Starting an LLC in Kentucky becomes super easy when you know the steps to take. That’s why it’s important to go through our easy-to-follow guide to set up your Kentucky LLC. Follow these simple instructions, and you will be able to create a Kentucky LLC in no time with a state filing fees of $40.
An LLC is regarded as a “pass-through” entity similar to a sole proprietorship or partnership for tax purposes. This gives an LLC the ability to avoid double taxation. However, an LLC may choose to be treated as a corporation and it’s that level of flexibility that makes setting up an LLC in Kentucky desirable for entrepreneurs.
Here is a step-by-step guide with explanations on how to start your LLC today and get your business started:
How to Form an LLC in Kentucky
STEP 1: Get a Name for your Kentucky LLC
First things first, your company needs a name. There’s no starting an LLC without deciding on the name first. Note that there is a Kentucky naming guideline that you have to follow while filing your LLC. Also, make sure that the name is easy to search by prospective clients.
Let’s talk about the Kentucky LLC naming guideline:
- It must have the phrase or abbreviations of “limited liability company” in your company name. The abbreviation can either be LLC or L.L.C.
- You can’t use words that might be confusing or looks similar to a government agency such as the State Department, Treasury, etc.
- Other words like Bank, Attorney, Insurance are also restricted. However, you can be permitted if you provide some paperwork and a licensed professional whether a lawyer or doctor as part of your company.
Check if the selected name is free in Kentucky
You can’t use a name that has been taken already. It’s important to carry out a name search to check if it’s still available; browse through the State of Kentucky site. If it’s available, you are good to go but if not, form another name.
Check if the URL is available (optional)
It’s recommended to check if the name is available to use as a web domain. If it’s available, you can buy the URL and keep it till when you are ready for a business website. Nonetheless, it will be good to own the domain for your business name.
STEP 2: Get a Registered Agent in Kentucky
The next step to creating your Kentucky LLC is to choose a registered agent for your LLC. The registered agent has to have a physical address in Kentucky.
But who is a Registered Agent?
This is a person or business entity that bears the responsibility of collecting crucial legal documents for your business. A registered agent can be considered a point of contact for your business with the State.
Who to choose as your Registered Agent?
The registered agent must be residing in Kentucky, and if it’s a corporation operating as a registered agent service, it must have authorization for business transactions in Kentucky. You can even be the registered agent yourself or choose any other person within your company.
It is however highly recommended to go with a 3rd party registered agent service to avoid missing important legal documents and notices.
STEP 3: File the Kentucky Articles of Organization
Filing the Articles of Organization is vital to your LLC registration with the State. You can do it online, in person, or by Mail, whichever way is convenient for you.
Needed information for a Kentucky LLC formation
Quite a lot of paperwork needs to be filed to form an LLC in Kentucky. You will need to file the articles of organization with the Secretary of the State of Kentucky. The article needs to contain information such as:
- Name of the LLC
- The physical address
- The mailing address
- The addresses of the principal office of the LLC
- Name and address of the LLC’s registered agents
- Indicate if the LLC is managed by a manager or by members
- The effective date of the article
Ways to file your LLC in Kentucky
You can also have an agent file the necessary paperwork on your behalf. The agent can also assist in reminding you of deadlines to file your paper works. Don’t forget to clarify if you want your Kentucky LLC to be manager-managed or member-managed. Here are a few ways to file your LLC in Kentucky:
- You can file your LLC online through the Kentucky Business One Stop Portal.
- If you are filing by Mail, you can download the forms and mail them to:
Office of the Secretary of State
PO Box 718
Frankfort, KY 40602
- And if you want to submit in person, go to:
Room 154, Capitol Building
700 Capital Avenue
Frankfort, KY 40601
Hours of Operation: 8:00 AM-4:30 PM ET
The State Filing Cost is a nonrefundable fee of $40, which is payable to the “Kentucky State Treasurer.” However, if you want to expand your existing LLC to Kentucky, you have to create a Foreign LLC.
STEP 4: Create Your LLC Operating Agreement
In Kentucky, it’s not compulsory to have an operating agreement to start an LLC. However, it’s good to get one for your business.
So what’s an Operating Agreement? It is a legal document that states the proprietorship and operating policies of an LLC in Kentucky.
What’s the need for an operating agreement? Operating agreements provide full details about the business structure and management to ensure that all owners are fully aware and prevent possible future disagreement.
STEP 5: Obtain an EIN
So is an EIN important for your LLC? It absolutely is. An EIN stands for Employer Identification Number and has nine digits. EINs are allocated to identify different businesses for tax purposes. The Internal Revenue Service(IRS) is in charge of assigning EINs, which are just like Social Security numbers for businesses.
Sometimes EIN is also termed a Federal Tax Identification Number (FEIN) or Federal Employer Identification Number (FEIN)
Why should you get an EIN? You need an EIN to:
- Open a bank account for your business
- Document and organize Federal and State Taxes
- Employ staff
If you already have an EIN as a sole proprietor, you are still expected to get a different EIN for an LLC.
When you are ready to get one, you don’t need to worry about where to go or how much you need to pay. You can do it by Mail or online, and you get it from the IRS for free.
If you are an international EIN applicant, there’s no need for an SSN to get your EIN. You can either go in person to the IRS office or apply for it by fax or sending a mail to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
Things to do After Forming an LLC in Kentucky
It is a great thing to start an LLC, but you definitely can’t stop there. There are important steps to take that will ensure the smooth running and development of your business.
