Kentucky’s central location facilitates the distribution of goods and materials to a massive industrial and consumer market, making it an excellent location to start a business. It’s home to two international airports and major hubs for UPS, DHL, Amazon, and FedEx. The cost of doing business in Kentucky is one of the lowest in the nation, with strong tax incentives and business-friendly policies.
Read on for how to start an LLC in Kentucky in simple steps, with key considerations for types of LLCs.
What Is a Kentucky LLC?
A limited liability company or LLC is a legal business entity that offers liability protection for its owners or members. A Kentucky LLC is an LLC formed in Kentucky or registered to do business in the state. It offers simplified administration, minimal paperwork, and pass-through taxation. A Kentucky LLC may elect to be taxed as an S-corporation or a C-corporation. All Kentucky LLCs must file their articles of organization with the Secretary of State.
What to Consider Before Forming an LLC in Kentucky?
Before forming an LLC in Kentucky, business owners will need to consider the industry, market, niche, and the best legal entity for their business goals. This includes deciding why you want to choose an LLC as your business entity.
You will also want to create a business plan, conduct market and customer research, and decide why you want to choose an LLC as your business entity. Other possible considerations before forming a Kentucky LLC include:
- How many owners or members will you have?
- What is your target market, including competitor research?
- Do you have a unique offering to fulfill your target market’s needs?
- What is your company’s vision and mission?
8 Steps to Start an LLC in Kentucky
Once you’re ready to start an LLC in Kentucky, it only takes four steps to create the legal entity and another few steps to lay the groundwork to open the business. You’ll find details of each of these steps here.
Step 1: Decide on a Business Name
A business name is a powerful marketing tool and means of connecting with potential clients. This should be unique and distinguishable from existing business entities in the state.
When choosing an LLC name, you must include “limited liability company” or one of its abbreviations.
To check possible names in the US, you can start by checking the US patent and trademark office to ensure the name isn’t trademarked. You’ll also want to check available URLs for a domain name. A Google search of possible names will show websites and businesses with related names.
You can check with the Kentucky Secretary of State’s database to confirm your chosen business name isn’t already taken. You can also search for businesses with the same name nationwide. Sometimes, you can also choose to use a DBA or fictitious name for the business.
Step 2: Choose a Registered Agent
A registered agent is an individual or business entity designated to receive and accept legal documents on behalf of the business. A Kentucky registered agent must have a physical address in Kentucky and be available during normal business hours to accept service of process if the business is involved in litigation. Any Kentucky resident, Kentucky business, or foreign business operating in Kentucky can serve as a registered agent.
You can be your own registered agent as long as you have an office in Kentucky and are available during regular business hours.
Step 3: Prepare and File LLC Articles of Organization
To form an LLC in Kentucky, you must file articles of organization for Kentucky. This legal document provides the necessary information about the LLC, such as its name, address, purpose, and the names of its members or managers.
By filing the articles of organization, the LLC becomes a legally recognized entity separate from its owners. This gives you liability protection, as it legally separates your personal assets from the company’s debts and liabilities.
To file articles of organization in Kentucky, you must pay a $40 filing fee. You can find more Kentucky filing information here.
Step 4: Draft an LLC Operating Agreement
After forming an LLC and filing with the Secretary of State, business owners’ next step is creating an operating agreement. The operating agreement is a legal contract between members to govern the company’s internal affairs. It outlines the rights, responsibilities, and operating procedures, including the distribution of profits and losses, management structure, decision-making process, and dispute resolution.
Common elements of an operating agreement include:
- Equity structure
- Capital contribution
- Allocation of profits, losses, and distributions
- Additional agreements or points of management
What’s Next After Filing an LLC in Kentucky?
After you’ve filed with the Kentucky Secretary of State and set up an operating agreement between members, the remaining steps are necessary for the business to open its doors. Here are the final steps to prepare your business to operate in Kentucky legally.
Step 5: Apply for EIN
An employer identification number (EIN) is necessary to hire employees and open a business bank account. Even as a single-member LLC, getting an EIN is necessary to open a business bank account, so you’ll have the option of hiring employees as the business grows. Each LLC needs its own EIN, so you cannot use an EIN you have for another LLC or business entity.
After filing form SS-4 with the IRS, you will receive a confirmation letter where you can find your EIN. If you’ve lost your EIN or misplaced this confirmation letter, you can recover it directly with the IRS or find it on other business documents.
