropriate returns each year.
In Kentucky, all corporations are required to file an annual report to update information with the commonwealth. You should expect to receive a reminder postcard in January and will have until June 30 of that year to return the completed postcard or complete your annual report by filing online with the Secretary of State.
Information you will need to provide in your annual report includes:
In addition, you will need to submit a $15 filing fee. If you fail to file the annual report and pay the $15 fee, the commonwealth can dissolve your corporation in 60 days.
The exact cost of starting a Kentucky corporation will vary depending on the size and type of business and where it is located. You will need to pay the $50 fee for filing the Articles of Incorporation at a minimum. Additional fees may include:
ZenBusiness can help get your corporation off the ground by assisting with many of the required steps for a low annual fee.
How a corporation is taxed in Kentucky depends on its designation. Corporations may be designated as a C corporation, an S corporation, or a nonprofit.
C corporations are treated as separate entities and must file their own tax returns. In addition to this, all owners and shareholders file tax returns for earnings and dividends. This results in double taxation. While that might seem less than ideal, there are some benefits to this tax structure, including more flexibility in what can be deducted.
S corporations are pass-through entities. All profits are passed through to the owners, who must pay on their individual income taxes.
Nonprofit corporations are exempt from paying federal and state taxes, provided they stay within the rules for nonprofit activity. However, anyone drawing a salary from a nonprofit corporation will pay income tax on that salary.
Kentucky has a gross receipts tax called the Limited Liability Entity Tax (LLET) that applies to businesses with limited liability, like corporations and LLCs. Kentucky charges an LLET rate of $950 for every $1,000,000 in gross receipts or $7,500 for every $1,000,000 in gross profits, whichever is lower. The minimum LLET is $175. Visit the Kentucky Department of Revenue website for more information about additional taxes your corporation may be responsible for, including sales tax.
Corporations are known for requiring a lot more paperwork and record keeping. This is not surprising, considering they tend to have more laws to comply with and usually more people involved. Consider bylaws, shareholder agreements, keeping track of all stock issuances, meeting notes, etc., and the paperwork can add up pretty quickly.
LLC stands for limited liability company. This type of business structure is a pass-through entity for tax purposes, and, like a corporation, it is useful in keeping the owners’ assets separate from business assets. However, LLCs do not have a board of directors and do not issue shares.
To change your corporation’s name, you will need to file the Articles of Amendment with the Secretary of State and pay a $50 filing fee.
It takes just one person to form a corporation in Kentucky as the incorporator.
Yes! By using Kentucky’s One Stop Business Portal, you can take care of all of your business filings online, including initial registration.
To dissolve your corporation, you will need to file the Articles of Dissolution. There are different forms and fees for this, depending on whether your corporation is being dissolved by the incorporators or initial directors ($40), by the board of directors or shareholders ($40), or whether your corporation is a nonprofit ($5).
ZenBusiness has experts who can walk you through each step of the process as you get your business started. With our help, navigating the ins and outs of growing a business doesn’t have to be a headache.
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