Hire a Business Accountant
It would be unwise to think that you can run your LLC in Kentucky at its best without an expert business accountant. Among other things, an LLC has an impressive business structure that grants you some fantastic benefits. You can write off business expenses and also enjoy pass-through taxation.
Hire a business-savvy accountant who’s an expert at taking advantage of these things. You will be saving your business a lot of money in taxes every year, including yourself. A business-savvy accountant doesn’t just save you based on taxes alone; although that’s quite obvious, there are a lot more:
- Managing payrolls for your business and your staffs
- Expert recommendation on advanced business management for deeper tax savings
- Preventing costly mistakes and keeping your business in the IRS good book
- Keeping detailed records of expenses and reconciling your business bank accounts
- Find out loopholes causing losses or untapped profit in your business
The best time to start a working relationship with a good business accountant is when you are just launching your LLC. You need expert advice as you begin your LLC so that you’re not starting your business on the wrong foot. It will give you a solid foundation and also maintain clean business finances in the future.
Separate your Personal and Business Assets
Avoid mixing up your personal and business accounts. Just don’t do it. If there should be an issue of a lawsuit against your Kentucky LLC, your personal assets will be affected if you mix them with your LLC.
Hence, it is only wise that you separate them. You can protect your Kentucky LLC by taking these steps:
Creating a business checking account:
Doing this puts clear segregation between your personal accounts and business accounts. Your personal assets won’t suffer from any business lawsuit, and it’s important to have personal asset protection.
Besides protecting your assets, you will be making your tax filings and accounting a lot easier without mixing things up.
Obtaining a business credit card:
It helps differentiate all business expenses from your personal expenses. When these are separate, you can establish your business credit history, which you can use to raise capital later. Your company’s credit history can help raise tangible business loans if you need them anytime in the future.
Acquire Business Insurance for your Kentucky LLC
You need business insurance for risk management as you grow your business. Getting business insurance helps you focus totally on building your business without having to worry about tomorrow. Some of the most popular business insurances include:
- General Liability Insurance: This is an extensive insurance policy that is for business protection against lawsuits. It’s the common go-to business insurance for many small businesses.
- Professional Liability Insurance: This is a specialized type of business insurance that is simply for professional service providers such as lawyers, doctors, etc. This business insurance protects professionals from cases of malpractice and any business mistakes.
- Workers’ Compensation Insurance: A kind of business insurance covering cases such as employees’ job-related sicknesses, wounds, or deaths. One of Kentucky’s law requirements is that an LLC with five or more staff must possess workers’ compensation insurance. Bear in mind that officials and members of an LLC are treated as staff.
Share Press Releases
Press releases are very beneficial to your company. They establish brand awareness. Press releases give your business the publicity it needs to thrive in a tough marketplace. It is worth considering as it is a cost-effective way of getting exposure. You enjoy both short-term and long-term benefits for your business.
Keep Your LLC Compliant
Get the Necessary Business Permits and Licenses
Before your LLC can start its operations, you need to obtain the necessary licenses and permits for your business. The licenses and permits required depend on the type of business you wish to run.
Permits range from health permits to signage and building permits. You can hire a professional external service to help you list the licenses and permits that you may require.
Asides from that, you can also check the State of Kentucky’s one-stop business portal to find out more about the licenses and permits that you would be needing. Every LLC also needs to obtain business-specific federal licenses and permits. Check out the US Small Business Administration’s guide (SBA) to find out more about these permits.
Comply with Tax-filing Requirements
It is imperative to register your company with government tax agencies to operate as an LLC in Kentucky. These taxes include self-employment taxes imposed on the company’s profits and sales tax – which is the tax paid on the purchase of physical goods. This tax is collected at the point of sale.
There is also the federal income tax and other industry-specific taxes imposed on businesses operating within specific industries; some of these industries are the hospitality and service industry.
Applying for Renewal
The State of Kentucky requires all LLCs to file their annual report with the State’s secretary. There are specific punishments attached for failure to comply with this requirement as the company may be fined and may even be dissolved by the government. LLCs can always file their annual report from the 1st of January to the 1st of June every year.
Frequently Asked Questions
Do you need a Registered Agent service?
A Registered Agent Service is someone or corporation who accepts official mails on behalf of your business. In simple terms, he/she acts as the intermediary for communication between the government and your business. You can appoint yourself as the registered agent or get a professional agent service for your business.
What is the difference between domestic Kentucky LLC and foreign Kentucky LLC?
A foreign Kentucky LLC is an LLC that was created in another state but operates within Kentucky. On the other hand, a domestic Kentucky LLC is an LLC that was created within Kentucky and operates within Kentucky.
All foreign Kentucky LLCs are required to register with the Kentucky Secretary of State.
What is an LLC?
An LLC is an abbreviation that stands for Limited Liability Company. A Limited Liability Company is a business structure that allows the owner(s) to put a limit to personal debt as a result of losses incurred in the business while still enjoying the flexibility and freedom that a sole proprietorship business enjoys.
Do I need a DBA for a Kentucky LLC?
No, you do not need a DBA for your LLC in Kentucky if you conduct your businesses under the official name with which the LLC was registered. A DBA is only required if you are planning on having a separate “Brand” name.