Step 6: Open a Business Bank Account
Once you’ve received an EIN, it’s time to open a business bank account. Taking the time to open a business bank account can help protect your personal assets and ensure that you comply with legal and tax requirements. Keeping your business bank account separate from your personal bank account can improve financial management and accounting efficiency.
A business bank account for your LLC makes it simpler to track business transactions, maintain accurate financial records, and demonstrate the legitimacy of your business to clients, suppliers, and financial institutions.
When opening a business bank account, you may want to ask banks about interest rates, monthly fees, and additional fees to choose the best option for your business.
Step 7: Obtain Licenses or Permits
Licenses vary by industry or profession, state, and local requirements. Depending on the nature of your business, you may need to register for specific licenses with the Kentucky Secretary of State or apply for a local business license in the city or county. Of course, you’ll also need the federal employer identification number and may also want to register with the local Chamber of Commerce or local trade groups to facilitate building the business.
Step: 8: Get Business Insurance
In Kentucky, business owners are required to carry workers’ compensation insurance if they have one or more employees. You might choose additional LLC business insurance, such as general liability insurance. Depending on the type of business, you might choose additional specific coverage, such as:
- Professional liability insurance
- Umbrella insurance
- Directors and officers’ liability insurance
- Liability insurance
- Property insurance
- Commercial vehicle insurance
- Business owner’s policy
- Cyber insurance
3 Types of LLCs to Consider in Kentucky
There are three types of LLCs to consider in Kentucky, from a single-member LLC to a PLLC.
A single-member LLC is created with a single owner or member. This LLC structure offers the same legal protection for your personal assets from business liability as any other LLC. A single-member LLC is a separate business entity that offers simplified administration and management and pass-through taxation so you can easily get the business up and running.
A multi-member LLC is an option for two or more people planning to form a business together. There’s no upper limit on how many members you can add. With a multi-member LLC, you gain a legal business entity, personal liability protection, and other LLC benefits like pass-through taxation and simplified administration. And you also can start a business with as many partners as you choose.
PLLCs are professional services businesses with the same legal protection as a standard LLC. A PLLC is intended for licensed professionals. To form a PLLC in Kentucky, you can file the Kentucky PLLC form and pay the $40 filing fee.
Professions that fall under a PLLC in Kentucky are physicians, osteopaths, optometrists, podiatrists, chiropractors, dentists, nurses, pharmacists, psychologists, occupational therapists, veterinarians, engineers, architects, landscape architects, certified public accountants, public accountants, physical therapist, and attorneys.
Launching a Kentucky Business
A Kentucky business is a big undertaking. You’ll need strong resources and a dedicated team to help take advantage of opportunities and build success. If the list above seems long, don’t worry! doola LLC formation services are here to help you with formation, getting an EIN, and opening a business bank account. Work with doola for fast and easy business formation services so you can focus on core business offerings and building success.
Why should I file an LLC in Kentucky?
Filing an LLC in Kentucky allows you to create a legal business entity to protect personal assets. It also gives legitimacy to your business. An LLC simplifies administration and is fast to open, making it an easy business structure to manage as you grow your company.
How long does it take to get an LLC in Kentucky?
In Kentucky, the Secretary of State normally requires one day of processing time for your LLC. This means that if you mail the articles of organization, you can expect the LLC formation within about a week, allowing for transit time in the mail. Online Kentucky LLC filings are approved immediately.
How much does an LLC cost in Kentucky?
The filing fee to form an LLC in Kentucky is $40. In addition, you’re required to file an annual report and pay the $15 annual filing fee. Hiring a registered agent can add a small amount to the cost of an LLC in Kentucky, usually $50 to $100 a year.
How is an LLC taxed in Kentucky?
As an LLC, you can elect to use pass-through taxation to members or file corporation taxes. In Kentucky, automatic tax treatment is taxed based on the number of members. A single-member LLC can file taxes as a sole proprietorship. A multi-member LLC and is taxed as a partnership by default in Kentucky.
Can I change the name of my LLC in Kentucky after it’s formed?
Yes, you can change the name of the LLC in Kentucky after it’s formed. In Kentucky, you’ll need to file articles of amendment with the Secretary of State. You can do this online or through mail.
Do I need to have a physical office for my LLC in Kentucky?
Yes, you must have a physical office, called a registered office, for the Kentucky LLC, along with a registered agent. For the registered office, someone must be available during regular business hours. You could use a registered agent service if you don’t have a physical office for your LLC.
Can I dissolve or close my LLC in Kentucky if I no longer need it?