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When starting a new company, choosing a business entity is the most important decision that the founders must make. For most businesses with more than one founding member, forming as an LLC is often the best option for a number of reasons.
An LLC is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Moreover, LLCs often enjoy a lower tax rate than corporations. Nevertheless, creating an LLC can get complicated depending on where you are based, with the formation process, filing fees, and continuing legal obligations differing from state to state.
Compared to some other states, starting an LLC in Kentucky is fairly hassle-free: the state follows the standard LLC organization process and its filing fees are some of the lowest in the country. To avoid a misstep in the filing process, follow these steps to start an LLC in Kentucky, and refer to the checklist at the bottom of the post to familiarize yourself with the legal and financial requirements for LLCs in the state.
Starting an LLC in Kentucky step-by-step
1. Select a name for your Kentucky LLC
Follow naming requirements
There are 2 major guidelines to follow when naming your LLC in the state of Kentucky:
- An LLC’s name must be distinguishable from the names of existing businesses on file with the Kentucky Secretary of State.
- An LLC’s name must contain one of the following phrases or abbreviations: “Limited Liability Company”, “Limited Company”, “LLC”, or “LC.” The words “Limited Company” may be abbreviated as “LTD CO.”
Reserve your LLC name with the Kentucky Secretary of State
After selecting a name for your LLC, you can reserve it with the Kentucky Secretary of State for up to 120 days to ensure that it’s still available when you are ready to file your LLC’s Articles of Organization.
First, check the Kentucky FastTrack Business Organization Search to confirm that your chosen LLC name is available for use in the state. If the name is open to be used, file a Reservation or Renewal of Reserved Name application online or by postal mail. The filing fee is $15.
2. Designate a registered agent
As in every U.S. state, forming an LLC in Kentucky requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf.
The registered agent must either be a state resident or business entity with a street address in Kentucky OR if the individual or business is based out-of-state, they must have a business office in Kentucky.
3. File Articles of Organization
An LLC is formed in Kentucky through the filing of Articles of Organization for a Limited Liability Company with the Kentucky Secretary of State. You can file the articles online (after creating a Kentucky Online Gateway (KOG) account) or via postal mail. The filing fee is $40 and payment can be made by check or credit card.
Your Kentucky LLC’s Articles of Organization must provide the following information:
- LLC name and address
- Registered agent’s name, address, and signature
- LLC principal office mailing address
- The date that the articles are filed
- Clarify whether an LLC is member-managed or manager-managed
- Information on the LLC’s type of business
- LLC organizer signature
Foreign LLCs doing business in Kentucky
An LLC formed outside of Kentucky intending to do business in the state must register with the Kentucky Secretary of State.
Follow these steps to do business in Kentucky as a foreign LLC:
- Comply with Kentucky LLC naming guidelines and make sure that the LLC name is available for use in the state with the Kentucky FastTrack Business Organization Search.
- Appoint a Kentucky registered agent.
- File a Certificate of Authority with the Kentucky Secretary of State online (KOG account required) or by postal mail. The filing fee is $90.
4. Draft an operating agreement
Although not a legally mandated step for forming an LLC in Kentucky, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies.
The operating agreement should do the following:
- Describe the LLC’s business structure
- Establish the individual responsibilities and obligations of LLC members
- Detail how the LLC will be run
Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.
5. Obtain an IRS Employer Identification Number (EIN)
All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs).
The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform many other important functions.
You can apply for an EIN online on the IRS website without paying a filing fee.
6. Fulfill your Kentucky LLC’s additional legal obligations
Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.
File Annual Reports
All LLCs active in Kentucky are required to file an Annual Report with the Secretary of State every year. The first report is due by June 30th the calendar year after the LLC was formed, and then by June 30th every following year.
You can file your annual reports online or by mail. The filing fee is $15.
Obtain business licenses and permits
A Kentucky LLC may be required to acquire one or more state or locally-issued business licenses, permits, or certifications depending on the nature of its business and the area where it is based.
You can find detailed Kentucky state business license information at the Kentucky One Stop Business Portal: Occupational Licenses/Permits page. For information on local licensing regulations, contact a clerk or local government representative in the city or county where your LLC is based.
Register with the Kentucky Department of Revenue
Many Kentucky LLCs are required to register with the state’s Department of Revenue, including LLCs that collect sales tax on retail goods and services as well as those with employees.
Kentucky LLC checklist
A Kentucky LLC’s name must obey the following rules:
- Must be distinguishable from the names of existing businesses on file with the Kentucky Secretary of State.
- Must contain one of the following phrases or abbreviations: “Limited Liability Company”, “Limited Company”, “LLC”, or “LC.” “Limited company” can be abbreviated as “LTD CO.”
Formational documents and filing fees:
- Reservation or Renewal of Reserved Name – $15 filing fee
- Articles of Organization for a Limited Liability Company – $40 filing fee
- Certificate of Authority – $90 filing fee (foreign LLCs only)
- An LLC is formed in Kentucky through the filing of Articles of Organization with the Kentucky Secretary of State.
Additional legal obligations:
- Filing Annual Reports – Required of all LLCs doing business in Kentucky
- State and local business licenses/permits – Required for some types of LLCs
- Kentucky DOR registration – Required for some types of LLCs