If you’re looking for a reliable DIY guide for starting an LLC in Kentucky, look no further. Below you’ll find all the information you need to launch your business and handle any associated costs. Follow each step carefully and your LLC will be established and ready to hit the ground running.
That said, the process can be complex, with various filings and costs, so if at any point you need help, you can hire an online incorporation service – they’ll take care of the paperwork so you can spend more time growing your business.
Recommended: Compare the Top LLC Services
If you’re new to the process of starting an LLC, you might also be unfamiliar with the LLC formation services that are reliable and offer great value – like ZenBusiness. As a reference point we compared them to the two most well known LLC formation services, IncFile and LegalZoom. See our comparison guides for more information:
Step 1: Name Your LLC
What’s in a name? Quite a bit, actually. Your business name is your Kentucky LLC’s identity, its personality, its reputation. Find a name that sticks in customers’ minds – while conveying your brand qualities – and you’ve struck gold. A unique, memorable name can draw in new customers and keep existing ones coming back.
Your LLC name is going to appear everywhere: business cards, marketing collateral, websites, legal contracts, bank accounts, invoices, directories, and much more. So be sure that it conveys your product, service, brand, and values.
While you can (and should) be creative with your business name, there are certain commonwealth requirements that it must follow.
As you whittle down your options, make sure that your potential names adhere to Kentucky’s naming rules. So, any name you choose must contain the words “limited liability company” or “limited company” or the abbreviation “LLC” or “LC,” and it must avoid using the word “cooperative.” Additionally, your name cannot already be in use. It should be completely distinguishable from every other business name on record with the Secretary of State.
If you find that your name is already taken, you’ll need to distinguish it. But how? Making changes to the following components will NOT be enough:
- Capitalization and special characters
- Punctuation and spacing
- Articles (“a,” “an,” and “the”)
- Conjunctions (like “and,” “but,” and “or”)
- Business type designators like LLC, Ltd., Inc., Corp.
To create a unique name, you must make substantial changes and/or rearrangements to its key words and not just its syntax.
Consider this: your friend Fanny wants to open a flower shop in Lexington, Kentucky. The name she wants, Flowers by Fanny, LLC is already in use. So she comes up with a new one: Fanny’s Florals and Design, LLC. This name is similar to the original but includes new words, distinguishing it in the Secretary of State’s records.
Determine the Name is Available
Of course, you will only need to make distinguishable changes if your name is already taken. Don’t make the mistake of ordering business cards, creating advertisements, and using a name on documents like the Articles of Organization without first confirming it’s available. Use the Secretary of State’s Name Availability Search to see if there’s an existing business using your desired name.
Maybe you pegged a distinguishable name right away, or maybe it took some modifications, but either way, once you have a unique name, you can lock it down by filing a name reservation.
Optional: Name Reservation
You may have fallen in love with a particular name, but still have some preparation and paperwork to sort out before starting your LLC, and you’re worried that someone will swipe it in the meantime. To calm your nerves, you can reserve that name in Kentucky for a renewable 120-day period.
Think about Fanny. After making her name distinguishable, she’s ready to make it official, but if she’s waiting on some paperwork to start her LLC, she can place a hold by mailing a Reservation or Renewal of Reserved Name and a $15 payment to:
Office of the Secretary of State
PO Box 718
Frankfort, KY 40602-0718
Or, if you live in Frankfort, you’re welcome to drop off your form and payment in person in Room 154 of the Capitol Building at 700 Capital Ave (hours of operation are 8:00 a.m. to 4:30 p.m.). Documents are usually processed the day they’re received but it can take up to three days.
A name reservation can prove extremely helpful if you aren’t ready to start your business, but if your LLC is ready to go, you’re better off skipping this step and simply entering your name on the Articles of Organization, which will register it automatically.
Step 2: Choose a Registered Agent
Fanny’s LLC is quickly taking shape, and if it’s going to operate in Kentucky, she’ll need a go-between for commonwealth and legal communications. This is called the registered agent.
A registered agent is a key component of your budding LLC, handling all of its sensitive communication with the commonwealth so you don’t have to. But maintaining an agent isn’t just a convenience, it’s required. According to Section 14A.4-010 of Kentucky’s LLC Act, “each entity and each foreign entity qualified to transact business in this Commonwealth shall continuously maintain: (a) a registered office […] and (b) a registered agent.” And the Articles of Organization define the agent as “designated to receive service of process in the event the business is a party to a legal action.”
Taxes, lawsuits, maintenance requirements, and more – the registered agent takes care of it all. If you had to do this yourself, it would pile additional tasks onto your already-full plate. Plus, your agent makes your business available to receive documents even when you’re out of town or away from the office. This is especially important if your physical office is outside Kentucky.
