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Kentucky offers a variety of incentives to businesses, including tax credits, business loans, and other forms of financial support. Business-friendly tax laws and a relatively low cost of living have attracted many new and existing businesses to Kentucky. If you plan to start a business in Kentucky, forming a limited liability company (LLC) can help protect your personal assets from business liabilities. An LLC business structure can also help you streamline the management of various business matters, such as regulatory compliance and taxes.
The main form that you need to form an LLC in Kentucky will ask you about the management of your company and the company’s registered agent. You must state whether the company owners, known as members, will run the company, or if they will select managers to run it for them. The following six steps will help you obtain the information you will need and file the necessary paperwork to get your Kentucky LLC started.
Next, you will find further details on each of these steps.
You will need to choose a unique name for your LLC. The name must not be in use for another business in Kentucky. It must end with one of the following:
You can search for business names on the Kentucky Secretary of State’s website to see if the name you want is available. Once you have confirmed that it is available, you have several options for protecting your use of that name.
If you are not ready to form your LLC quite yet, you can reserve the name you chose for up to 120 days by filing Form RES, “Reservation or Renewal of Reserved Name.” You may use the same form to renew your reservation for another 120 days. You must submit the form at least 30 days before the 120-day reservation period expires.
The form requires you to indicate whether you are reserving a new name or renewing an existing reservation. You must state the type of business entity you intend to form, with LLC as the second option. You must provide your name and address as the “applicant.” Finally, you must sign and date the form.
You may file Form RES online through the Secretary of State’s One Stop Business Portal. The filing fee is $15.
You may also file the form by mailing the original and one copy to the Office of the Secretary of State, P.O. Box 718, Frankfort, KY 40602-0718. You should include a check for $15 made out to the Kentucky State Treasurer.
You can transfer the name reservation to someone else by filing Form NOT, Transfer of Reserved Name. This form requires your name, the name and address of the transferee, and your signature. It has the same filing fee and filing instructions as Form RES.
If you no longer want to keep the reserved name, you can either let the reservation expire after 120 days, or you can file Form CCR, Cancellation of Reserved Name. This form asks for your name and address as the applicant, the date you filed the name reservation with the Secretary of State, and your signature. The filing fee is $10. The filing instructions are the same as for the other forms.
You might also be required to file paperwork with the county clerk in the county where you live or where you plan on doing business. You can check with local county clerk offices directly to find out if you should file a copy of your name reservation paperwork with them. Once you have filed with the state, you can obtain copies of the paperwork from the Secretary of State’s business search tool.
Your LLC is not required to use its real name when it does business. It can use an assumed name, also known as a “doing business as” name or “DBA”, but it must register this name with the state. The name must also be unique within the state. This step must occur after you have formed the LLC by filing articles of organization with the Secretary of State.
Form ASN, Certificate of Assumed Name allows an LLC to operate under an assumed name. The form asks for the assumed name, the LLC’s real name exactly as it appears on the Articles of Organization, the LLC’s address, and the signature of an authorized member or manager of the company.
The filing fee for Form ASN is $20. You can file it online, or by mail by sending the original and one copy to the Office of the Secretary of State, P.O. Box 718, Frankfort, KY 40602-0718, with a check made out to the Kentucky State Treasurer.
Registration of an assumed name is valid for five years. You can renew the registration for another five years no later than six months before the assumed name expires.
Other forms that you might need with regard to an assumed name for your LLC include the following, each of which has a $20 filing fee:
You may also be required to file a copy of your DBA paperwork with your local county clerk.
Trademark law protects brand names, logos, and other marks used to identify products and services. You may be able to register your company name as a trademark with the Kentucky Secretary of State or the U.S. Patent and Trademark Office (USPTO).
To qualify for state trademark protection, you must already be using your company’s name in commerce. Federal law states that you must already be using the name, or you must intend to start using it soon.
You must identify one or more classes of goods or services that your company name represents. The state trademark application identifies 34 classes of goods and 11 classes of services. The USPTO has many more classes than that. Suppose, for example, that your LLC makes and sells clothing. You might choose class 25, “Clothing, footwear, headgear,” on the state application.
The main advantage of federal trademark registration is that it applies nationwide. The advantage of registration in Kentucky is that it costs much less. The fee for a state trademark registration application is $10 per class; the federal fee is $250 to $350 per class.
