How to File an LLC in Kentucky

Growing a small business in Kentucky is an exciting prospect. But before hiring, selling, and doing business in the state, you have filing issues to consider.

As an entrepreneur, you have a couple of options regarding business structures. Each one, whether a sole proprietorship, C corp, or S corp, has its benefits and challenges. More often than not, a Kentucky LLC is the ideal business structure for starting new or expanding operations in the Commonwealth of Kentucky.

Key Takeaways

• As an entrepreneur looking to operate in Kentucky, forming an LLC is likely your best option to enjoy the liability protection of a corporate business structure and the flexibility of a sole proprietorship.

• Kentucky allows LLC owners to choose a business name during the LLC formation process. You’re not required to reserve your business name.

• When filing a Kentucky LLC, you must complete different Articles of Organization forms depending on your LLC’s business type.

What Is LLC Formation?

A limited liability company, or LLC, is a business structure designed around flexibility and minimizing liability. It shares elements of a sole proprietorship structure or limited liability partnership as well as structural and management aspects of corporate business entities.[1] 

The Kentucky Secretary of State gives LLC owners almost complete autonomy over their companies. That means you can decide the management structure and how the business operates. In contrast, corporation structures can force owners to adhere to various strict regulations to function legally in the commonwealth.

One of the main distinctions between opting for an LLC formation and a general partnership or proprietorship is liability protection. Legal proceedings, bankruptcy, and other issues do not affect personal assets. That said, LLCs don’t have complete liability protection; some scenarios can expose your assets to risk.

When it comes to rules, LLC formation grants plenty of freedom. However, it doesn’t mean there aren’t any legal guidelines to follow to be in good standing with state laws.

• Pay a sales tax when you lease or sell goods and services

• Appoint and keep a resident agent in the state who can handle legal documents

• Use LLC, limited liability company, or other abbreviations in the business name

• File forms and pay state fees when forming your LLC

• Submit the annual report document by June 30 and pay the $15 filing fee[2]

Although there are a few things to keep an eye on as an LLC owner, the regulations offer more than enough freedom to operate. In addition, given the alternatives, the extra liability protection compensates for having to follow a few rules.

Who Should Form an LLC in Kentucky?

Forming an LLC in Kentucky can help many entrepreneurs. People with many personal assets that need protection from potential business-related liabilities should strongly consider this business entity type. Particularly, sole proprietors benefit the most from having an LLC as it can protect assets like a house, car, and others from legal recourse.

Moreover, small business owners can prioritize forming an LLC instead of the corporate route, which results in less management control. In addition, using an LLC allows owners to determine who can invest. It also enables owners to draft LLC operating agreements and set clear rules for how the LLC should operate.

Having an LLC offers another advantage. It’s less susceptible to hostile takeovers from other shareholders. That’s because LLC business entities aren’t obligated to distribute shares.

Step-By-Step Guide To Starting Your Kentucky LLC

While the formation process of your LLC may seem similar in most states, there are some distinctions to keep in mind. Kentucky has its filing fees and formation process documents on top of a few requirements. The following step-by-step process can help you form an LLC with ease.

Step 1: Choose a Business Name for Your LLC

Contrary to popular belief, creating a business name isn’t easy. It’s time-consuming, especially if you want to get it right when forming your LLC.

Your business name must enhance branding and marketing potential without causing legal issues. Naturally, your LLC name should resonate with your target customers and clients and look good on marketing materials.

But your preferred name might be taken by a different company. The Commonwealth of Kentucky doesn’t allow two businesses operating in the state to share the same name. In addition, you should consider trademark challenges. Sometimes, even a too-similar name won’t be a good option as it can open your company to legal action.

As such, consider conducting the business naming process in four stages.

Stage 1 — Search for Available Names

Before searching for available names, keep a few Kentucky LLC naming rules in mind:

• You can’t use names indistinguishable or hard to differentiate from other licensed businesses in the commonwealth

• You must add LLC, limited liability company, or limited company to the name

• You can’t make references to products or services you won’t offer

With these restrictions in mind, you can conduct a business name search using the Name Availability Search function. The database contains records filed with the office of the Secretary of State. However, note that the database may not be up to date.

Alternatively, call the Office of the Secretary of State at 502-564-3490  for a preliminary name availability check. It’s worth noting that your name availability search can’t focus on DBAs or names under which a company is doing business, assumed names, etc.

Stage 2 — Get an Online Domain Name

Even if you find an available name you like, you aren’t done with the naming process.

Every modern business needs a reliable website. Shoppers do plenty of online research, regardless of whether they shop in digital or brick-and-mortar shops. Therefore, you need a website and a domain name relevant to your business.

