You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees — before you sell a single product, there are startup costs associated with launching an LLC in Kentucky.
Make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Kentucky startup fees here.
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Overall Kentucky LLC Formation Costs
LLC Name Reservation Fee
Consider this: you came up with a perfect business name, but you aren’t ready to start the business yet. How can you keep other companies from using it while you sort out your paperwork? This is where name reservation comes in. It’s not a required part of the LLC formation process, but it’s helpful in certain situations. Pay $15 and you’ll receive a 120-day hold on your name. But if you’re ready to start your business right away, it saves time and money to file your Articles of Organization instead, which will lock in your name.
To clarify, most states don’t require name reservations, and they’re rarely necessary. If you’re concerned about someone else registering the name you want, you could opt to simply form your LLC instead of reserving the name.
Whether you reserve your business name or not, you should always perform a Kentucky business name search to make sure the name you want is available.
Articles of Organization Fee
This is the big one, the most important form that you’ll file to start your Kentucky LLC. In the eyes of the state, if there are no Articles of Organization, there’s no business. Compared to other states, Kentucky’s filing fee for this form is relatively inexpensive: $40 to file online or with a hard copy. What’s even better is that you only need to file the Articles of Organization once, so once you pay this fee once, you won’t need to again.
The information you’ll need to file your Articles of Organization includes your LLC’s official business name, the name and address of your registered agent, your LLC’s principal office mailing address, an indication that your LLC will be managed by its members or a manager, an indication that your LLC is veteran-owned (if applicable), the date, your LLC organizer’s name, title, and signature, and your registered agent’s name and signature.
Before we move on, we’ll quickly note that if you’re forming a Kentucky professional LLC, you’ll need to use a specialized version of the Articles of Organization. For more info, check out our full guide on this topic.
Business and Professional Licenses
In some cases, businesses need to apply for business or professional licenses before commencing business in Kentucky. This all depends on the type and location of the business. For example, a dietician business would need to apply for a Dieticians’ License from the Kentucky Board of Dietitians and Nutritionists. Additionally, specific cities and/or counties may require their own business licenses. Check with your local government and the OneStop Business Portal to find out which licenses your LLC requires.
What are some of the most commonly required business licenses for Kentucky LLCs? If your business operates in a regulated industry, you will probably need some sort of professional license to operate in compliance with state law. On the municipal level, things like alarm permits, building permits, and zoning permits are all very common.
LLC Formation Service
Starting an LLC in Kentucky can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for an LLC service. These services take care of the registration process for you, so you don’t have to spend time on research, paperwork, and filings.
Most of these services (like ZenBusiness and IncFile) offer basic LLC formation services like Articles of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, operating agreements, and expedited filing.
Registered Agent Service
Appointing a Kentucky registered agent is an important part of your LLC formation process. Your registered agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with Kentucky business law. In short, you need an agent you can trust.
While you can be the registered agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional. A registered agent service ensures that your annual reports and other forms are filed efficiently, saving you from the penalties of delinquent filings and the stress of having to do it yourself.
If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind.
Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that. On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2,000.
Cost variations depend on the experience and location of the lawyer. There are a lot to choose from, so it’s important that you do some research to find the best option for your LLC. A site like Avvo, which offers a database of Kentucky business lawyers, can help. It allows you to compare and contrast attorneys based on rates, locations, specialties and more.
If you don’t want to go digging for your own attorney, we compiled the following list of highly rated business lawyers in Kentucky. All of these attorneys are primarily focused on the business world, they all receive five-star ratings from clients, and they all have excellent Avvo ratings.
Foreign Qualification Fee
This only applies if your LLC was formed in another state and is now expanding into Kentucky. In this case, the “Certificate of Authority” will take the place of the Articles of Organization.
All foreign business entities are required to foreign qualify in Kentucky, or they could incur some pretty severe penalties. Avoid them by downloading, completing, and mailing in the “Certificate of Authority.” The filing fee is $90 but it’s a one-time fee, so you won’t have to worry about paying it again.
LLC Annual Fees
Once your LLC is formed, you’ll need to keep its records current by filing an annual report every year. Annual reports ensure that the Secretary of State has the most updated contact, office, and registered agent information for your business. It must be filed each year by June 30 with a $15 fee. You can file online, by returning the annual report postcard you receive in the mail, or by printing and mailing your report.
The information required to file your annual report includes your registered agent’s name and address, your LLC’s principal office address, and the names and addresses of your LLC’s members and/or managers.
For more information on filing a Kentucky annual report, consult our full article on this topic.
When we’re talking federal taxes, most LLCs don’t have to pay directly. Instead, their owners report income and losses on their personal tax returns.
Kentucky doesn’t impose a franchise tax on its business entities for the privilege of operating in the state, but it does require LLCs to pay the Limited Liability Entity Tax. Any LLC with gross receipts less than $3 million will pay the minimum tax of $175. For LLCs with over $3 million in gross receipts, the tax varies based on their total income.