Once you have chosen a name for your company and confirmed that it is available, you can form your LLC. You may do this by filing articles of organization with the Kentucky Secretary of State. Three different forms are available, depending on the type of company you plan on forming:
The three forms are almost identical in the information that they require. You can check with your local county clerk’s office to see if you must file a copy of the articles of organization with them.
The filing fee for articles of organization is $40. You can pay it by credit card if you file online or by check made payable to the Kentucky State Treasurer if you file by mail.
The articles of organization form asks for the following information:
You can file the articles of organization online through the Kentucky Secretary of State’s online portal. You may file in person or by mail instead.
To file in person, you may go to Room 154, Capitol Building, 700 Capital Avenue, Frankfort, KY 40601 between 8:00 a.m. at 4:30 p.m., Eastern Time, Monday through Friday. Note, however, that the Secretary of State’s office has encouraged online and mail filings throughout the COVID-19 pandemic. Before heading to the Capitol, you might call the office at (502) 564-3490 to see if they have any restrictions in place for in-person visits.
You can file by mail by sending the original and one copy of the articles of organization, along with the filing fee, to the Office of the Secretary of State, P.O. Box 718, Frankfort, KY 40602-0718.
In order to do business in Kentucky with an LLC or any other type of entity, you must designate an individual or business to serve as your registered agent. A registered agent’s job is to provide a consistent location, known as the registered office, for the following:
The state will send important correspondence to your LLC’s registered agent. If someone files suit against your company, the process server will pay the registered agent a visit at the registered office. The registered agent is responsible for passing these materials on to you.
An individual or business may serve as a registered agent. Individuals must be at least 18 years old. A registered agent must have a physical address in Kentucky. They may not use a P.O. Box as a registered office location.
You may serve as the registered agent for your LLC. You may also designate someone else. Some lawyers or law firms serve as registered agents for their clients. Numerous companies serve as registered agents for others for an annual fee, which typically ranges from $199 to $400.
You must designate a registered agent and registered office in your LLC’s articles of organization. The registered agent must sign the form to indicate their consent to serving in that role.
You can name a different registered agent or change the registered office address by filing Form RAC, Statement of Change of Registered Agent and/or Registered Office Address. The form has a $10 filing fee. You will also need to file Form CRA, Statement of Consent of Registered Agent, with the new registered agent’s signature.
A registered agent may resign from that role by filing Form SRA, Statement of Resignation of Registered Agent. There is no filing fee for this form. The Secretary of State will send you a notice if they receive this form. You are then responsible for finding a new registered agent and filing Forms RAC and CRA.
An LLC operating agreement represents the agreement of the initial members about how they will run the company. If the Articles of Organization state that managers will run the company instead of members, the operating agreement can establish procedures for how the members will select managers. Kentucky law does not require an LLC to have an operating agreement, but it is a very good idea regardless.
While not legally required in Kentucky, an operating agreement is a good idea for an LLC, whether it has dozens of members or only one. LLCs with numerous members may need to establish procedures for how they will make decisions on important matters, how they will distribute business profits and allocate business losses, and how they will resolve disputes or impasses among members.
Kentucky law establishes various rights and obligations for LLC members. An operating agreement can clarify how state law applies to the company and its members and managers.
For a single-member LLC, an operating agreement can demonstrate that the LLC is a distinct legal entity separate from its owner. This can help protect the member from liability for business debts. It can also protect the LLC from the member’s personal liabilities.
Kentucky law does not require an LLC to have an operating agreement, nor does it set any requirements for an agreement’s form or content. In the absence of an operating agreement, the provisions of Kentucky law apply to the company, its members, and its managers.
The next step in forming your LLC is to obtain an Employer Identification Number (EIN) from the IRS. Even if your LLC will not have employees, you will need an EIN for a variety of reasons. We can assist you in obtaining an EIN for your business.
An EIN serves a similar function as a Social Security Number, except for LLCs, corporations, and other entities instead of people. EINs even have the same number of digits as Social Security numbers, although they have a different arrangement. While a Social Security number is formatted XXX-XX-XXXX, an EIN is formatted XX-XXXXXXX.
Your LLC’s EIN will identify it on all tax filings with the IRS. You will also need an EIN to open a company bank account.
You may obtain an EIN from the IRS online, by fax, or by mail. You can begin by filling out Form SS-4. Even if you obtain your EIN online, and therefore do not need to file an SS-4, it serves as a useful record of the number.
