Think about your LLC a year from now: raking in profits and taking Kentucky by storm. 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.
While you’re making plans and dreaming big, 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.
Quick Note: If you’d like to keep your costs of starting an LLC as simple and low as possible, consider hiring ZenBusiness – a reliable business formation service. To get a better idea of the value they offer and how it works, we compared them to the two most well known services:
Bare Minimum Cost to Start an LLC in Kentucky
- Optional: LLC Name Reservation Fee
- $15 for online or hard copy filings
- Required: Articles of Organization Fee
- $40 for online or hard copy filings
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 the 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.
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’s 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.
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 One Stop Business Portal to find out which licenses your LLC requires.
LLC Formation Service
Starting an LLC 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 formation service. These services take care of the registration process for you, so you don’t have to spend the time on research, paperwork, and filings.
Most of these services (like ZenBusiness and Northwest) offer basic LLC formation service 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 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 and on-time, saving you from the penalties of delinquent filings and the stress of having to do it yourself.
Not all registered agent services are equal, so you’ll need to be careful in choosing one. Fortunately, we’ve done some research for you, and we recommend Northwest Registered Agent. In addition to registered agent services, Northwest also handles LLC formation — and they’ll include a registered agent free for one year when you form your business with them. We think they’re the most reliable choice, but if you’d like to evaluate all your options, check out our Best Registered Agent Services guide.
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 $500-2000.
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.
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.
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?
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 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.