If you plan to form a limited liability company (LLC) in Kentucky, you will want to know what your initial, annual, and optional costs will be.
Initial LLC formation costs include state registration fees, legal fees to prepare an operating agreement, initial license and permit registration costs, initial third-party registered agent fees, and fees to set up a bank account.
Annual expenses include annual registered agent fees, bank fees, annual report fees, permit, and license renewal fees, and taxes.
Finally, optional costs include naming fees, fees to amend documents previously filed with the state, fees for requesting a certificate of good standing, and fees for obtaining certified documents from the state.
This post provides a detailed breakdown of all spending.
|File articles of organization||$40|
|Foreign LLC application for a certificate of authority||$90|
|Business bank account||Varies|
|Prepare an LLC operating agreement||$0 to $500|
|Initial permit fees||Varies|
|Initial license fees||Varies|
|Initial third party registered agent fees||$50 – $150|
|Limited liability entity tax||$175|
|Sales and use taxes||6%|
|Annual third-party registered agent fees||$50 – $150|
|Transfer a reserved name||$15|
|Cancel a reserved name||$10|
|Apply to use indistinguishable name||$20|
|Foreign LLC – application of registered name||$36|
|Amendment of articles of organization||$40|
|Restated articles of organization||$40|
|Amended and restated articles of organization||$80|
|Amended annual report||$15|
|Certified document copies||$10 + $.50 per page after 5 pages|
|Certificate of good standing||$10|
|Statement of change of registered agent||$10|
|Statement of change of principal office||$10|
|Any other document filed with state||$15|
Kentucky LLC formation cost: $40
To legally form an LLC in Kentucky you will need to file Articles of Organization with the Kentucky Secretary of State. The filing fee is $40.
You can file the Articles of Organization by mail, online, or in person. Online filing is done through the Kentucky One-Stop Business Portal.
The time to process your LLC filing online is 24 hours. If you file by mail, it can take between 7-10 business days to process your submission. Kentucky does not offer an expedited filing service.
If you formed your LLC in another state and want to register to do business in Kentucky, you’ll need to file a Foreign LLC Certificate of Authority. This document will authorize your company to do business in the state. The filing fee is $90.
Extra Kentucky LLC costs to account for
In addition to the fee for filing the LLC Articles of Organization, there are several other initial, annual, and optional costs to consider.
Registered agent costs: vary
Kentucky doesn’t charge a separate fee for appointing a registered agent.
However, Kentucky does charge a fee for changing your registered agent details — name or address. The cost is $10.
LLCs often choose to retain a third-party professional registered agent for convenience and privacy.
The purpose of a registered agent is to receive important documents and mail on behalf of the LLC, such as lawsuits or tax notices. Thus, a registered agent must have someone available during regular business hours to receive these documents. That can be difficult for some businesses to maintain.
Also, many companies don’t want a process server showing up at their place of business. A professional registered agent in Kentucky costs between $50-$150 annually.
Trade name registration: $20
Sometimes, a business may want to use a name different from its legal name.
For example, a company may have developed a brand name independent of its legal name for marketing. Have you ever heard of Blue Ribbon Sports? That was Nike’s original legal name.
In Kentucky, an alternative legal business name is called an Assumed Name. In other states, it’s called a Doing Business As (DBA) name or fictitious name.
An LLC can register an assumed name by filing a Certificate of Assumed Name. The filing fee is $20 per name.
Kentucky LLC name reservation: $15
You may have chosen the perfect name but are not yet ready to file the Articles of Organization.
In Kentucky, you can reserve the name you have selected for up to 120 days before filing the Articles of Organization. To do so, you complete a Reservation or Renewal of Reserved Name form. The filing fee is $15.
Certified document copies: costs vary
At some point, you may need a certified copy of your LLC’s organizational documents. Of course, obtaining certified documents is not free.
Kentucky charges $10 for the first 5 pages of any certified documents and $0.50 per page after that. To get certified documents, you’ll need to file a Request for Corporate Documents — a form where you select the type of copy you need.
You can file this form by mail or fax.
Business permits and licenses: costs vary
Kentucky doesn’t require a general business license. But if you operate in a regulated industry, you may need an “occupational” license.
For example, a Certified Public Accountant must apply for and obtain a license from the Kentucky Board of Accountancy. The CPA must meet specific educational, experience, and testing standards. You’ll need to renew your license every two years. The fee is $100.