Other common LLC taxes include the sales or use taxes for businesses that sell merchandise, and the withholding and unemployment taxes for businesses that hire employees. Learn more about potential business taxes and register your business (if necessary) on the Kentucky Department of Revenue website.
What if I Don’t Pay?
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Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
Miss an annual report or tax filing and your LLC will fall out of good standing with the state. What happens if you lose your good standing? Quite a bit, actually. Companies that do not have good standing cannot foreign qualify in most states, apply for business loans, renew many professional licenses, and more.
Concerning annual reports in particular, if you don’t file by June 30, your LLC will be administratively dissolved or, for foreign LLCs, your authority to do business will be revoked. Dissolution means that your company will be inactive, unable to conduct business until your outstanding forms and/or fees have been reconciled and you’ve completed the reinstatement process. See the Kentucky annual reports page for more details.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Kentucky.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees — like annual reports and Limited Liability Entity taxes — so your business doesn’t fall out of good standing.
Key Steps for Starting a Kentucky LLC
- The first step to forming a Kentucky LLC is to come up with a good name for your business. You’ll want to make sure the name you want is still available and hasn’t already been claimed by another business, so you’ll need to search the state’s business database to verify its availability.
- Next, you’ll need to choose your registered agent. While you can legally serve as your own registered agent in Kentucky, this role can actually be more of a hassle than you might expect. That’s why we always recommend hiring a reputable registered agent service that can handle the responsibility of this position on your behalf.
- The third step involves the preparation and filing of your Articles of Organization. You’ll need to fill out the paperwork and pay a $40 fee. Once the state processes this document, your LLC will be officially open for business!
- That’s not the end of the road for the startup process though, as you’ll also need to create an operating agreement for your LLC. There is no legal requirement for Kentucky LLCs to have written operating agreements, but it’s still an extremely important element of any LLC. The operating agreement is an internal document that outlines how your LLC will operate, and there are several aspects of this document that can prevent messy ownership disputes down the line.
- You will also need to acquire a federal tax ID number (also known as an EIN, or employer identification number). This is essentially a Social Security number for your business, as it is a nine-digit code used to file taxes, hire employees, open business banking accounts, and more.
- Next, you’ll need to register for any relevant taxes with the Kentucky Department of Revenue, and also obtain all licenses and permits that apply to your business type. Keep in mind that, depending on the nature of your business, you might require licenses from the federal, state, county, and municipal governments.
Once you’ve finished all of these steps, you’re ready to operate a compliant business entity with the state of Kentucky!
Key Steps for Maintaining a Kentucky LLC
After you’ve completed all of the items in the previous section, you’ll need to focus on maintaining your LLC. The first step in this process is to open a business bank account. This will help you keep your business and personal expenses entirely separate, and it will also help immensely with your accounting and taxation responsibilities.
You should also keep detailed records of every financial transaction that takes place with your LLC. This means maintaining a file of invoices for every purchase and sale you make, along with information regarding your employees or contractors and the work they perform for your business.
As we already mentioned, annual reports are a key component of LLC maintenance in this state, and there are harsh financial penalties for delinquent reports. Additionally, you might want to hold an annual meeting to discuss goals and priorities for your LLC, although this is an optional step.
Frequently Asked Questions
Before we wrap things up, let’s take a look at some of the most common questions we hear from readers regarding the LLC formation process in Kentucky.
What are the state business tax rates in Kentucky?
If your LLC is taxed like a sole proprietorship or general partnership, you’ll need to pay taxes on your business income at the state’s personal income tax rate of 5%. If your LLC is taxed like a corporation, you’re required to pay Kentucky’s 4-6% corporate income tax on your business revenue.
How quickly does Kentucky process LLC formations?
The Secretary of State should be able to process your LLC’s formation within five business days, but the state says it typically processes business filings within just one business day.
How many small businesses are there in Kentucky today?
The state of Kentucky is home to nearly 320,000 small businesses. Entrepreneurs of all backgrounds and business types find that Kentucky is a great place to own and operate a small business.
What are the top small business resources and websites in Kentucky?
The Kentucky chapter of the Small Business Development Center is a great place to start, as they offer a wide variety of tools and resources for Kentucky LLCs. The U.S. Small Business Administration’s Kentucky District Office is another valuable resource, and the state’s small business resource page also has plenty of good info.
Should I form my LLC in Kentucky, or choose a state like Delaware or Wyoming?
Some people like to form their LLCs in states with favorable legal settings. For instance, Delaware is often seen as the most business-friendly state, as it has an entire court system that’s dedicated solely to business matters. As for Wyoming, this state has some of the most generous anonymity laws for LLC ownership.
However, for most people, your best option is to simply form your business in your home state. Forming in a different state can be a tremendous hassle, and it can add some unnecessary complexity to tax issues as well.
Cost to Start an LLC in All 50 States
We break down the LLC costs in detail in all 50 states. View all of our State LLC Costs guides below.