How to Start an LLC in Kentucky

Thinking about starting a limited liability company (LLC) in Kentucky? The Bluegrass State boasts one of the lowest costs of doing business in the U.S., with affordable utility rates, workforce development programs, and a low cost of living for employees. The state also has a central location and strong air, rail, and road logistics.

Kentucky LLC registration not only gives your business liability protection but also positions you to thrive in this pro-business environment. If you’re ready to get started, learn everything you can about how to start an LLC in Kentucky.

How to get a Kentucky LLC in 6 steps

Forming a limited liability company in Kentucky is a relatively straightforward process, but be careful not to overlook the details. Follow these steps to set up your Kentucky LLC.

1. Name your Kentucky LLC

You’ll need to choose a business name to include in your articles of organization before you can register your LLC. Names must comply with Kentucky’s naming requirements:

• Your business name must include the words limited liability company, limited company, LLC, or LC. You can abbreviate “Limited” to “Ltd.” and “company” to “Co.”
• The name of every professional limited liability company must contain the words Professional Limited Liability Company or Professional Limited Company, or the abbreviations PLLC or PLC.
• Your business name must be different from an existing business in the state. You can do a Kentucky LLC search on the Secretary of State’s website to determine if a particular business name is in use.
• A business entity name can only contain letters of the English alphabet, Arabic numerals (1, 2, 3, etc.), Roman numeral characters, and common symbols like &, !, *, ?, or >.

If you aren’t ready to register your LLC but are concerned your business entity name might be taken by someone else, you can reserve it. In Kentucky, names may be reserved for up to 120 days by paying a $15 filing fee and submitting the proper form to the Kentucky Secretary of State.

2. Choose your registered agent

Kentucky requires you to appoint a registered agent for your LLC. This is the person or business entity authorized to receive service of process and other official legal documents and notices on behalf of your LLC.

A registered agent can be a person (including yourself or an employee of your LLC) or an entity that offers a registered agent service. They must meet the following criteria:

• Be an individual resident of Kentucky, a Kentucky entity, or a foreign entity authorized to transact business in Kentucky.
• The agent must have a physical street address in Kentucky.
• The agent must be available to accept documents during regular business hours.

Many Kentucky LLCs choose to use a registered agent service for convenience. LegalZoom’s registered agent service can provide you with peace of mind that you won’t miss any important documents.

3. Prepare and file articles of organization

The articles of organization is a document that officially establishes your LLC by laying out basic information about it. To prepare your articles, you’ll need the following information:

• Your LLC’s business name
• The name and street address of your registered agent
• The mailing address of the LLC’s initial principal office
• Whether the LLC is veteran-owned
• Management structure: Will managers or members manage the LLC?
• The signature of the organizer or the person forming the LLC
• The signature of the registered agent or the signature of the individual authorized to accept the appointment if the agent is an entity

If you’re starting a professional limited liability company (professional LLC or PLLC), you’ll need to fill out the articles of organization for PLLCs. You must also state the professional service your LLC will be providing.  

Prepare articles of organization and file them with the Kentucky Secretary of State to start the LLC formation process. You can file online, by mail, or in person at the Office of the Secretary of State in Frankfort. The filing fee is $40.

Once you file your articles, the Secretary of State will review the filing. If the articles are approved, the state will issue you a certificate that confirms your Kentucky LLC is now a formal business entity. After receiving this certificate, you may obtain an employer identification number (EIN), a business license, and a business bank account.

4. Create an operating agreement

An operating agreement is a legally enforceable document that outlines the way your LLC will transact business. Kentucky does not require an operating agreement, but it is an essential component of your business.

An operating agreement can help you settle disputes that may arise over financial agreements and other potential litigation. Single-member LLCs also benefit because an operating agreement can outline your liability protection and clarify your business structure in case of legal disputes.

Without an operating agreement in place, your business will be governed by Kentucky Revised Statutes Chapter 275, “Limited Liability Companies,” not necessarily what is in the best interest of the LLC and its members. For example, under state law, a simple majority-in-interest (50.01%) is required to approve a merger. However, your operating agreement could require a two-thirds or three-fourths majority-in-interest vote. 

The LLC operating agreement can include, but is not limited to, the following:

• Purpose of the business entity
• How profits and losses will be divided
• Indemnification and liability clauses
• Information about the articles of organization
• Management and tax structure of the LLC
• Members and their contribution
• Procedure for admitting new members, as well as outgoing members

You can create this document on your own, speak with an attorney, or get an operating agreement through LegalZoom.

5. Get an employer identification number and open a business bank account

An employer identification number (EIN) is a nine-digit number assigned by the Internal Revenue Service to identify your business entity for taxes. You need it to hire employees, pay federal taxes, and open a business bank account. In Kentucky, having a business bank account helps separate your personal and business finances, which strengthens your personal liability protection and simplifies tax filings.

You can obtain your EIN by mail or online through the IRS. You can also use an online EIN service, which can help you make sure your filing is error-free.

In Kentucky, you’ll also need a Commonwealth Business Identifier (CBI). This is a 10-digit number that state agencies use to identify your business. You’ll need it to pay state taxes.

6. Register for state taxes and get business licenses

While Kentucky has a low cost of doing business, most businesses will have to pay taxes. The following are the most common business taxes in Kentucky.