Now for the practical application, the “how-to.” There are two steps to designating a registered agent. First, you must include the agent’s name and the registered office address on your Articles of Organization. Concurrently, you’ll need to file a Statement of Consent of Registered Agent with the Secretary of State. There is no fee for this filing.
You have two options for who can serve as a registered agent: an individual or a company.
Individual as Registered Agent
You may think that an individual registered agent would need specialized training or experience, but this isn’t the case. Anyone can serve as your registered agent, as long as they are a Kentucky resident a physical address in the commonwealth, and are at least 18 years old.
Third parties like attorneys or consultants are good options, but friends or family members are valid as well. You can even appoint yourself as long as you’re prepared to take on the additional responsibilities.
Registered Agent Service
It can be a lot easier, though, to use an LLC formation service like IncFile or Northwest Registered Agent, so we highly recommend it. Not only will they take care of business formation requirements, but they’ll also include a free registered agent service. Or, if you’d rather start your Kentucky LLC on your own, you can use a national registered agent service to cover your agent duties.
During the life of your LLC, you may, at some point, need to change your registered agent. Perhaps you want to switch from an individual to a professional service, or maybe your existing registered agent resigns. Either way, you’ll want to make the change as soon as possible because operating without an agent on file can lead to administrative dissolution.
Step 3: File the Formation Documents with the Commonwealth
This is where the LLC formation process kicks into high gear. Let’s check back in with Fanny.
She’s reserved her unique business name, designated a registered agent, and she’s ready to get her LLC off the ground. It’s time for Fanny to take on the most important LLC document: the Articles of Organization. This filing creates a record for Fanny’s Florals and Design, LLC with the Kentucky Secretary of State, giving it the authorization to commence business in the commonwealth.
When you’re ready, you can file the Articles of Organization online, by mail, or in person, so whether you do all your business electronically or prefer to leave a paper trail, there’s a good option for you. No matter which you choose, the filing fee is $40.
You can complete the entire process through the Kentucky One Stop Business Portal. Get started by logging in or setting up an account. Then follow the provided instructions.
Filing by Mail
Find the paper application here. When you’ve finished filling it out, include your payment and mail everything to:
Office of the Secretary of State
Division of Business Filings
P.O. Box 718
Frankfort, KY 40602 – 0718
Filing in Person
If you live near Frankfort, you can also hand-deliver your completed document and payment to Room 154 of the Capitol Building at 700 Capital Ave., Frankfort, KY 40601.
Documents are typically processed the same day they are received (regardless of filing method) but it can take up to three business days.
Step 4: Create an Operating Agreement
The operating agreement is the framework that holds up an LLC, the vital underpinning that establishes processes for its procedures, activities, and conduct. Essentially, it serves as your company’s bylaws.
There’s no Kentucky law that requires your LLC to adopt an operating agreement, but this doesn’t mean it’s in your best interest to go without one. By creating an operating agreement, you’re setting your business up for success, protecting your assets, and gaining legitimacy in the eyes of banks, courts, government agencies, other businesses, and more.
Let’s say our friend Fanny sells a percentage of her company to two other owners. Her operating agreement could stipulate how the LLC’s assets would be distributed among them in the case of dissolution. But if she decides to maintain sole ownership, the agreement could be used in court as evidence that the LLC’s assets are separate from her personal ones. These are just two examples, but the operating agreement governs everything from member duties to tax structure.
If you’ve decided to draft an agreement, there are two ways to go about it:
- Write it yourself. Don’t be intimidated by this option. There are plenty of free online templates that serve as helpful guides. You can create an effective document from most of the templates out there, but we recommend getting one through ZenBusiness, which includes a free LLC operating agreement with every package. This will save you a lot of time and money.
- Hire an attorney. If you want to be absolutely sure that you don’t miss any important details, an attorney can write or review the agreement for you, ensuring that it complies with commonwealth law, includes all necessary information, and avoids the commonwealth’s default laws.
What are default laws?
Each state has its own set of generic, baseline laws for how LLCs should operate. These laws, however, only govern matters not included in your operating agreement. Take dissolution, for example. If your LLC ever dissolves, your operating agreement would determine what happens to its remaining assets and debts. But if you fail to include it in the agreement, the commonwealth will make that decision for you.
Because default laws are broad and not tailored to your specific business, they often aren’t in your LLC’s best interest, so it’s best to avoid them by being as comprehensive as possible in your agreement.
Step 5: Get an EIN
There’s simply no way to avoid taxes. In fact, it’s illegal to try, so don’t do it.
Federally, LLCs are classified as “pass-through” entities, businesses that don’t file corporate tax returns, but whose owners include income and losses on their individual returns. Still, there are certain circumstances that require LLCs to pay federal taxes, like classifying as a corporation or partnership, hiring employees, or selling merchandise. So, in Fanny’s case, if she plans on hiring additional florists and selling bouquets, she will need to apply for an EIN.
