Thinking of starting a business and want to know how to form an LLC in Kentucky? This guide will take you through the necessary steps. We’ll also cover a few things you should do after you form your Kentucky LLC so things keep running smoothly.
An LLC is a business structure that provides liability protection for your personal assets. In the event that your business is sued or runs into financial problems, your personal assets will be protected.
Forming an LLC is convenient, as it doesn’t require the formalities of corporations, and maintains a fairly flexible operation. Let’s see the step needed to create an LLC in Kentucky.
1. Picking A Name For The Kentucky LLC
The first step to set up your KY LLC is to do a name search to check for availability. It’s usually a good idea to pick a few names and see which one is available. The name should be distinguishable and unique when compared to other entities registered with the state.
A good place to start is the Kentucky Secretary of State’s business entity search. This will give you a good idea if the name is available and if similar names exist.
Another method is to call 502-564-3490 and check for name availability.
It’s worthwhile to search the USPTO website to make sure your name won’t run into any possible trademark issues.
Proper Designators For KY LLC
LLC names must end with a proper designator. Kentucky LLCs can use the following designators:
- Limited Liability Company
- Limited Company
- LTD CO
The most commonly used designator is LLC.
LLC Name Reservation (Optional)
It is possible to reserve a name for your LLC in Kentucky without actually having to start the company. This should give you enough time to get things in order before you take the plunge.
The Name Reservation Form is available on the Kentucky Secretary of State website’s Business Filings page. You can submit this form via mail or use the Kentucky Online Gateway (Kentucky One Stop Portal) to file the form online.
The filing fee for this form is $15 and the name is reserved for a period of 120 days. A renewal application for Name Reservation can be filed up to 30 days before the reservation period is over.
2. Kentucky LLC Registered Agent
You should have a Registered Agent in Kentucky before you move for registration of your LLC. A Registered Agent is a person or entity (business) that agrees to receive service of process on behalf of your LLC.
Service of process primarily relates to legal documents like lawsuits, summons, subpoenas, etc. A Registered Agent may also receive general correspondence, but their primary role lies in receiving service of process.
The Registered Agent for your Kentucky LLC should have a physical street address in Kentucky. PO Box addresses are not accepted. Ideally, the Registered Agent must also be available during normal business hours (9 am to 5 pm) to receive service of process.
As long as the above requirements are satisfied, the Registered Agent can be:
- Any adult who is a resident of Kentucky.
- A domestic or foreign business entity that’s allowed to do business in Kentucky and has an office in the state.
Many people choose the second option and hire commercial registered agents. These are companies meant to fulfill this role. It helps that they can meet all requirements for their role and handle it professionally.
3. Filing Articles Of Organization For Your Kentucky LLC
Kentucky LLC Articles of Organization can be filed via mail or online. The filing fee for both methods is $40. Veteran-owned LLCs are free.
Filing online requires the use of the state’s one stop portal for business, Kentucky Online Gateway (KOG). If you don’t already have an account, you will have to register for a free account. Overall, the process is simple and fast, and required formalities can be completed quickly.
The approval time is about 24 hours, though it can be a bit longer on some days.
If you choose to file your KY LLC via mail, you’ll need to fill form KLC-1. This (and other) form is available on the Business Forms page of the Secretary of State website. The required $40 filing fee can be paid using a check or money order made payable to “Kentucky State Treasurer”.
The mailing address is:
Secretary of State
PO Box 718
Usually, it can take 2-3 business days for processing and approval of Articles of Organization received via postal mail.
Recording Articles Of Organization With The County Clerk
There is an unusual requirement for LLCs in Kentucky. Once the SoS approves your Articles of Organization, you must have them recorded with the County Clerk. The county clerk for the record should be the same as the county where your Registered Agent is located.
The record fee varies by county, though it’s usually $9 – $15. You might want to call your county clerk to get the full information.
4. Operating Agreement For KY LLC
While not mandatory by law, having an operating agreement is highly advisable for any LLC. The agreement could be considered as the constitution or the basic guidelines to run your company.
It may include additional details like what percentage of the LLC is owned by each member, roles and responsibilities for members, dispute resolution mechanisms, approach to taxation, and a lot more.
The agreement shows that your LLC is operating correctly and is indeed a separate entity, thus reinforcing liability protection. While it’s very important for multi-member LLCs, single-member LLCs shouldn’t discount its importance either.
An Operating Agreement is an internal document of your LLC. There is no need to file this with any government agency or department. However, all members should keep a copy of the agreement.
5. Getting A Federal Tax ID (EIN)
The EIN (Employer Identification Number) is a federal tax ID issued by the IRS. Once your LLC is approved, you should register with the IRS to get an EIN.
It’s a relatively simple process and can be completed online. In case online filing isn’t possible for you, use Form SS-4. This form can be submitted to the IRS via fax or postal mail.
Filing online gets you the EIN instantly, fax requires 4-7 business days, while postal mail can take 5-8 weeks.
Apart from tax requirements, an EIN is also useful for several day-to-day tasks of a company. This includes opening a business bank account, hiring employees, getting business credit cards, and more.
6. Kentucky LLC Annual Report
Every KY LLC must file an annual report before June 30 each year. The reports have to be filed annually, except for the first year of your LLC’s formation. For example, an LLC formed in February 2020 must file its first annual report before June 30, 2021. And so on every year.
Annual reports list and confirm the LLC members, managers, principal office of the LLC, and registered agent, etc. Any change in this information must be reported.
It costs $15 to file the Kentucky LLC Annual Report, though veteran-owned companies don’t have to pay the fee.
To help with filing the report, the state will mail postcards well before the due date. You can fill this postcard, and mail it along with the filing fee. The check or money order should be payable to “Kentucky State Treasurer”. The mailing address is:
Secretary of State
PO Box 1150
Frankfort, KY 40602
In case you don’t have the postcard, you can download the report online. To do this, search for your business on the business entity search. When you find your Kentucky LLC, look for “printable forms” option and download the Annual Report.
You can make changes if necessary, and then mail the report to the Secretary of State.
7. Business Licenses, Permits, And Taxation
Business licenses and permits for your Kentucky LLC have to meet local and state requirements. County/city requirements can play a major role in deciding what licenses and permits your KY LLC needs to comply with. The requirements may also depend on the industry of your business/LLC.
You can check for licenses and permits with your city/county. Relevant information is also available on the Kentucky OneStop Business Portal. For some industries, federal permits may be required as well.
State taxation can involve sales tax, limited liability entity tax, and several more, which may be dependent on the industry of your business.
Federal taxation for LLCs can vary depending on how you structure your company. As a default, LLCs are taxed as pass-through entities. Your profits can be a part of the returns you file with the IRS.
However, you may also choose to have the LLC taxed as an S-corp or C-corp. This changes the tax requirements. Additionally, the forms required will vary depending on LLC structure, or if it’s a single-member or multi-member Kentucky LLC.