If you’ve decided to start a new business — congratulations! Creating your own company can be an exciting time. However, figuring out the legal requirements and steps you need to take to form your business officially can seem overwhelming at first.
Luckily, forming a limited liability company (LLC) in Kentucky is an affordable and relatively easy process. Once you understand all the steps you’ll need to take, the rest of the process is fairly straightforward.
Best of all, once you know the steps you’ll need to take to make your LLC official, the process can be completed rather quickly, and it can all be completed online. Of course, you can always consult professional help along the way to take some burden off you.
To help, we’ve created this simple step-by-step guide to walk you through the LLC formation process in Kentucky. We’ll discuss the steps you’ll need to take and direct you through each one in detail. We’ll also explain how the right LLC partner can help speed up the formation process, so you can have your Kentucky business up and running in no time.
We know that your priority as a new business owner is to grow and market your Kentucky LLC — so allow this guide to demystify the process for you.
The 5 steps to form an LLC in Kentucky:
To start your LLC in Kentucky, you’ll begin by registering your new company with the Secretary of State. This allows your business’s information to become public to Kentucky, allowing the government to reach out regarding new regulations or important business communications.
Before you can file this paperwork and register your LLC, you’ll need to do some legwork. You’ll start by deciding on your LLC’s official name and reserving it through the Secretary of State’s office. You’ll also want to choose a registered agent to handle communications from the Kentucky government, create an Operating Agreement to dictate your company’s operating structure, and set up your business with the IRS.
We’ll take you through each of these requirements for setting up a Kentucky LLC below.
Step 1: Name Your Kentucky LLC
One of the most important decisions you’ll make when launching your Kentucky LLC is deciding on your company’s name. Your name needs to achieve a few goals: It should be distinct and memorable, quickly sum up what your product or service offers, and follow all Kentucky government regulations.
You may already have a name in mind. We recommend making a list of three to five names (or more) that you might like to use for your business. Even if you’re sold on one name, you’ll need to research to find out if another company in Kentucky has already secured this name.
In Kentucky, your LLC name must be unique, so you’ll need to check existing business names to ensure there are no conflicts. To do this, you’ll use the Kentucky Secretary of State Name Availability Search. Type in your company name, and the database will let you know if another business has already taken it. Once you’ve found a name that’s available, move on to the next step.
In Kentucky, you must add an LLC designation to the end of your official company name. This means that you’ll need to add a designation like “LLC” or “Limited Liability Company” to the end of your business name. You can find a full list of all acceptable designations below.
- Limited Liability Company
- Ltd. Liability Company
- Limited Liability Co.
- Ltd. Liability Co.
- Limited Company
Once you’ve decided on a name and designation, you can reserve it to ensure that no one else registers it before you. To do this, you’ll fill out a Reservation or Renewal of Reserved Name form on the Kentucky Secretary of State’s website. This will reserve your name for up to 120 days.
You can file this form via mail for $15.
You’ll likely want to use your LLC name on a website, too. Double-check through a domain name search on whether it is available, and have someone like ZenBusiness reserve your website domain name once you’ve made your choice.
A couple of other things you want to think about are trademarks and a DBA. Visit the United States Patent and Trademark Office website to see whether your business name or logo is trademarked at the federal level. Trademarks happen at the state level as well. Look here to find out more about trademarks in Kentucky or to file for a trademark there.
If you want your LLC to operate under a name other than its legal name, you’ll need a DBA or “Doing Business As” name. To see if the DBA you want is available, use the same process above. Then file a Certificate of Assumed Name with the Kentucky Secretary of State.
Step 2: Appoint a Registered Agent in Kentucky
Now that you’ve named your LLC, you’re ready to assign a Kentucky registered agent. Your registered agent will act as a third party between you and the Secretary of State’s office, passing along important communications and paperwork.
All Kentucky LLCs must assign a registered agent. You can work with an individual or company, as long as they have a registered office located in Kentucky and can be found during normal business hours. This must be a physical Kentucky address and not a P.O. box.
Sometimes, LLC members decide to act as their registered agent. While that’s perfectly legal under Kentucky law, it’s not always recommended. Since registered agents can be served legal documents, like subpoenas or service of process, this means that when acting as your agent, you could receive subpoenas and summons in front of clients. When you act as your registered agent, you might also have to make some of your information public.
