How to Start an LLC in Kentucky in 2023 [Easy Guide]

A limited liability company (LLC) is a legal arrangement for a firm. It blends a corporation’s limited liability with the independence and absence of formalities offered by a company or sole proprietorship.

Any business owner who wants to restrict his or her legal responsibility for company defaults and claims should think about creating an LLC.

EIN (Employer Identification Number)

You can receive an EIN by filling out a PDF Document (Form SS-4) from the Internal Revenue Service (IRS) or by applying for one on the IRS website.

Any LLC that hires people involves an EIN in order to pay withheld taxes on such jobs, open bank accounts, register for credit cards, and otherwise function separately as a corporate organization.

Operating Agreement

Operating agreements are not necessary when establishing an LLC inside kentucky, but these operating agreements are highly essential. By forming an operating agreement, you are creating a guideline on how the Kentucky LLC will operate; basically, a model about how the business’s corporate relations will be organized. Creating such an operating agreement has been seen to prevent disagreements between staff and owners.

Secretary of State

As the director of the United States Department of State, the Kentucky secretary of state conducts international strategy with the United States administration. The Cabinet rank, founded in 1789, is comparable to that of a foreign minister in other countries.

The Kentucky secretary of state is nominated by the president of the United States and confirmed by the United States Senate during a nomination hearing before the Senate Committee on International Affairs.

Because of the significance of their specific offices, the secretary of state, the secretary of the Treasury, the secretary of Justice, and the Attorney General are commonly recognized as the four most powerful Cabinet members.

The Kentucky Secretary of State is a Class I rank on the Executive Calendar, and therefore collects the salary recommended for that level (US$221,400 in January 2021).

The specified duties of the secretary of state are to supervise US foreign service and immigration policies, as well as to manage the Department of State. The secretary may also counsel the president on U.S. foreign policy concerns, such as the recruitment of diplomats and ambassadors, as well as the firing and recall of certain people.

The secretary of state has the authority to negotiate, interpret, and cancel international security arrangements. The secretary of state can also serve the United States at foreign conventions, associations, and agencies.

Renewal of LLC

Both corporate companies shall preserve their good reputation by sending an annual report to the Secretary of State. Renewals may be done electronically in a matter of seconds by utilizing the record identifier or ID search feature (found linked in the heading of this paragraph).

In Kentucky, state authorities only need the registered agent information, the principal office address, and a few other bits of specific information. Both filers must request a $10 filing charge for their periodic report, but this fee will escalate if the renewal is late.

How To Get an LLC in Kentucky in 2023?

1.  Choose a Name for Your LLC

According to Kentucky statute, an LLC name must include the terms “limited liability company” or “limited company,” as well as the abbreviation “LLC” or “LC.” If you choose to shorten “limited company,” use the abbreviation “LTD CO.”

The business name of your LLC  in Kentucky may be distinct from the names of any corporate companies currently on file with the Kentucky registered Secretary of State. Check the Kentucky Secretary of State company name database to see whether a name is accessible.

By sending a Reservation or Extension of Reserved Name (Form RES) to the Secretary of State, you may reserve a business name for up to 120 days. Reservations may be made online or via mail. There is a filing fee of $15.

When doing business in the real world, you are not forced to use the official legal business name registered in your Articles of Organization. An assumed corporate business name, sometimes known as a fictitious name, “DBA” (short for doing business as), or trade name, may be used instead.

In Kentucky, you have to file a Certificate of Assumed Name (Form ASN) with the Secretary of State in the state of Kentucky. You may file either by mail or online. The registration is valid for a period of five years. There is a $20 filing fee.

2. Appoint a Registered Agent

Any Kentucky LLC must have a service of process agent in the state. There is a person or business entity that offers to sign court documents on behalf of the LLC if it is sued. A registered agent may be a Kentucky resident or a domestic or international business organization that is allowed to do business in Kentucky. A physical street address in Kentucky is needed for the registered agent.

3. File Articles of Organization

An LLC in Kentucky is formed by filing Articles of Organization for a Limited Liability Company (Form KLC) with the Secretary of State in the state of Kentucky. The following elements must be used in the articles:

• the LLC’s name
• the LLC’s street address
• the name and address of the LLC’s registered agent
• the mailing address of the LLC’s initial principal office
• whether the LLC is managed by members or a manager
• the effective date of the articles
• checked boxes showing the LLC’s size and general nature of business, and
• signatures of the LLC’s organizer and registered agent.