The Employer Identification Number (EIN) is a nine-digit number that the IRS will use to identify your company’s tax accounts, so if you pay any business taxes, it’s extremely important to have one. Click the “Do I need an EIN?” link on this page to see if you fall into this category. If so, apply for an EIN one of three ways:
Need to get this done quick? File online – it’s by far the most efficient method. You can only complete the process between 7 a.m. and 10 p.m. EST, Monday through Friday, but you’ll receive your number immediately upon finishing the digital form. Keep in mind that you will need to provide a valid individual taxpayer number (like a Social Security Number) as part of the process.
You might prefer the feel and security of a paper form. In this case, download Form SS-4, complete it, and fax it to (855) 641-6935. You will receive your EIN within four business days.
Or, there’s always trusty postal mail. However, this is the slowest option, as processing typically takes around four weeks. If that doesn’t deter you, fill out Form SS-4 and send it to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Okay, so you’ve filed the Articles of Organization, designated a registered agent, adopted an operating agreement, and filed for an EIN. Time to start doing business, right? Sorry, there are a couple of additional steps you may need to take first. But don’t worry, you’re almost there!
Step 6: Taxes, Licensing & Income Reporting
For all intents and purposes, most LLCs will be official after completing all the prior steps. Still, it’s important for business owners like Fanny to keep looking ahead, as there are certain maintenance requirements to keep a Kentucky LLC running smoothly and in good standing with the commonwealth.
Before you start doing business, create a plan for the following potential LLC requirements:
As mentioned earlier, LLCs are almost always classified as “pass-through” entities, which means that they don’t pay income taxes directly to the federal government. That responsibility falls instead on the owners, who must include business income and losses on their personal 1040 tax returns and/or Schedule C. LLCs are flexible with tax structure, so you can choose to have yours taxed like a corporation instead. In this case, it would need to file a separate corporate tax return.
Good news: your commonwealth income taxes act much like federal ones do, in that they’re reported on the LLC owners’ personal returns rather than a separate corporate one. Kentucky does impose a Limited Liability Entity Tax, but only on LLCs with an annual gross profit of more than $3 million. The amount of this tax is based on income, but it has a $175 minimum.
Your LLC might be responsible for other business-related taxes depending on its activities and circumstances. Do you sell merchandise? If so, your LLC will owe Sales and/or Use Taxes. Do you hire employees? Then your LLC will need to pay Withholding and Unemployment Taxes. If any of these taxes apply to your business, you can register online or by completing and submitting Form 10A100.
Plus, depending on your LLC’s location, it may owe a local tax to its city, municipality, or county. Consult your local government’s website to find out.
The Articles of Organization may have already made your business legitimate, but your LLC might still need to obtain a license before doing business. This all depends, however, on the type of business you run.
Consider our friend Fanny, for example, who may need to obtain a Nursery Dealer license from the University of Kentucky College of Agriculture, Office of the State Entomologist before opening her flower shop’s doors. Unsure whether or not your LLC will require licensure. Take a look at the One Stop Business Portal’s license database search.
Certain cities and counties require their own specific licenses on top of any commonwealth ones, so you should also check with your local government.
Once you’ve taken all the steps to start your LLC, you’ll be off and running, making deals and growing the company. But when things are moving 100 miles per hour, don’t forget that Kentucky requires all of its businesses to submit one important recurring filing: the Annual Report.
Each year, your LLC will be responsible for filing an Annual Report and paying the attached $15 fee by June 30. The commonwealth will mail you an Annual Report postcard, and you can either complete and return it, or file online.
Mark your calendar and set a reminder on your phone so you don’t forget! If you miss the June 30 deadline, your LLC will lose its good standing with the commonwealth, and if you haven’t filed by August 31, it can be administratively dissolved.
And we’ve come to the end. It’s a long process, and not always easy, but the reward is well worth it. If you’ve made it this far, congratulations! Your Kentucky LLC is ready for takeoff. So go ahead and start with that big sale, promotional campaign, or business deal. Maybe you’ll see Fanny out there in the business world, selling her beautiful floral creations.
Need Help Creating Your LLC?
If you even skimmed this guide to look over the steps, you likely got a sense of how many moving parts there are when starting an LLC. Can you do it all yourself? Absolutely. We have complete confidence in you.
But if you’d rather hand it off to someone else and not have to worry about it again, we recommend using an LLC formation service. This way, you can go about your other business responsibilities with the confidence that everything will be submitted correctly and punctually.
Plus, an LLC formation service can handle maintenance items like Annual Reports, so you can take them off your to-do list. And on top of that, many services also provide a registered agent.
Sound good? Whether you know that you’ll need an LLC service or you’re just exploring your options, take a look at IncFile and Northwest Registered Agent. These are two of the top services available. And you can take our word for it because we’ve done a whole lot of research on the topic.