Although forming a limited liability company (LLC) may seem daunting, it can be quite simple and affordable, particularly if you are aware of the specific details the State of Kentucky requires.
Interested parties must register with the Kentucky Secretary of State by filing the necessary forms, paying the necessary fees and meeting all naming and formation requirements.
The requirements for forming a Kentucky LLC are as follows:
Registration. File an Articles of Organization form with the Secretary of State. The form must include pertinent information such as:
- LLC name and mailing address
- Name, address and dated signature of registered agent
- Type of management, i.e., member-managed or manager-managed
- Delayed effective date, if applicable
- Organizer’s name, title and dated signature
Remember to include all necessary fees.
Forms and fees. LLC registrants are required to file Articles of Organization accompanied by the necessary filing fee of about $40. Fees can change, check with the Secretary of State for the most recent fees.
Timeline. Business files and forms are usually processed the same day they are received but may need up to three business days.
Naming requirements. The easiest way to ensure the approval of your LLC name is to make it distinguishable from those of other LLCs and to include specific required words. You may opt to have a preferred name checked for availability on the Secretary of State’s website before filing your LLC formation documents.
Formation requirements. To form an LLC, a registrant must file the Articles of Organization form with the Secretary of State.
Next, an LLC with more than one member is strongly advised to have a limited liability operating agreement among its members. This operating agreement contains the terms entered into by the members of the LLC and governs such critical items as the roles of each member, voting rights, who manages the LLC, how members are admitted or removed, dissolution of the LLC and procedures for amending the LLC operating agreement itself.
Starting an LLC in Kentucky
Before you begin the registration process, it’s important to know what an LLC is and whether or not it is a viable business structure for your company. At its core, an LLC is a business structure that is privy to tax efficiencies, has flexible organization and provides limited liability for its members. There is no limit to the number of members, which is considered one of the biggest benefits of an LLC, and members may include individuals, corporations, other LLCs and foreign entities. An LLC is also known as a ”hybrid” business structure in the sense that it brings together elements of a corporation and limited liability partnerships.
These steps will guide you through the LLC registration process with the Kentucky Secretary of State:
1. Decide on a name for your business. Choose any name as long as it ends with “Limited Liability Company,” “Limited Company,” or any variation of its abbreviation—e.g., LLC, LC, or Ltd. Co.
Names may be reserved up to 120 days with the Secretary of State by filing a name reservation request online or by mail. All requests must be accompanied by the non-refundable $15 filing fee and must include the following information:
- Proposed name to be reserved or renewed
- Name and mailing address of applicant
- The type of management
- Delayed effective date, if applicable
- Dated signature with the name and title of the applicant
A preferred name may be checked for availability on the Secretary of State’s website.
2. Assign an agent for service of process (also referred to as the resident agent). Registered agents are individuals or corporations authorized to do business in the state and that have permanent addresses in Kentucky. Registered agents accept legal documents on behalf of the LLC and make sure its members are notified.
3. Get an Employer Identification Number (EIN) from the IRS. If there are two or more members in your LLC, your company will need to obtain an EIN from the IRS, for tax purposes.
4. Create an operating agreement. Although LLCs in Kentucky are not required to have a limited liability company operating agreement, it is wise to have one in place with other members should your LLC have more than one member. The State of Kentucky recognizes limited liability company operating agreements as governing documents.
5. Make sure that your LLC, should it offer professional services, meets Kentucky state legal requirements. The state of Kentucky regulates how some professionals, such as doctors, lawyers and accountants can form an LLC. Check with the Secretary of State to see if your profession is regulated by these laws.
6. Familiarize yourself with the LLC’s continuing legal obligations, specifically annual reports. Annual reports are filed with the Secretary of State between January 1 and June 30 every year the LLC is active, following the year that it is formed. Filing requires a fee of $15 and can be done online. Annual report postcard reminders are sent to LLCs every January. Failure to submit your LLC report by June 30 results in automatic “bad standing.” which can involuntary dissolve, or shut down, your LLC.
Continuing legal obligations may include, but are not limited to, state taxes and so on.
Filing an LLC and Fees
Following are the forms and fees that are required when starting an LLC in Kentucky:
1. Forms. Complete and submit an Articles of Organization form to the Kentucky Secretary of State.
2. Fees. The processing fee for the Articles of Organization form is about $40 and may be paid by cash, check, credit or debit card, money order or electronic funds transfer.
3. Limited liability company operating agreement. Although the LLC operating agreement will not be submitted to the Secretary of State, it is a good idea to have one in place for LLCs with more than one member. This agreement should be kept on file by the registered agent.
4. Taxes. LLCs in Kentucky are treated as corporations, limited liability partnerships or single-member LLCs and are subject to federal income tax classifications. Depending on the type of taxation you opt to have for your LLC, the tax responsibilities are as follows:
a. An LLC treated as a limited liability partnership. These LLCs are required to file Form 1065 (U.S. Return of Partnership Income) and to show equal distribution of profits, losses and credit on a Schedule K-1 with the IRS.
b. An LLC treated as a C corporation for federal tax purposes. These LLCs are required to file Form 8832 (Entity Classification Election) and must opt to be taxed as a corporation. Next, they must file Form 1120 (U.S. Corporation Income Tax Return) with the IRS.
c. An LLC treated as an S corporation. These LLCs are required to file Form 1120S (U.S. Corporation Income Tax Return) accompanied by a report from each owner expressing the equal distribution of profits, losses and credit with the IRS.
d. An LLC treated as a sole proprietorship. These LLCs must report all business income and expenses via the sole proprietor’s personal income tax returns, Schedule C (Form 1040, Profit or Loss from Business) with the IRS.
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