The articles may be submitted either online or via letter. There is a $40 filing fee.

4. Prepare an Operating Agreement

In Kentucky, an LLC operating agreement is not necessary, but it is strongly recommended. This is an organizational guide that outlines how the LLC will operate. It outlines the representatives’ and managers’ privileges and duties, as well as how the LLC will be handled.

It will even help you keep your limited liability by demonstrating that your LLC is a distinct business entity. In the absence of an operating agreement, your LLC’s activities would be regulated by state LLC statute. An operating agreement does not need to be lodged with the Articles of Organization if one is established.

5. Obtain an EIN

If you create a one-member LLC in Kentucky, you must receive an EIN only if it would have workers or if you want to levy it as a company rather than a sole proprietorship (disregarded entity). You will get an EIN by filling out an online application on the IRS website. There is no filing fee.

6. Open a business bank account

Keeping your personal and corporate accounts apart allows your accountant to prepare your taxes more efficiently. It may also be used to show that the organization is a different agency from you. If your accounts are intertwined, you may lose your personal money as well as your company profits in a dispute.

Well, the limited liability feature of your Kentucky LLC covers you, but how can anybody tell what money is yours and what belongs to the company if the finances are all merged into the same bank account? Many banks would need evidence that the Kentucky LLC is licensed with the State of Kentucky in order to open an account. Expect to be sent the following forms:

• A stamped—or official—copy of your Articles of Organization
• A Certificate of Good Standing indicating that the organization is duly licensed as a Kentucky LLC.
• A duplicate of your EIN (unless you are a single-member LLC without any employees)

The first two papers are available for free printing from the Secretary of State website. Simply browse their company database for your Kentucky LLC.

7. Get a business license

A general business license is not needed to create an LLC inside Kentucky, however, you will need an occupational license to work in some controlled industries. Among the regulated occupations are:

• Psychologists, psychiatrists, alcohol educators, and social services are also examples of professionals.
• Engineers, developers, and landscape architects
• Cosmetologists, barbers, nail designers, and estheticians are also examples of beauty professionals.
• Electricians and plumbers

Check out the city-specific criteria for the cities in which you would be working. There may be general business licenses or industry-specific licenses. Denver, for example, does not require general licensing but does require permits for food peddlers, dry cleaners, child care centers, and other companies.

8. Open a wage withholding account

Do you plan to recruit staff and deduct taxes from their pay? The state of Kentucky then allows you to open a salary withholding account, which you can do for free online. If you’re recruiting W-2 workers or withholding taxes from 1099 contractors, you’ll need this. You will use this account to administer and reimburse deferred income tax.

9. File Annual Reports

Every year, all Kentucky LLCs must submit a report annually with the Secretary of State by June 30. You must apply the names and addresses of your LLC’s officers and employees, confirm the principal and registered agent, and sign and date the report after submitting the first annual report.

The same details must be verified in corresponding annual reports. The first report is due between January 1 and June 30 of the calendar year following the year in which the LLC was created. Subsequent regular reports must be submitted with the Secretary of State by January 1 and June 30 of the calendar year following.

The report may be submitted electronically, by returning the annual report postcard that your LLC would get in January, or by printing and mailing the annual report. There is a filing fee of $15.

Benefits of Forming an LLC In Kentucky

Personal responsibility insurance and pass-through taxes are the two primary advantages of creating an LLC in Kentucky. We’ll proceed with the most significant. Personal responsibility insurance is a privilege provided by all businesses and limited liability partnerships.

It creates a “security shield” between the personal assets and the assets of the company. If the company is prosecuted, you cannot use your personal assets to pay off any loans or obligations. The second advantage is that pass-through taxation is available to llc, sole proprietorships, and partnerships.

Your corporation is not taxed on its own under this principle. Instead, all corporate gains or expenses are reported on a personal tax return. You escape the downside that Corporations face: double taxation. Paying taxes at both the business and personal levels is referred to as double taxation.

Kentucky LLC vs Corporation

An LLC is Cheaper to Create and Maintain

Unlike a corporation, forming and managing an LLC does not cost a lot of money. The Kentucky Secretary of State charges a one-time filing fee of $50 for the creation of an LLC. The Periodic Report, which is due once a year, costs just $10. It is therefore less costly to manage an LLC than it is to maintain a corporation.