Searching for an available domain name is similar to researching your LLC name availability:

• Enter a domain name you like in a web browser to see if other companies pop up

• Use a domain registrar to check the name availability for your desired domain

Using a registrar won’t always be free. Still, it’s the most reliable way to determine availability, find alternatives, and even buy the domain name immediately.

Stage 3 — Reserve an LLC Name

Even with an available name, you have more to prepare before filing the Articles of Organization with the Commonwealth of Kentucky Office of the Secretary of State. But because of that, you risk losing your name without reserving it.

Consider reserving a business name for your LLC. You’ll have 120 days to use it and file your LLC formation documents. You must complete and submit a Reservation or Renewal of Reserved Name form with the Commonwealth Secretary of State to do that.

The form requires personal information, your LLC name, and other details. Ensure you specify that the application is for a name reservation, not a name renewal.

You can mail or deliver it in person to one of the following addresses after paying the $15 filing fee.[3]

Michael Adams

Office of the Secretary of State

PO Box 718

Frankfort, KY 40602-0718

Though helpful, reserving your name isn’t mandatory to form an LLC in Kentucky. It’s more like an extra step you can take to make sure your name is available by the time you file the Articles of Organization. You can do it immediately if the name is available and you’re ready to file.

Stage 4 — Trademark Your Business Name

Never take trademarks for granted. They offer ample legal protection to your brand’s trade names, business names, and other identifying marks. Again, it’s not a prerequisite to forming an LLC. Yet it makes it easy to dispute unauthorized and unlicensed use of your brand’s name and marks.

Trademark filing fees cost $10 per class application in Kentucky. Once granted, you will have a legal document to use in various legal disputes.

Step 2: Fill Out Kentucky Articles of Organization

With a business name in mind or reserved, you can file the Articles of Organization paperwork. Remember that your LLC structure matters. For-profit and nonprofit LLCs have slightly different forms.

You can deliver the papers and pay the fee in person or mail everything using this address:

Michael Adams

Office of the Secretary of State

PO Box 718

Frankfort, KY 40602-0718

Form a For-Profit LLC

Standard domestic LLCs have a simple Articles of Organization form to fill out. And unlike other states, Kentucky only asks for $40 in state fees. Here’s some of the information you must include.

• Your LLC name

• The street office of the registered office

• Mailing address for the principal office

• Management structure

• If the business is veteran-owned

• Name and signature of the registered agent

The Kentucky Secretary of State may approve your application in a few business days.[4]

Form a Nonprofit LLC

To register a nonprofit in Kentucky, you must file the Articles of Organization NLC form. Similar information is requested on the form. And unless your nonprofit is at least 50% veteran-owned, you must pay the $40 state filing fee.

Form a Foreign LLC

Kentucky has a slightly different process for registering a foreign LLC in the Commonwealth. Unlike domestic companies that file Articles of Organization, foreign business entities must file a Certificate of Authority FBE form.[5]

This process is called foreign qualification, allowing out-of-state and international companies to apply for authorization to do business in Kentucky. The form is short, intuitive, and asks for information including but not limited to the following:

• Business entity type

• Desired business name in Kentucky

• Already established name

• State or country in which the business entity was established

• Registered office and principal office addresses

The foreign qualification paperwork costs $90 in filing fees.

Step 3: Hire a Kentucky Registered Agent

You may notice that all formation documents ask for a registered agent. Like all states, Kentucky requires a registered agent or resident agent to serve as a point of contact between businesses and the state.

Registered agents fulfill essential duties, such as:

• Maintaining a registered office with a physical address, not a mailing service or PO Box

• Receiving legal documents for LLC owners during regular business hours

• Accepting, signing, and processing legal correspondence and other documents for your LLC

Kentucky lets business owners, company officers, and other employees be named as registered agents in the Articles of Organization and Certificate of Authority documents.

Why You Might Not Want To Be Your Own Registered Agent in Kentucky

Acting as your own registered agent is a time-saver at first. But it can create many issues in the long run. Experienced entrepreneurs and even small business owners generally prefer hiring a registered agent service.

Here are a few reasons why this is a good choice.

• You keep your mailing address private

• You won’t risk being served in a lawsuit in front of important clients

• You leverage their expertise to avoid non-compliance

• You save time you would have spent sorting mail

• You can keep irregular business hours and enjoy flexibility in your schedule

• You save money by avoiding the need to rent or own office space for a registered office

Take advantage of registered agent services in Kentucky for domestic and foreign LLCs to accommodate all your compliance and privacy needs.

Step 4: Create an LLC Operating Agreement

According to Kentucky commonwealth legislation, LLC owners don’t have to create, formalize, and file an LLC operating agreement with the Secretary of State. But while the document isn’t necessary to be compliant and in good standing, it’s needed so the business structure can function optimally.

An LLC operating agreement is a legally binding document defining the company’s responsibilities and roles. Furthermore, the document outlines the ownership percentages of a business entity. Sometimes, your LLC operating agreement can even include clauses that add more liability protection.

