Guide to Forming an LLC in Kentucky
Follow our free guide to form an LLC in Kentucky
- Pros and Cons of Forming an LLC in Kentucky
- Starting Your Kentucky LLC
- Maintaining Your Kentucky LLC
- Additional Kentucky Resources
Starting an LLC in Kentucky is a process with multiple steps. This step-by-step guide is divided into two main phases, starting and maintaining your LLC, with an in-depth instruction for every part of Kentucky LLC formation.
Pros and Cons of Forming an LLC in Kentucky
Low Cost for LLC Set-Up
The state fees for LLC set-up in Kentucky are very cost effective and among the lowest in the nation.
Low Taxes for LLCs
LLCs with less than $3 million in annual gross receipts are only required to pay $175 Limited Liability Entity Tax (LLET).
Low Labor Costs
Labor costs in Kentucky are significantly lower than the national average—more than 20%.
Complex Corporate Tax Structure
Kentucky LLCs that choose to be taxed as a corporation must deal with tiered and complicated corporate tax rates, as well as the LLET.
Recording Requirement with County Clerk
New Kentucky LLCs must file a copy of the Articles of Organization with the county clerk’s office; the cost is $10 to $15 and must be in the same county as the registered agent.
Owners Disclosed in Annual Report
Kentucky state law requires all of the LLC members/ managers to be listed in the annual report.
Cost of Doing Business
- $40 filing fee / $10-$15 recording fee
- $15 annual report
- $175 Minimum LLET (under $3 million gross receipts)
Phase One: Starting Your Kentucky LLC
You might assume that forming a Kentucky LLC is difficult, but the process can be fairly simple, especially when you have the right help. The initial steps regarding how to form an LLC in Kentucky lay the foundation for your new business.
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Decide on a Registered Agent
- Step 4: File the Articles of Organization
- Step 5: Create your Operating Agreement
- Step 6: Register for an EIN
Step 1: Name Your Kentucky LLC
The first step in forming your Kentucky LLC is to choose a name your business. Both the state and federal government have guidelines concerning business names. There are also some regulations and restrictions regarding the use of certain words.
Tip: Use a free business name search tool to ensure your company’s desired name is available.
Business Name Guidelines
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.
You will also need to decide on a name for your LLC’s website and reserve a domain name with an online web services site. Even if you do not plan to do much/any online business, having a website is still important for your business.
Step 2: Establish Ownership
LLCs do not have owners—they have members and managers. All LLCs will have members, but only some will have managers; it depends on the business’s chosen management structure.
LLC Management Structures:
- Member-managed: The members are actively involved in operating and making decisions for the LLC
- Manager-managed: An appointed manager oversees the daily operations and decisions of the LLC; the members are not actively involved.
Kentucky LLC Member Guidelines:
Required Number of Members
There must be at least one member or manager to form an LLC in Kentucky.
Member Disclosure Requirements
An organizer may sign and file the Articles of Organization in place of the LLC members.
LLC members in Kentucky may be of any age.
There are no residency restrictions imposed on LLC members in Kentucky.
Step 3: Find a Registered Agent in Kentucky
All businesses formed in Kentucky must have an appointed registered. Your LLC will not be officially formed without this position.
What is a registered agent?
A registered agent can be either a person or business who is authorized to accept official government mail and service of process notices on behalf of the LLC.
Why do you need a registered agent?
The state of Kentucky requires you to appoint a registered agent so that the government has a consistent contact person for your LLC.
What are the main requirements for a registered agent?
- Must have a physical address — P.O. Box not allowed
- Must be available during regular business hours
Who can be a registered agent in Kentucky?
- A Kentucky resident with a physical address
- An LLC or corporation that is licensed to conduct business in Kentucky
Can I be my own registered agent for my business?
You can be your own registered agent as long as you have a physical address in Kentucky.
Is being my own registered agent discouraged?
Since the registered agent’s name and address are publicly listed, LLC business owners who choose to be their own registered agent risk compromising their personal information.
Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in Kentucky. Find more information here.
Step 4: File the Articles of Organization
Filing the Articles of Organization with the Secretary of State is the most important step in creating your Kentucky LLC.
What is the Articles of Organization?
The Articles of Organization is a legally binding document that officially forms your LLC with the state government.
Why do I need the Articles of Organization?
Your Kentucky LLC will not be legally recognized by the Secretary of State as a business without this document. Consider the Articles of Organization as part of your LLC’s foundation.
What information is included in the Articles of Organization?
- The name and address of the LLC (including county)
- The name and location of the registered agent
- The name of the organizer filing the paperwork
- The chosen LLC management structure
- The size of the LLC (number of employees/members)
- The minority makeup of the LLC (minorities/women/veterans)
- The industry of the LLC
- The signature of the organizer AND the registered agent
Additional Kentucky Filing Requirements—Recording Requirement
LLCs formed in Kentucky are also required to file a copy of the Articles of Organization with the County Clerk’s office. The additional fees range from $10-$15, depending on the county. Generally, the form must be filed in the county where the registered agent is located.
Other Kentucky Filing Requirements—Professional Service Businesses
Kentucky permits certain types of professional service businesses to form a Professional Limited Liability Company (PLLC).