For these reasons, many LLCs decide to partner with an outside registered agent service that can receive paperwork on your company’s behalf and ensure you remain in good standing by completing any paperwork with a hard deadline. Hiring a registered agent in Kentucky is generally affordable, as well.
Some other benefits of working with an outside registered agent include:
- With a registered agent that has a registered address, you don’t have to take the time (or pay the fees) to file your change of address if your business ever moves locations.
- The business owner is able to work unusual business hours while someone else is available for the traditional 9 to 5, Monday through Friday.
Step 3: File Kentucky Articles of Organization
Now that you have your official LLC name and designated registered agent, you’re ready to register your business with Kentucky. To officially register your LLC, you’ll need to fill out the Kentucky Articles of Organization LLC form.
To complete this form, you’ll need to provide the below information:
- Your LLC Name. This is your company’s official name with the LLC designation.
- Your Registered Agent’s Address and Name. This is your registered agent’s office address (must be in Kentucky) and their legal name.
- Your LLC Operating Address. This is your LLC’s primary operating address (it can be the office address or your residence).
- Management Structure. This is where you’ll indicate if your LLC is run by managers or members. Member-managed LLCs are run by the members (owners) of the LLC. Manager-managed LLCs are run by a manager (an owner or outside party) who is appointed by the members.
- County of Operation. This refers to the county where your office address is located.
- Your LLC Size. You’ll select the estimated size of your company and employees.
- Your LLC Industry. You’ll indicate the industry your LLC operates within.
- Partner Signature. This is where you’ll sign the form. Up to two partners can sign.
- Registered Agent Signature. This is where your registered agent will sign.
You’ll also need to pay a $40 fee when filing online or via the mail.
For those who choose to mail it in, you can send it to:
Alison Lundergan Grimes
Office of the Secretary of State
PO Box 718
Frankfort, KY 40602
Step 4: Create an Operating Agreement
In Kentucky, Operating Agreements are highly recommended but are not required. Your Operating Agreement clearly defines how your LLC is owned and structured, detailing how financial decisions are made and how employees are managed.
Even if you’re forming an LLC where you’re the sole member, it might be good to construct an Operating Agreement. This agreement can protect you if you’re incapacitated or unable to run your business for any reason. Without an agreement, you’ll default to Kentucky LLC law, which might not reflect your LLC’s best interests.
Let’s look at a few other key benefits of creating an Operating Agreement for your LLC.
- Your LLC Operating Agreement better separates your company’s liability and assets from your personal assets and liability in the eyes of the courts.
- Your Operating Agreement allows new investors or owners to review how the company is managed and run before making any commitments.
- Conflicts can typically be resolved quickly by consulting your Operating Agreement — partner disputes and voting structures should be detailed in your agreement.
While you don’t have to file your Operating Agreement with Kentucky, you should still make sure it covers all your bases.
Step 5: Apply for an EIN
Now that you’ve registered your LLC in Kentucky and created your Operating Agreement, you’re ready to register with the Internal Revenue Service (IRS). You’ll start this process by registering for an Employer Identification Number (EIN).
Think of your LLC’s EIN as your company’s Social Security number. It allows your LLC to be easily identified by the government and lets you file taxes, hire new employees, and open business bank accounts.
Sometimes a single-member LLC with no employees isn’t required to secure an EIN, providing they fall within the IRS’s parameters. But even those who aren’t legally required to have an EIN can benefit from having one because using an EIN can build business credit and help protect against identity theft, as you won’t be using your Social Security number for business purposes.
You can apply for an EIN online by visiting the IRS website. You should receive your EIN right after you submit your request. There’s also no charge for this service.
How much does it cost to start an LLC in Kentucky?
So, how much does it cost to form an LLC in Kentucky? Let’s take a look at the basic filing fees below. Breakdown of formation expenses:
- Reserving Your Business Name: $15
- Filing Your Articles of Organization: $40
- Applying for an EIN: $0
The total base cost for forming your Kentucky LLC is $55. However, this does not cover the cost of special permits or licenses or applying for expedited processing on any of your documents. These fees also don’t take into consideration the time or effort you’ll need to spend filing them and making sure your information is correct. You will need to file your annual report each year, as well, which should be submitted with a filing fee. To help, you can team up with ZenBusiness to help you navigate this process for a low price.
What are the benefits of an LLC in Kentucky?
LLCs are a popular business structure for many reasons. This type of business allows for ultimate flexibility in management while offering personal financial and legal protections. LLCs are also very straightforward to set up.
