Interested in starting an LLC in Kentucky?
Kentucky is not just a great state where you can watch championship horse racing and sip the finest bourbon in the world. It’s also an attractive location for entrepreneurs to start a new small business.
Kentucky is centrally located in the US. It has easy access to shipping and transportation. The cost of living is low. And the state runs many programs to develop the construction, technology, energy, medical, and aerospace industries.
So if you are looking to form a limited liability company (LLC), Kentucky has a lot of potential.
Here are the steps you need to take to start a new business.
Table of contents:
- Step 1: Choose a name for your LLC
- Step 2: Select a registered agent
- Step 3: File the Kentucky LLC Articles of Organization
- Step 4: Obtain a copy of the Certificate of LLC Registration
- Step 5: Create an LLC operating agreement
- Step 6: Get an (EIN) Employer Identification Number from the IRS
- Costs to set up an LLC in Kentucky
- Last steps
Step 1: Choose a name for your LLC
The first step of LLC formation is choosing a name.
While naming can be a fun and creative task, there are some naming requirements to account for. The name of your LLC must be distinguishable from other business names already registered in Kentucky. Use the state's name search tool to determine whether the LLC name is available.
Also, under Kentucky law, the LLC name must contain “limited liability company,” “limited company,” or one of the abbreviations — LLC or LC. So that the public is aware that they are dealing with an LLC.
Making a name reservation for an LLC
If you’re not ready to form your LLC just yet, you can place a name reservation for 120 days.
To do so, you must file form RES with the Kentucky Secretary of State. The state fee for a name reservation is $15. There are also fees if you want to transfer a name you reserved, cancel a reserved name, or apply to use a name that is not distinguishable from other names currently being used in Kentucky. Also, if you formed your LLC in another state and want to do business in Kentucky as a foreign LLC, you may register the name of your LLC in advance by filing an Application of Registered Name. The fee is $36.
There may be times when you want to use a name other than your LLC's legal name.
For example, you may need to do this if your LLC was formed in a different state and its name is already being used by another business in Kentucky. In Kentucky, an alternative business name is called an “assumed name.” Other states call it a “fictitious name,” “trade name, or “DBA” (doing business as) name. If you wish to use an “assumed name,” you must file a Certificate of Assumed Name. The state filing fee is $20.
Step 2: Select a registered agent
As with other states, Kentucky requires every LLC to appoint a registered agent.
A registered agent is a key point of contact for your business. Their task is to receive important mail or papers from the state and third parties. The registered agent must have a physical address in Kentucky (no P.O. boxes). You may serve as your own designated agent for free. However, most businesses use a third party as the designated agent for privacy and convenience.
Generally, businesses don’t want a process server showing up at the registered office address. Also, a designated agent must be available during normal business hours to receive mail and papers. Not all businesses can be available during those times.
If you choose a commercial registered agent service, expect to pay between $50 and $150 annually. Your Kentucky registered agent should file form CRA – Statement of Consent of Registered Agent. There’s no fee payable to the state to designate a registered agent. However, there are fees if you change your designated agent or your principal office address.
Step 3: File the Kentucky LLC Articles of Organization
The Articles of Organization is the legal document that creates your LLC in Kentucky.
In other states, the name of this document can be “Articles of Formation” or “Certificate of Formation.”
Kentucky Articles of Organization contains basic information about your business entity:
- Registered agent name and address
- Operating address and mailing address
- County of operation
- Management structure (member- or manager-managed)
- Registered office location
- Industry and size
- LLC organizer signature(s)
The state fee for registering a domestic LLC is $40. If you ever need to amend your Articles of Organization, a $40 fee is due each time. The Articles of Organization can be filed by mail to the Kentucky Office of the Secretary of State. Or you can submit the form online using the Kentucky One Stop Business Portal.
Online LLC registrations are usually processed within 24 hours. If filed by mail, the processing time can be much longer. Kentucky does not have expedited filing services.
Other LLC registrations
If you formed your LLC in another state and want to register to do business in Kentucky as a foreign LLC, you must file an application for a Certificate of Authority with the Kentucky Secretary of State. The fee is $90. Also, you need to use a different form for registering a non-profit LLC or a professional service LLC (PLLC).
Step 4: Request a copy of the Certificate of LLC Registration
After the Secretary of State approves your LLC formation documents, you want to get a certified copy of the registration certificate for your records. You may also need to present a certificate copy when opening a business bank account or obtaining a business loan.
In Kentucky, you will complete the Request for Corporate Documents and pay a $10 fee for the first five pages and $0.50 for each additional page.
Step 5: Create an LLC operating agreement
Like the by-laws of a corporation, the operating agreement governs the relations among the members. Typical, although not always, it is in writing and signed and dated upon formation of the LLC.
This document governs the rights and duties of LLC members and manager(s) around the LLC's business activities. And Kentucky laws apply when the operating agreement doesn’t address a particular issue. Further, it is not required to be filed with the Kentucky Secretary of State. When in writing, a copy of the operating agreement should be given to all members of the LLC and kept with the LLC's books and records.
A written operating agreement may provide greater liability protection for the LLC and its members than the Kentucky LLC statutes. It allows new investors to see how the LLC will be managed. Also, a written operating agreement helps prevent conflicts between members.
An operating agreement should include the following:
- Member identity
- Member interests
- Member capital contributions
- Allocation of profit and loss among members
- Amount and timing of member distributions
- Management responsibilities
- Voting rights
- Procedures for changing the LLC ownership structure
- LLC dissolution procedures
The cost of drafting an operating agreement can range from $0 (if you draft your own agreement) to thousands of dollars for a complicated multi-member LLC.
Step 6: Get an EIN (Employer Identification Number) from the IRS
Once your new legal entity is formed, you should obtain an employer identification number (EIN) from the Internal Revenue Service.
An EIN is the business equivalent of a social security number. It is necessary to file federal tax returns for LLC members and employees. Also, some financial institutions may require an EIN for opening a business bank account.
Also, having EIN may help build the LLC's business credit rating and protect against identity theft.
The application process is straightforward, and you may obtain an EIN online. There is no fee.
Costs to set up an LLC in Kentucky
The costs to register your Kentucky LLC will depend on its complexity.
Here's a summary of all the fees you may incur when setting up your LLC in Kentucky.
- Reserving a business name – $36
- Registering a DBA – $20
- Using a professional registered agent – $50 – $150 / annually
- Filing your LLC Articles of Organization – $40
- Amending Articles of Organization – $40
- Registering a foreign LLC – $90
- Obtaining copies of approved Articles of Organization – $10+
- Drafting an Operating Agreement – $0 – $2,000
- GRAND TOTAL: $286 – $2,386
Even after you register your LLC with the Kentucky Secretary of State, your work isn't quite finished. You may need to complete a few more tasks before you're done with the administrative work of forming your LLC.
Register with the Kentucky Department of Revenue
To register for state taxes, you must complete the Kentucky Tax Registration Application. This form lets you get a state ID number for paying various local business taxes. For example, if the LLC sells goods or has employees, it must register with the state for employer withholding tax, sales tax, and use tax. You can send the form by mail or submit it via One-Stop Business Portal.
The Kentucky Department of Revenue website contains a summary of state taxes and forms.
Open a business bank account
Opening a business bank account is another key step in business formation.
To open a business account, you will usually need to provide:
- A certified copy of your Articles of Organization
- A company resolution authorizing the opening of a bank account
- Your EIN (if applicable)
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.
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