The SS-4 asks for the LLC’s legal name, meaning the name on the articles of organization, and its address. Line 8a asks if you are applying for an LLC. Line 9a asks about the type of entity that is applying. “LLC” is not an option, so you may check the box for “Other” and write in “LLC.” Line 10 asks your reason for applying for an EIN. You may choose “Started new business.”
The online EIN application is available on the IRS website. You can receive an EIN in moments by using this method.
If you apply by fax, it typically takes 4-5 days to get your EIN. Applying by mail may take 4-5 weeks. Mailing and faxing instructions for applicants in Kentucky are:
You must register your new LLC with the Kentucky Department of Revenue (DOR). It will issue a ten-digit for your business known as a Commonwealth Business Identifier (CBI). The DOR will notify you about your state tax requirements. The following is an overview of federal and Kentucky business taxes.
By default, LLCs are taxed like partnerships or as sole proprietorships. The company itself does not pay federal income taxes. Instead, the members pay income tax on their prorated shares of business profits, or they may deduct their share of losses. The members may elect for the company to be taxed as a corporation by filing Form 8832 with the IRS.
Single-member LLCs are considered “disregarded entities” for federal income tax purposes. This means that the member may report business income and expenses on a schedule attached to their personal income tax return.
LLCs do not pay federal income tax themselves. The members pay tax on their share of the profits. Kentucky LLCs might, however, have to pay a Limited Liability Entity Tax (LLET) to the DOR. The LLET only applies to LLCs with annual gross revenue of at least $3 million. It is currently a flat rate of 5%. You can pay LLET with DOR Form 720.
If you sell goods or provide services that the DOR deems taxable, you will have to collect sales tax from your customers and remit it to the DOR. Kentucky has a statewide sales tax rate of 6%. No local governments have their own sales tax laws with different rates.
You may pay yourself wages or a salary as if you were an employee of your LLC. If you do this, you must deduct and pay payroll taxes. If you do not, you may have to pay self-employment tax instead. Self-employment tax contributes to Social Security and Medicare just like payroll taxes. The current rate is 15.3% of the amount you pay yourself, which breaks down to 12.4% for Social Security and 2.9% for Medicare.
If your LLC has employees, or if you pay yourself as an employee, you must deduct taxes from each paycheck to send to the IRS. This includes federal income tax withholding and payroll taxes for Social Security and Medicare. The IRS refers to the amounts you withhold from employee paychecks as “trust funds,” since you are holding them in trust for your employees. It is vitally important that you send trust funds to the IRS on time.
Payroll tax rates are as follows:
An employer must match the amount of payroll taxes withheld from employee paychecks, making the total amount paid to the IRS 15.3% of the employee’s pay.
Employers must also pay Federal Unemployment Tax (FUTA) on the first $7,000 they pay to each employee annually. The rate is 6%, so the maximum amount an employer will have to pay for one employee in one year is $420.
Your LLC may have to pay other taxes to the DOR or other state entities, depending on what kind of business your LLC does. They may also have to pay taxes or file reports with county or city governments. Kentucky’s One Stop Business Portal has an overview of state tax requirements. You can also contact local officials in your area to ask about tax obligations.
Now that you have formed your LLC and registered it with all the necessary government agencies, you are almost ready to start doing business. Here are a few more steps you should take before you get started:
Using an LLC for your business may help protect you from personal liability for business debts and other problems. To assist in maintaining that liability protection, you should keep your assets separate from the business’s assets. You can open a bank account in the LLC’s name once you have an EIN from the IRS. The LLC’s income should go into a business bank account, not your personal account.
You must file an annual report with the Kentucky Secretary of State every year. The first report is due between January 1 and June 30 of the year after the year you formed the LLC. Each subsequent annual report is due on June 30. The filing fee is $15. You may file online or by mailing the form to the Secretary of State.
You will need to make regular reports to the IRS, the DOR, and other agencies regarding your LLC’s financial condition. The best way to stay on top of the company’s finances is to hire one or more professionals to help you manage these obligations. Having professional assistance will assure you that your company is in good hands. It will free up your time to focus on running the actual business. Finally, regularly consulting with a tax advisor, lawyer, or accountant can help you get as many tax benefits for your LLC as possible.
Depending on where your LLC does business and the type of business it does, you may need to obtain licenses or permits from city or county governments. You might also be required to have certain types of insurance coverage, such as workers’ compensation. The Kentucky One Stop Business Portal offers a guide to regulations and ordinances that could affect your business.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.