An LLC has Less “Red Tape”

An LLC, unlike a corporation, is not burdened by strict organizational laws. It is not necessary to appoint a board of directors, employ corporate officers, or schedule corporate meetings. A company is liable for this.

An LLC is Not Subject to Double Taxation

As previously said, the gains and expenses of an LLC “pass in” on your personal federal tax return. That is not the case for a corporation, since its earnings are taxed twice. This ensures that earnings are levied at the corporation level, and then dividends are taxed again at the shareholder level.

A limited liability company (LLC) is a “pass-through” organization. This ensures that the earnings are charged at the same pace as your own. The LLC does not file income taxes with the IRS. This is not to say that a Corporation has little potential for development.

This isn’t the case. They are simply more difficult to manage and are best fit for businesses who need to attract capital from outside investors. Consider technology and startup firms.

To start an LLC could be a safer choice for business owners (especially those just starting out) who want to escape the hassle of operating a complicated corporate structure (but also want personal asset protection).

Kentucky LLC vs a Sole Proprietorship/Partnership

An LLC Member Enjoys Personal Liability Protection

An LLC provides a “shield of security” between your personal assets and the assets of your company. When the corporation is prosecuted, only the company’s funds will be used to compensate off the LLC’s debts. In brief, your personal belongings (bank account, home, vehicle, etc.) are safeguarded and secure in the event that the company is sued.

There is no other precaution for a single proprietorship. Since the law considers you and your company to be the same thing, your personal properties will be included if your business is prosecuted. The same holds true with a Partnership.

There is no different agency formed in this situation. When the business is prosecuted, your and your partner’s personal properties will be used to pay off its debts.

Get Business Insurance For Your LLC Kentucky

Company insurance enables you to control costs while concentrating on the success of your LLC. The below are the most popular forms of company insurance:

General Liability Insurance: This is a large insurance scheme that covers the corporation against claims. The majority of small companies obtain general liability protection.
Professional Liability Insurance (PLI) is a form of company insurance that protects cases of malpractice and other business negligence for professional service suppliers (consultants, accountants, and so on).
Workers’ Compensation Insurance: A form of insurance that protects staff who are sick, disabled, or killed on the job. Workers’ compensation policy is required by statute in Kentucky for companies with one or more staff, except officers and LLC registered agent.

Create Your Business Website In Creating An LLC In Kentucky

Creating a website is a significant move toward legitimizing the business. Any organization requires a website. And if you believe the company is too limited or in an offline market, if you do not have a website, you are losing out on a significant portion of future clients and sales.

Some people may believe that designing a company website is out of their control because they lack website-building expertise. Although this was a legitimate problem in 2015, online technology has seen substantial strides in recent years, rendering the lives of small business owners even easier.

The below are the key explanations why you can not put off creating your website:

• Any legal company has a website, period. When it comes to bringing your company online, it doesn’t matter what size or sector it is.
• Social networking accounts, such as Facebook pages or LinkedIn company profiles, are not a substitute for a business website that you own and manage.
• Website builder software, such as the GoDaddy Website Builder, has made it incredibly easy to create a basic website. You don’t need to employ a web developer or designer to build a website you’re proud of.

Send Out a Press Release

Press releases are one of the simplest and most effective ways to advertise the business. They are still one of the least expensive tactics since they:

• Gives advertising
• Establish your brand’s online presence Boost your website’s search engine optimization (SEO), drawing more customers
• Are a one-off commitment in terms of time and resources
• Have long-term advantages

Kentucky LLC Tax Filing Requirements

Sales Tax

If you’re selling a physical item, you’ll usually need to apply for a seller’s permit online at the State of Kentucky’s website. This credential entitles a corporation to receive income tax on taxable sales. The sales tax, commonly known as the “Sales and Use Tax,” is a fee imposed by governments, cities, and towns on commercial purchases including the exchange of such taxable products or services.

Employer Taxes

If you have workers in Kentucky, you must apply with the Unemployment Insurance Tax and the Employee Withholding Tax electronically at the State of Kentucky’s website.

Federal LLC Formation Tax Filing Requirements

Most of the LLC formation must file Form 1065 Partnership Return (most multi-member LLC use this form) and Form 1040 Schedule C with the IRS each year (most single-member LLCs use this form). Your federal taxes would be affected by how you pay yourself as an owner.