The following professions may form a PLLC:
- Physicians/Medical Professionals
- Professional Counselors and Psychologists
- Architects and Engineers
- Social Workers
A few points to consider:
- The name of the business must include “PLLC” or “PLC” (professional limited company).
- All members of the PLLC must be licensed in the profession of the business.
- The PLLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern the PLLC’s profession.
Step 5: Create an LLC Operating Agreement
The Kentucky Secretary of State may not require an LLC Operating Agreement, but this document is still necessary for the successful formation of your LLC.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legal document that explains the operating procedures of the business by defining the roles of the members, as well as each person’s responsibilities and voting privileges.
Why do I need an LLC Operating Agreement?
The Operating Agreement details the roles of the LLC members and provides direction for daily operations; this creates a level of stability and structure that helps to reduce disputes.
Do I need to file the LLC Operating Agreement?
You do not need to file the Operating Agreement with the state; it is for the benefit of your LLC and remains in-house.
What goes into an LLC Operating Agreement?
The LLC Operating Agreement changes with every business, but most documents will include the following information:
- List of the members/managers and their roles
- Designation of authority in the LLC
- Initial capital contributions of the members
- Voting designations and percentages of the members
- Member transfer/addition rules and restrictions
- Distribution of profits
- Meeting schedule
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 6: Register for an EIN
Almost all Kentucky businesses must register for an EIN. Your Kentucky LLC may not be able to function correctly without this ID.
What is an EIN?
The EIN (Employer Identification Number) is a nine-digit number that is assigned to your business by the Internal Revenue Service (IRS). The EIN is also known as a Federal Tax ID and identifies your business with the federal government.
Are all businesses required to have an EIN?
Federal law dictates that certain types of business entities register for an EIN:
- Any business with employees (even if owned by one person)
- Any business with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is not required to have an EIN, but it is still recommended.
Why does my LLC business need an EIN?
The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
In short, if your business earns income and it has employees, you must register an EIN.
Is the EIN publicly listed?
The EIN for your LLC will be part of public record.
Can I use my Social Security Number as the EIN?
You can elect to use your social security number as your business’s EIN (especially if you are sole proprietor); however, the EIN is part of public record.
Swyft Filings offers EIN services for small businesses in Kentucky. Find more information here.
Phase Two: Maintaining Your Kentucky LLC
The initial phase of creating your Kentucky LLC is complete, and you are now ready to move on to the next set of steps that will focus on moving your business forward and remaining compliant.
- Step 1: Register for Taxes in Kentucky
- Step 2: Apply for Permits and Licenses
- Step 3: File the Annual Report for your LLC
- Step 4: Request a Certificate of Good Standing
Step 1: Register for Kentucky State Taxes
LLCs and corporations in Kentucky are responsible for paying the Limited Liability Entity Tax (LLET) — a gross receipts tax for revenue over $3 million. There is a minimum payment due of at least $175 every year (for LLCs with less than $3 million in gross receipts).
LLET Rate Explained:
- 9.5 cents per $100 of gross receipts OR
- .75 cents per $100 of gross profits
You can also choose to have your Kentucky LLC taxed as a corporation; if so you will be responsible for paying the corporate income tax rate on your business’s earnings in addition to the LLET. The corporate tax rate for Kentucky is on a tiered scale and runs from 4% to 6% (see chart below).
Important: Small business owners will also be required to pay state income tax on their earnings. The new income tax rate for Kentucky is a flat rate of 5%.
Other taxes your LLC may need to pay:
- Sales and Use Tax (6%)
- Employee Withholding Tax
- Unemployment Tax
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in Kentucky can vary, depending on a number of variables:
- Location (city and county)
- Type of Business
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File an Annual Report
Any business formed in Kentucky is required to file an annual report with the Secretary of State.
What is an annual report?
An annual report is a legal document that is filed on a periodic basis with the Secretary of State to keep your business’s information updated with the state.
What kind of information is in the annual report?
The information requested in the annual report is similar to what was listed in the Articles of Organization:
- The name and address of the business
- The name and address of the registered agent
- The names of the members
- The business’s EIN
Is the annual report part of public record?
The annual report filed on behalf of your LLC is a matter of public record.
Fees and Due Date
Due Date: June 30th
Implications of Late Filings: Administrative dissolution of the LLC
Swyft Filings helps you stay compliant by providing stress-free solutions. File your annual report with us today.
Step 4: Request a Certificate of Good Standing
Your Kentucky LLC is almost ready for business—all you need now is a Certificate of Good Standing.
What is a Certificate of Good Standing?
The Certificate of Good Standing is an official notification that confirms your business is properly formed and is in compliance with all state regulations.
Who issues the Certificate of Good Standing?
The Certificate of Good Standing is generally issued by the Secretary of State.
When can I request a Certificate of Good Standing for my business?
You will be able to request a Certificate of Good Standing after your LLC is officially formed through the Secretary of State.
Why do I need a Certificate of Good Standing?
Many financial institutions and businesses want proof that your LLC is in good standing with the state government before entering into any contracts or business deals.
Some states also require a Certificate of Good Standing before a business can apply for Foreign Qualification.
Does the Certificate of Good Standing have an expiration date?
The Certificate of Good Standing does not expire/does not need to be renewed.
Swyft Filings can create a Certificate of Good Standing for your Kentucky LLC. Click here for more information.