Most small businesses in Kentucky need to be licensed and/or permitted. While there isn’t any one statewide Kentucky business license that every business must apply for, few businesses don’t need any local or state license. Thankfully, business licenses in the state tend to be affordable even for if you’re just starting a business in Kentucky.
Do you need a business license in Kentucky?
Kentucky has a largely decentralized business licensing system, meaning that many licenses are issued at the local level rather than the state. Most cities and counties have their own local occupational license. Businesses usually need to obtain a local occupational license where they’re located.
In addition to an occupational license, your business could be subject to additional local, state or federal requirements depending on its industry.
To find out what local occupational and other licensing requirements apply to your business, you can contact the city clerk and county clerk. They should each have information on what’s required from businesses. The Kentucky County Clerk’s Association keeps a database of all county clerks’ contact information.
For state licensing requirements, contact the appropriate body that oversees your industry. You can expect to need a state license if in an industry such as alcohol sales, firearms sales, medical care or many others. You can check state requirements through Kentucky Business OneStop.
Federal licenses are required for businesses operating in alcoholic beverages, agriculture, aviation, ammunition, firearms, and explosives, fish and wildlife, commercial fisheries, drilling and mining, logistics and transportation, radio and television broadcasting, and maritime transportation. Check with the appropriate overseeing body, or contact the Small Business Administration (SBA) if you’re unsure.
How much does a business license cost in Kentucky?
The cost of licensing a business in Kentucky varies substantially. Your business’s location, industry and size are some of the primary determining factors. The total cost could be anywhere from nothing to thousands, but many businesses fall between these two extremes. For a broader look at average fees and what influences them nationwide, see our business license cost overview.
Sales & Use Tax License
Part of starting a business here involves registering your business with the Kentucky Department of Revenue. Specifically, you’ll almost certainly need a Sales & Use Tax License. There is no fee for this license.
Sales & Use Tax Licenses are sometimes referred to as “seller’s permits.”
Occupational Business License
The most common local business license in Kentucky is an Occupational License. This is a local business license, and shouldn’t be confused with professional licenses issued by the state (e.g. for medical professionals). You can obtain an Occupational License from the city or county clerk.
Local governments often use a percentage-based fee for their Occupational Licenses. Your business’s cost will increase with sales and payroll. The upside of this system is that the cost of a license is extremely affordable when first starting out.
Most counties have an occupational tax rate of 0.5 – 2.5%. A number of counties either don’t charge a fee, or have a flat fee rather than a percentage one. Keep in mind that cities can have their own percentage on top of a county’s.
Types of business licenses in Kentucky and their cost
| Location | License / Permit | Issuer | Potential Cost |
| Statewide | Sales & Use Tax License | Kentucky Department of Revenue | $0 |
| Statewide | Professional Licenses | Kentucky Department of Professional Licensing | varies |
| Lexington-Fayette Urban County | Occupational Business License | Lexington-Fayette Urban County Government | 2.25% of payroll and net profits |
| Boone County | Occupational Business License | Boone County | 0.8% of payroll and net profits |
| Kenton County | Occupational Business License | Kenton County Business Services | 0.7% of payroll only |
| Louisville / Jefferson County | Occupational Business License | Louisville-Jefferson County Metro Government | 2.2% (resident) or 1.45% (non-resident) of payroll and net profits |
Some jurisdictions have a minimum occupational tax rate that applies if the percentage-based amount isn’t higher.
Examples: Industries and the licenses they typically need in Kentucky
Businesses in many industries need additional licenses that are specific to their work or field. Some examples of industries that Kentucky has state licensing requirements for are:
- Professional Services: Professionals such as psychologists, speech pathologists, athlete agents, massage therapists and long-term care administrators need an applicable professional license from the state. The Department of Professional Licensing maintains a list of the state’s licensing boards.
- Food Service Businesses: Local health departments commonly require that food and beverage businesses in their jurisdiction obtain a license or permit. Contact the health department where your business is to check on any food license or permit requirements.
- Alcohol Sales: Businesses that sell alcohol to customers need to be licensed by the Department of Alcoholic Beverage Control. This is one of the more expensive business licenses.
- Construction Businesses: Contractors and tradespeople sometimes need local licenses or permits. They might need a license to work within a city or county, and/or a permit for each project. Contact the local clerks for help with these.
- Home Businesses: Home businesses often are supposed to have an Occupational Business License.
Renewing your business license in Kentucky
The Kentucky Sales & Use Tax License remains in effect as long as your business is in operation. There’s no need to renew this license — just make sure to remit these taxes to the Department of Revenue on time.
Any occupational business tax also should be remitted to the city and/or county on time. Sometimes the Occupational Business License is technically renewed, and sometimes it isn’t actually renewed. In either case, the tax has to be paid.
Professional licenses come with their own renewal timelines and requirements. It’s common for these to come with additional fees, and to require certain continuing education units (CEUs). Check with the state board if you have a professional state license.
If you do have a business license that gets renewed, make sure to submit the renewal application by the deadline. Missing the deadline can result in additional late fees, and ignoring renewal altogether can bring legal consequences if your business is delinquent for too long.
Conclusion
Obtaining the right business licenses is an important part of starting your new business. They’re just one of several steps you’ll need to complete, though. You’ll also need to file your formation documents, create an operating agreement, and appoint a registered agent. If you’re not sure where to begin, you can learn how to start an LLC in Kentucky to guide you through the entire process from registration to licensing. At Tailor Brands, we’re here to help new business owners in Kentucky, like you, with each of these steps. We can help you succeed.
FAQ
Yes. You must register for a Kentucky Sales & Use Tax License if you sell to customers in the state, and most businesses also need a local Occupational Business License from the city or county.
Apply for a Sales & Use Tax License through the Kentucky Department of Revenue online or by mail, and contact your city or county clerk to determine and apply for any required local licenses.
A Sales & Use Tax License is usually approved within 1–2 days online or up to 3 weeks by mail, while local and specialty licenses may take days to several weeks.
Yes. Forming an LLC creates a legal entity, but licenses are still required to operate, sell goods, or collect taxes.
No. An LLC defines your business structure and liability protection, while a business license gives you permission to operate.
You may face fines, penalties, back taxes with interest, or be forced to stop operating until you comply.
It’s a city or county tax on payroll and net profits that businesses register for when obtaining a local license, typically ranging from 0.5% to 2.5%.