Avoid Automatic Dissolution

When an LLC fails to file one or more state reports, it can face penalties and even automatic dissolution. When this occurs, LLC shareholders run the risk of losing their LLC limited liability rights. A good licensed registered agent service will help you avoid this by informing you of impending filing deadlines and sending information on your behalf.

Hiring Employees

If you want to recruit staff for your business, take these measures to keep in compliance with the law:

• Confirm the prospective employers are qualified to serve in the United States.
• Employees can be reported to the state as “recent recruits.”
• Employees can be equipped with employees’ compensation benefits.
• Employee taxes should be withheld.
• Print workplace compliance posters and display them in high-traffic parts of the workplace.

The minimum wage in Kentucky

Kentucky’s minimum wage has been unchanged in 13 years, at $7.25 per hour.

Frequently Asked Questions (FAQs)

Should I form an LLC?

Whether you are just starting out or have been working as a sole proprietor, you should think about creating an LLC. LLCs restrict an owner’s legal responsibility for corporate debts and claims and have a great deal of versatility in terms of business control, management, and taxes.

How do I know if my LLC name is available?

It is important that the name of your LLC be distinguished from the names of all existing companies on file with the Kentucky Secretary of State. To ensure that your suggested name is available, you may perform a free name search on their website.

How much does it cost to form an LLC?

To register the Articles of Organization, the Kentucky Secretary of State charges a fee of $40. You may reserve your LLC name with the Kentucky Secretary of State for $15. Filing on your own is often the cheapest choice, but processing all of the forms and filing them on your own can be difficult. Hiring a lawyer is another choice, but it would also cost you hundreds, if not thousands, of dollars.

Do I need an operating agreement for my Kentucky LLC?

Operating agreements are not needed in Kentucky for LLCs, but they are strongly recommended. An operating agreement can help secure your limited liability status, avoid financial and managerial misunderstandings, and guarantee that you choose the laws that control your company rather than state law by design.

Do I need a business license in Kentucky?

Depending on the nature of your company and where it is based, your LLC can include additional local and state business licenses. Check with the clerk of the community where the LLC’s primary place of business is situated regarding municipal licenses (or county if it is in an unincorporated area).

Are there Kentucky business taxes I need to pay?

In certain situations, such as where you want to market merchandise and pay income tax, or if you have staff, you must file with the Kentucky Department of Revenue (DOR). You may register online (via the Kentucky One Stop Business Portal) or by document (using Form 10A100, Kentucky Tax Registration Application).

Can a foreign LLC do business in Kentucky?

All LLCs created outside of Kentucky must file with the Kentucky Secretary of State in order to do business in the state. Foreign limited liability companies shall nominate a licensed agent for the operation of the process who is physically located in Kentucky. To apply, you must first obtain a Certificate of Authority (Foreign Business Entity) (Form FBE). The application may be sent either online or via mail. The filing fee is $90.

Can I form a single-member LLC?

A Kentucky single-member LLC is treated the same as a multi-member LLC for most purposes of creation. The processes for creating a single-member LLC are the same as those described above. When it comes to preparing a tax report, single-member LLCs have more leeway.

Can I form a professional LLC?

If you wish to create an LLC to offer a licensed professional service, you must first form a professional limited liability company (PLLC). Architects, lawyers, dentists, registered public accountants, and other professionals are examples of technical services. In general, if you offer a business that necessitates acquiring a Kentucky state certificate before training, you are offering a skilled service.

LLCs may be created to offer professional services under Kentucky law. However, only one type of service can be offered, and all of the LLC’s owners must be certified or registered to offer the professional service for which the LLC was established.

Can I dissolve my Kentucky LLC when I’m done?

If you decide to shutter the company and end all activities, you can properly disband your LLC to reduce your responsibility for claims and government fines.

Do I require a Certificate of Good Standing in Kentucky?

Yes, a Certificate of Good Standing, also known as Certificate of Existence in Kentucky acts as a verification document of your limited liability company has adhered all legal requirements, properly formed and maintained. There are various instances which require you to have a Certificate of Good Standing such as open a business account, applications of business licenses and permits and seeking funds from banks.

Conclusion

If you want an easy, low-cost company that covers your personal properties in the event of litigation, then forming an LLC is definitely the best choice for you. If you want a company that is easy, affordable and protects your personal belongings, an LLC is a right choice for you.