LLC operating agreements create a clear separation between an LLC and a sole proprietorship regarding management. It can prevent creditors from going after personal assets to settle company debts. Because of this, both multi-member LLCs and single-member LLCs benefit greatly from drafting and formalizing this legal document.

Here are some of the details your operating agreement can outline:

• The ownership percentage of each owner

• The voting rights

• The duties and responsibilities of your LLC members

• The exit strategy or guidelines on drafting buyouts and ownership stake transfers

• Profit and loss distribution rules

• Special powers or perks given to members

In addition to having less liability protection, operating without this agreement can subject an LLC to abide by standard Kentucky business rules. That can create complications for some business models or membership and ownership structures.

Step 5: File for an Employer Identification Number and Business Licenses

Having a consenting Kentucky registered agent and your Articles of Organization means you’re close to doing business in the state. However, Kentucky has another prerequisite for getting authorization to do business in the state.

This unique identification number is similar to a social security number. But it’s for business entities and not individuals. The Internal Revenue Service (IRS) requires an EIN because it simplifies collecting employment taxes for LLCs with employees.

Fortunately, getting one isn’t as challenging as you may think.

Getting Your EIN

Note that the IRS can use a company’s EIN to examine the state of your income taxes, federal taxes, and general tax returns.

Moreover, you may need an EIN to work with financial institutions. For example, banks may ask for an EIN before letting you open a business bank account or before issuing a business credit card. So here’s how you get an EIN.

The fastest way to do it is through the IRS website. You can mail or fax your application, but online filing works much quicker. Furthermore, this isn’t something you can delegate to a company officer. LLC owners must apply for the EIN and submit their tax identification number.

Getting Your CBI

Your Kentucky LLC might need an additional ID called a commonwealth business identifier or CBI. You can get it by registering your LLC with the Kentucky Department of Revenue.

However, you won’t get one without obtaining your EIN first.

Additional Business License Considerations

Kentucky doesn’t issue statewide business licenses covering all industries. Various professions and sectors require companies to file extra license applications before they can legally do business in the state.[6]

Here are a few scenarios where you should consider applying for different business licenses:

• Your company sells tangible goods and services

• Your company operates in the tobacco or food industry

• Your company manufactures, sales, or distributes liquor

• You employ people from specific trades or offer particular services that need additional qualifications

The good news is that the Commonwealth of Kentucky One Stop Business Portal has an extensive database of trades and associated licenses. You can search for specific keywords to determine whether your LLC needs more licenses and permits to do business in the state.

Let Us Handle Your LLC Paperwork

Good research, organizational skills, and knowledge help entrepreneurs open their small businesses as LLCs in Kentucky. But even in the inception stage, you’re juggling many things. As straightforward as registering a business is, it can cause many headaches and require a significant time investment.

Our LLC formation team can handle your LLC paperwork efficiently. We’ve served over 250,000 clients since 2015 and helped them with their business formation process. If your Kentucky LLC needs guidance, we can help.

FAQs

How much does it cost to start an LLC in Kentucky?

The cost of opening an LLC in Kentucky differs based on your business structure. For instance, domestic for-profit and nonprofit LLCs must pay $40 in filing fees. Foreign entities pay $90 in state fees. But you may incur additional costs for registering a trademark, buying a domain name, and getting other necessary business licenses.

How is an LLC taxed in Kentucky?

A Kentucky LLC doesn’t have to worry about federal taxes because it’s known as a pass-through business entity. Profits and debts are passed and split among members based on the Articles of Organization. Members then pay federal or state rates on their income taxes.

What are the benefits of a Kentucky LLC?

A Kentucky LLC gives owners and other partners additional business freedom. Likewise, members benefit from more liability protection for personal assets when settling business-related debts.

How do you dissolve an LLC in Kentucky?

Regular, nonprofit, and professional service LLCs can dissolve the company by filing the Articles of Dissolution form. Like other formation and amendment forms, this application must be filed with the Commonwealth of Kentucky Secretary of State, Division of Business Filings. It costs $40 to file the Articles of Dissolution.

Bibliography

1. Internal Revenue Service. “Limited Liability Company (LLC).” Accessed April 11, 2024.

2. Kentucky Secretary of State. “Business Filings Information – Annual Report.” Accessed April 11, 2024.

3. Kentucky Secretary of State. “Division of Business Filings – Reservation or Renewal of Reserved Name.” Accessed April 11, 2024.

4. Kentucky Secretary of State. “Division of Business Filings – Articles of Organization.” Accessed April 11, 2024.

5. Kentucky Secretary of State. “Division of Business Filings – Certificate of Authority.”  Accessed April 11, 2024.

6. Kentucky Business One Stop. “Occupational Licenses/Permits.” Accessed April 11, 2024.