Similar requirements apply to architects who must renew their license each year and pay $125 and registered occupational therapists who must pay an application fee of $50.
Occupational licenses may also be required at the local level, where the fees can vary from $75 to $250.
The Kentucky One Stop portal provides a helpful search function that business owners can use to determine which licenses or permits they need for their operations.
If the LLC will sell products, it will have to register with the state to obtain a sales license to withhold and remit sales taxes to the state. The Kentucky sales tax rate is 6%.
Does Kentucky have an annual LLC fee?
Yes. Kentucky requires all LLCs to file an annual report with the Secretary of State and pay a $15 fee. The annual report can be filed online, by mail, or in person.
The filing deadline for annual reports is June 30th each year. Failure to file on time triggers penalties — from late fees to loss of good standing and possible LLC dissolution.
What taxes do LLCs pay in Kentucky?
LLCs face various business taxes in Kentucky for the privilege of doing business. These may include sales taxes, use taxes, employment taxes, etc.
The first step in complying with the state tax responsibilities is registering with the Kentucky Department of Revenue. Kentucky DOR will issue you a state ID (different from federal EIN) to report local taxes.
Sales and use taxes
If your LLC will sell taxable goods and services, prepare to pay a local 6% sales tax.
Additionally, you may be subject to use tax.
A use tax is imposed on tangible personal property purchased and stored or used in Kentucky when an LLC hasn’t paid a Kentucky sales tax on the tangible personal property. The use tax rate in Kentucky is also 6%.
Individual cities and counties in Kentucky don’t impose extra sales or use taxes.
If your business has employees, you’ll be required to withhold and pay federal and state income and employment taxes. The rate of withholding will vary by employee. Kentucky also requires employers to pay state unemployment taxes based on wages paid.
Kentucky has a variety of annual franchise tax charged to LLCs.
It’s called Limited Liability Entity Tax (“LLET”). An LLC with gross receipts of less than $3 million pays a minimum LLET of $175. The minimum LLET for LLCs with gross receipts greater than $3million is based on a percentage of revenue.
You can find more detailed information regarding Kentucky business taxes on the Kentucky Department of Revenue website.
Conclusion: How much does an LLC cost in Kentucky?
As you can see, there are various costs associated with starting and maintaining an LLC in Kentucky. You can register an LLC for as low as $40 (if no additional business license registrations are required). Then pay $190 in annual LLC costs.
In reality, however, the total initial, annual and optional expenses will depend on the facts and circumstances of each LLC.
For example, assume that Bill is a Kentucky CPA and wants to branch out independently. He decides to form his LLC and name it Bluegrass Advisors LLC. Bill has determined his name is available but doesn’t want to wait until he files the Articles of Organization to secure the name. Thus, he files a Reservation of Reserved Name for $15.
Bill also decides to use a third-party commercial registered agent, which charges $100 annually in advance. To open a business bank account, Bill requires a certified copy of his Articles of Organization ($10). A local bank $0 to open the account and then a $10/month service fee thereafter.
Bill uses an online service to draft an operating agreement for $75. He is already a CPA and only needs to renew his license this year ($100).
Bill operates his new business in the City of Franklin, and his annual revenues are $250,000. So his annual tax is $175 + $150 for annual report submission. He also pays sales tax on all tangible personal property purchases for this business.
Below is a summary of Bill’s expected initial, yearly and optional costs.
|File articles of organization||$40|
|Business bank account||$0|
|Prepare an LLC operating agreement||$75|
|Initial professional license fee||$0|
|Initial business license fee – City of Franklin||$100|
|Initial third-party registered agent fees||$100|
|Name reservation (optional)||$15|
|Certified copy of articles of organization (optional)||$10|
Total initial costs
|Limited liability entity tax||$175|
|CPA license renewal ($100 every 2 years)||$50|
|Sales and use taxes||$0|
|Annual third-party registered agent fees||$100|
|Bank fees ($10/month)||$120|
|Annual City of Franklin business license fee||$100|
|Annual City of Franklin gross receipts license fee (.0006 x $250,000-$100)||$50|
Total annual costs
This material is provided for informational purposes only. The provision of this material does not create an attorney-client relationship between Paul Donovan and/or Donovan Legal PLLC and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel. Do not take action in reliance on the contents of this material without seeking the advice of counsel.