• Limited Liability Entity Tax (LLET): Every business that is protected from liability by the laws of the state, like corporations, LLCs, and limited partnerships, must pay the LLET. The tax amount is based on the amount of business your company does in Kentucky. It’s smart to consult a tax professional about the LLET tax.  
• Sales and Use Tax: Wholesalers, retailers, and sellers that sell tangible property, digital property, and certain services must pay the Sales and Use Tax, which is 6%. However, there are no local sales and use taxes in Kentucky.
• Excise taxes: Like most other states, Kentucky has extra taxes for alcohol, tobacco and vapor products, motor fuels, rental vehicles, and “transient rooms,” including not only hotels, motels, and rentals, but also campgrounds and RV parks.
• Employer taxes: If your Kentucky LLC will have employees, you’ll also need to register for the Employer’s Withholding Tax.
• Business income taxes: In Kentucky, LLC income “passes through” to your personal income tax returns, so you’ll report the profits and losses on your individual tax returns. Kentucky has a flat personal income tax rate of 4%.

You can register for all taxes through the Kentucky Online Gateway. In addition to taxes, your Kentucky LLC might need specific licenses and permits. Kentucky does not require a general business license, but certain businesses might need one or more of the following.

• Professional licenses: If your business is a professional limited company, you’ll need a license from the Kentucky Department of Professional Licensing. PLLCs include attorneys, accountants, architects, chiropractors, dentists, doctors, engineers, nurses, pharmacists, physical and occupational therapists, psychologists, and veterinarians.
• Environmental permits: Businesses that produce air emissions, wastewater, or hazardous waste, dispose of waste on-site, or withdraw water from the ground or a stream might need environmental permits or authorization. Check with the Kentucky Energy and Environment Cabinet.
• Local licenses and permits: Many cities and counties in Kentucky require local business licenses and permits. Consult your local government officials to check.

Next steps after forming your Kentucky LLC

LLC formation gives you a legal foundation to conduct business. But there are a few more things to think about before you’ve covered all the steps for how to start an LLC in Kentucky.

• Register a domain name: Even if you don’t think you’ll need a webpage, you probably will. When you do your Kentucky LLC search, it’s a good idea to check if the URL is available and secure the domain name.
• Obtain a certificate of existence: This optional document, often called a certificate of good standing in other states, verifies your LLC’s legal registration in Kentucky. It can be useful for securing contracts or partnerships. You can request one through the Kentucky Secretary of State for a $10 filing fee. 
• Purchase insurance for your business. If you have employees, you’ll need to register with the Office of Employment and Training (OET) to get unemployment insurance. You might also need general liability insurance, property insurance, and other types of insurance, depending on your industry.
• Consider a foreign LLC: If you plan to conduct business outside of Kentucky, you’ll need to register as a foreign LLC in other states to legally operate there. LLCs in other states applying for a foreign LLC in Kentucky must submit a Certificate of Authority to the Secretary of State.

Annual filing requirements for Kentucky LLCs

All Kentucky LLCs are required to file an annual report by June 30 each year (reports can be filed any time between Jan. 1 and June 30). Your annual report must list the names and addresses of your LLC’s members and managers, confirm the principal and registered office/agent, and be signed and dated.

You can file your annual report online, by mail, or in person for a $15 filing fee. If you miss the filing date, your LLC could be dissolved. LegalZoom’s annual report filing service can help you avoid this by expediting your paperwork directly with the state.

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

The cost of forming an LLC in Kentucky is $40 to file the articles of organization. This makes Kentucky an extremely affordable place to start a business. However, you might also want other services. The following is the full breakdown of the costs.

• Name reservation: $15 filing fee
• Formation cost: $40 for filing the articles of organization
• Registered agent services: $100–$300 per year
• Operating agreement: $99 and up
• Certificate of existence: $10
• Licenses and permits: Varies by location and industry

The total cost of Kentucky LLC registration, therefore, ranges from $40 to about $465, plus the cost of any business licenses or permits. You’ll also need to pay $15 each year when you file your Kentucky Annual Report.

How to start your Kentucky LLC with LegalZoom

Learning how to start an LLC in Kentucky is easy, but services like LegalZoom can make it even easier. You can quickly file your Articles of Organization and get help with drafting your operating agreement. LegalZoom can also serve as your registered agent, file your annual reports, and offer ongoing legal support for your business. Start your LLC with us today.

FAQs

What are the benefits of registering a Kentucky LLC?

An LLC offers personal liability protection, meaning your personal savings and property are shielded from lawsuits or debts incurred by the business. Kentucky, in particular, offers low business costs, a low, flat income tax rate, and access to strong logistics networks.

How long does it take to form an LLC in Kentucky?

LLC formation in Kentucky typically takes about one week if filed online. Mail filings may take a bit longer, but this can vary depending on the current processing times at the state level.

Do I need a business license if I have an LLC in Kentucky?

Kentucky doesn’t have a general business license, but some businesses might need professional licenses, environmental permits, or city and county licenses and permits. Check with your city or county government for specific requirements, as the type of license may depend on your business activity.

What taxes does an LLC pay in Kentucky?

LLCs in Kentucky must pay the Limited Liability Entity Tax (LLET) and may also be responsible for sales tax, excise taxes, and employer withholding taxes, depending on the business type. Business income is taxed as a “pass-through entity,” which means you’ll report your LLC’s income on your personal tax returns each year and pay the flat personal income tax rate.

Rudri Bhatt Patel contributed to this article.