Here are a few reasons forming an LLC in Kentucky is an excellent choice:
- LLCs offer separation between your personal liability and debts and your business liability and debts.
- LLCs allow you to manage your company as you see fit and have very few rules and regulations to adhere to.
- LLCs are exempt from double taxation. This means you’ll only pay taxes on your LLC profits when filing your personal tax return versus paying taxes on both your corporate tax return and your personal tax return.
- LLCs have fewer reporting requirements than business structures like corporations.
Want to learn more about the benefits of forming an LLC? Check out our comprehensive guide for more information.
How is a Kentucky LLC taxed?
As already noted, Kentucky LLC owners are exempt from double taxation. This means your company won’t pay taxes on the income you own, but you will. Of course, there are other tax requirements you’ll need to be aware of. An experienced accountant or tax specialist can come in handy here, to ensure you make the best tax decisions and are tax-compliant.
Here are a few additional tax requirements you’ll need to keep in mind.
- Self-employment tax: LLC members aren’t employees, so Social Security and Medicare contributions aren’t withheld from their paychecks. Instead, most LLC owners are required to make those contributions as “self-employment taxes” and pay them directly to the IRS on their tax returns.
- If you choose to be taxed as a corporation: Though most new LLCs prefer to be taxed the default way (as a sole proprietorship or partnership), for some LLCs (particularly those with very high earnings), it may be advantageous to be taxed as a corporation, either a C corporation or an S corporation. These options can have some distinct advantages, which you can learn more about here. To file as a C corporation, you’ll need to file an 8832 tax form with the IRS. For an S corporation, you’ll need Form 1120-S. Your personal taxes will be filed separately. Before deciding, consult a qualified accountant.
- To avoid tax penalties: You’ll be responsible for making sure your LLC pays estimated quarterly taxes each year. These payments must be made for both your Kentucky and federal taxes. If you have employees, you’ll also be required to withhold taxes from their paychecks. You’ll need to apply for a withholding account in Kentucky and submit these withholdings to the IRS regularly. Employers must also register for the Unemployment Insurance Tax with the Kentucky Office of Unemployment Insurance.
- To satisfy sales tax requirements: If your company sells items/services and collects sales tax, you need to fill out sales tax forms, depending on your industry, via the Kentucky Department of Revenue.
- To stay compliant: You need to pay a Limited Liability Entity Tax (LLET) each year. This tax is a minimum of $175 (or an amount computed by their formula, whichever is higher).
Kentucky LLC FAQs
- What is the processing time to form my Kentucky LLC?
If you file your Articles of Organization online with the commonwealth of Kentucky, your request is generally processed within minutes and active within 24 hours. If you file through the mail, your request may take longer to process.
- Do I need to file an Operating Agreement with the state of Kentucky?
No, you are not required to file an Operating Agreement in Kentucky, although the law strongly encourages all LLCs to create one.
- What tax structure should I choose for my Kentucky LLC?
Most LLC owners decide to have their business taxed the default way, which is as a sole proprietorship (for single-member LLCs) or a partnership (for multi-member LLCs). This method only requires members to pay taxes on their percentage of their profits on their personal tax returns. The LLC itself is not taxed. This avoids the “double taxation” that corporate shareholders pay, in which profits are taxed both at the business level and the personal level.rnrnIf your LLC is large or has particularly high earnings, it may make sense to file your taxes as a corporation instead. It’s important to understand the tax distinctions before making this decision. You should reach out to an experienced accountant and read through this guide on corporation taxes.
- Does Kentucky allow a Series LLC?
Kentucky does not allow you to form a Series LLC. A Series LLC, which is essentially several child LLCs operating under one parent LLC, is an intriguing business structure for many entrepreneurs. Still, many states in the U.S. do not allow for this type of company.
- Which licenses and insurance are required for an LLC in Kentucky?
While Kentucky does not require a general business license for your LLC to operate, some industries have different requirements. Not sure if your industry requires a specific license or permit? No problem. You can learn more about these requirements at Kentucky’s One Stop Business Portal and submit any requests online.rnrnIn any case, we recommend hiring a professional service like ZenBusiness, which will provide you with a comprehensive package of all the licenses and insurance required for your Kentucky LLC.
- How do you dissolve an LLC in Kentucky?
To dissolve your Kentucky LLC, you must file your. The fee for filing is $40.