Do you want to expand an existing LLC into Kentucky with a foreign qualification, but you’re not familiar with the process?
This guide will outline important details when expanding your business and explain how to foreign qualify an LLC in Kentucky.
Your business is growing, and you’re planning an expansion to other states. It’s a good problem to have!
But it’s not quite as simple as choosing another location. Because each state has different rules and requirements for business operations, you may need a “foreign qualification” in each state where you plan to do business.
It’s a common misconception that foreign qualification is only for businesses operating outside the U.S. But in this case, “foreign” refers to any business operating in a state that isn’t the state where the LLC was originally formed.
For example, if your LLC is registered in Ohio and you are looking to open a second location in Kentucky, you may need to complete a foreign qualification in Kentucky before you can expand there.
Important Note: If you’d like to save time and have the foreign qualification paperwork taken care of for you, many of the best LLC services can handle this task for you.
Foreign qualifying is essentially asking permission to do business in the state of Kentucky. And the notion that “it’s easier to ask forgiveness than permission” doesn’t apply here. Failing to foreign qualify before starting a business in Kentucky yields consequences that are far costlier than registering in the first place.
If you fail to foreign qualify, your business will be prohibited from maintaining any action or lawsuit in Kentucky courts. Plus, the attorney general could stay any in-progress actions or proceedings your LLC commenced. And there are monetary fines too. Your LLC will be subject to a $2 fine for each day it has been transacting business without authorization in the state.
Two dollars might not seem like much, but when you consider that it adds up to $730 a year, it looks much more intimidating. You would also need to make up any LLC taxes that you should have been paying. That – combined with the fact that you could lose your legal standing in Kentucky – makes operating in the state without foreign qualifying a risky move.
Although, there are some things that would remain unaffected. Transacting business without authorization won’t, for example, invalidate your LLC’s current contracts; nor would it prevent you from defending an action in court.
Find more information on these penalties in Kentucky’s Revised Statutes, Section 14A.9-020.
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Kentucky? The state statutes are fairly quiet on what specifically constitutes “doing business,” but according to other state and tax laws, you are considered to be “doing business” and required to foreign qualify in most states if:
Depending on how you’ve structured your LLC, you also might be subject to specific business taxes in Kentucky. Without a foreign qualification on file, the state would be unaware of your LLC’s tax status, and this could lead to even larger penalties later on. So, foreign qualifying right away can help you stay in good standing with the state and avoid further fines. It’s important to always stay on top of your LLC’s taxation requirements to avoid any unwelcome surprises.
If you’re unsure whether or not you need to file for a foreign qualification in Kentucky, we suggest seeking legal counsel.
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Kentucky. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
You can find this list in more detail in the Kentucky Revised Statutes, Section 14A.9-010. After reviewing both lists, see if your business activities in Kentucky are included. If they are, you’re probably exempt from foreign qualifying. However, it’s wise to seek legal counsel if you’re unsure or if you just want to double-check.
Foreign qualification in Kentucky is simple if you know where to find and send your forms. If you or your legal counsel has decided to foreign qualify your LLC in Kentucky, go to the Secretary of State Business Forms Library and scroll down to the Foreign Limited Liability Companies section. There you’ll find a link for the “Certificate of Authority.” Click it to begin your foreign qualification journey.
Unfortunately, online filing isn’t an option for this form, so you’ll need to download it and submit it via mail or in person. To streamline the process, gather all your information beforehand so you won’t have to stop and search while filling out your form. Here’s what you’ll need:
When you’re finished, you can mail your form to:
Secretary of State
P.O. Box 718
Frankfort, Kentucky 40602-0718
If you live near Frankfort and want to physically hand it in, that works too! Drop it off at:
Capitol Building, Room 154
700 Capital Ave.
Frankfort, Kentucky 40601
Foreign qualifying isn’t cheap, but Kentucky’s $90 fee is a lot less than some other states. You can pay this fee by including a check made out to the “Kentucky State Treasurer” with your form.
After your form is in and your fee is paid, sit back, take a deep breath, and pat yourself on the back. Your LLC is foreign qualified and you’re embarking on another chapter in the life of your business.
But we’re not done yet! Before submitting your document and payment, quickly check to make sure your LLC name follows Kentucky’s business naming guidelines. Your name must:
You can also reserve your Kentucky business name if you’re not quite ready to foreign qualify your LLC.
We think you should foreign qualify your LLC before you begin conducting business in a new state. If you don’t, your business could be subject to a broad range of fines and penalties for operating an LLC in a jurisdiction where you don’t have permission to do so.
Kentucky processes business filings faster than most states, as they can get your LLC foreign qualified the same day you submit your paperwork in many cases. That said, it can take up to three business days, which is still quicker than you’ll find in most states.
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Kentucky state law. For more information about business licenses and more in this state, check out the Permits, Licenses, and Renewals page on the Kentucky One-Stop Business Portal website.
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a Kentucky LLC Annual Report.
The overall costs of operating a Kentucky LLC can vary considerably based on the specifics of your business. However, we created a helpful guide to help you identify and plan for every expense your LLC will face in this state.
The answer to this question lies in your personal preferences, but we can give some general pointers. An attorney will cost the most by a mile, but also provides expertise you won’t find with the other options. The DIY route is free of charge but can require quite a bit of legwork and provides no peace of mind that the process is being completed correctly.
Using an LLC service means your business will be foreign qualified by professionals who know what they’re doing, while also costing significantly less than a lawyer. This “best of both worlds” attribute is what makes LLC services our preferred option.
Using an online LLC service removes much of the hassle from the foreign qualification process. With these services, all you need to do is provide them with the name, location, and industry your business operates in, along with some info about yourself and your Kentucky registered agent.
The service then registers your Certificate of Authority with the state to qualify your LLC to do business in Kentucky.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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