The process of starting a Kentucky limited liability company (LLC) can seem intimidating for a first-time entrepreneur or business owner. Fortunately, with the right information, it can be much easier than you expect.
This article will explain:
- The steps you must take to start a Kentucky LLC
- Important tasks you must take care of after you start your LLC
- How long it takes to make an LLC in Kentucky, and how much it costs
For more information on Kentucky LLC formation, keep reading!
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Step 1: Name your Kentucky LLC
To start an LLC in Kentucky, you’ll need to choose a business name. You can't use any name you want, though, because Kentucky law has some basic rules for naming an LLC that you must follow. Certain words are prohibited, while other words are required.
We’ve explained this more in the sections below.
Words You Have to Use
Kentucky Revised Statute 14A.3-010 requires LLC names to end with one of the following:
- “limited liability company”
- “limited company”
The statute also lets you abbreviate “limited” as “ltd.” and “company” as “co.”
Words You Can’t Use
You can't use a name for your LLC that makes it seem like it is a different type of legal business entity, such as a corporation. You also can't use a business name that implies that your LLC is part of the government.
Additionally, the name of your business should not suggest that you provide illegal services. For example, if you don't have a legal license to offer a service, the name of your LLC can’t suggest that you provide that service.
The big rule is this: if you need a license to do your job, double-check with the Secretary of State to make sure your company name complies with the law.
It also says in Statute 14A.3-010 that your LLC name needs to be “distinguishable” from all the names registered with the Kentucky Secretary of State. This rule exists because people can confuse one company for another if they have the same name.
Check out the Secretary of State’s Guidelines to Name Availability for more information about how to know if a name is up for grabs.
Research the LLC Name You Want
After you’ve chosen the name of your new LLC, you can use the Secretary of State’s Name Availability Search to make sure it is available.
If a name is available, Kentucky Revised Statute 14A.3-020 lets you reserve it for renewable 120-day periods. To do so, you must submit a Reservation or Renewal of Reserved Name form and a $15 filing fee to the Kentucky Secretary of State.
Note that for any LLC documents you file, you must make your filing fee check out to the “Kentucky State Treasurer,” not the Secretary of State.
You can't reserve an LLC name online in Kentucky. Instead, you can mail your form to the following address:
Office of the Secretary of State
P.O. Box 718
Frankfort, KY 40602-0718
Another option is to file the form in person at the address listed below:
Room 154, Capitol Building
700 Capital Avenue
Frankfort, KY 40601
Get a Matching Domain
Once you settle on an LLC name, we recommend you get a matching domain, even if you don’t have immediate plans for a website.
Competitors can buy your perfect domain and its variations to block you from using them.
Domain squatters sift through public records of newly registered LLCs and will buy their matching URLs, only to relist them with huge markups.
A domain name from GoDaddy.com or a similar registrar will cost you between $20 and $50 per year, with regular specials and sales where you can get large discounts.
It pays to check now.
Once you have your domain name, you can also create a branded email address through GoDaddy.
Kentucky DBA: Using an Assumed Name
Many business owners choose to use a “doing business as” or “DBA” name instead of their LLC’s real name. A DBA is an alternate name that lets a business operate under a name other than its legal one.
With a DBA, you can shorten your LLC name to something catchier or easier to remember. Plus, it lets you be less formal in the name you use in your day-to-day business.
If your LLC’s legal name is “Devin’s Donuts, LLC,” you could use a DBA of “Devin’s Donuts.”
But what if you start selling other pastries as well? A new DBA of “Devin’s Bakery” would help you let people know what your business sells.
In Kentucky, DBAs are called “assumed names.” If you want to use a DBA for your LLC, Kentucky Revised Statute 365.015 says you must submit a Certificate of Assumed Name to the Secretary of State.
As with the name reservation form, you must submit this form by mail or in person. There is a $20 filing fee.
Step 2: Appoint a Registered Agent for your LLC
A registered agent is an individual or business that has agreed to receive important legal documents for an LLC.
Kentucky Revised Statute 14A.4- 010 requires all LLCs to name a registered agent. Your Kentucky registered agent must have a physical address in the state and be available to accept service of process during regular business hours.
Accepting service of process is a legal phrase that means receiving official documents sent when your LLC gets sued. So, if your LLC is part of a lawsuit, your Kentucky registered agent will get the paperwork.
Many new LLC owners want to name themselves as the registered agent of their company. This option has some advantages:
- It’s cheap: You’re not paying someone else to do it for you.
- It’s easy: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important documents personally.
However, being the registered agent for your own LLC can end up being more trouble than it’s worth.
Some of the problems you might encounter include:
- No privacy: Your name and address will be published on the Secretary of State’s website. This means that anyone with an internet connection can find your personal information.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: You also must be available at all times during regular business hours to receive documents. This means no vacations, sick days, or leaving the office for lunch.
- Business interruptions: Client meetings can be interrupted by people serving process. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your address is correct and up to date. If you make a mistake or miss something, you are held responsible.
You won’t have any of these issues if you use a professional registered agent service. Hiring a service allows you to keep up with any documents your LLC receives, plus it only costs about $100 per year.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
If you want to expand to other states, it's best to have a nationwide registered agent service. This will make it easier to register as a foreign LLC and find a registered agent in each state you want to do business.
You can hire a national service provider and enjoy the convenience of only making one payment, even if you need an agent in multiple states.
Step 3: File Your Kentucky LLC Articles of Organization
An articles of organization form lists basic information about your LLC. Filing this document with the Secretary of State officially creates your LLC.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my Kentucky Articles of Organization?
Kentucky Revised Statute 275.025 says your articles of organization must include:
- The LLC’s name.
- The name and address of the registered agent.
- The mailing address of the principal office.
- Whether the LLC will be managed by a manager or its members.
Your articles can also include any other matters you want to discuss in them.
You can file your articles of organization online using the Kentucky Business One Stop Portal. You can also file Kentucky articles of organization by mail or in person.
Kentucky LLC Filing Fee
According to the Kentucky Secretary of State’s Fees list, the filing fee for Kentucky articles of organization is $40.
Read More: How Much Does It Cost to Form an LLC in Kentucky
Kentucky LLC Processing Time
Articles of organization are usually processed the same day they are received, but it can take up to three business days.
Step 4: Draft your Kentucky LLC Operating Agreement
Operating agreements are contracts used by LLC owners to document how the company will be managed. They also detail what each member’s rights and duties are.
Kentucky does not require you to have an operating agreement for your LLC. However, this document can be a great way to set clear expectations. It also helps avoid arguments over how to handle future issues.
For example, say one of the LLC members wants to sell their interest in the LLC. An LLC operating agreement can dictate how they're able to do that and what happens to their duties if they do.
Some other ways an LLC operating agreement can help include:
- They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
- They say what the manager has the right to do. Managers also have special duties to the company and the members. The LLC operating agreement should state these.
- They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- They say how new members can join the company. They also have rules about how exiting members can leave.
- They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
- They say whether members or managers are in charge. They also say how to hire and fire managers.
- They say how and under what circumstances the LLC should end. You might not want to dissolve your business entity now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
- They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.
All the owners of an LLC should be involved in creating the operating agreement. This will ensure that everyone is aware of the company's procedures and help all the LLC members to work together without disagreements.
Step 5: Get an EIN (Employer Identification Number) for Your Kentucky LLC
An EIN is a nine-digit number assigned to a business by the IRS. It is often used to identify a business, just like an SSN does for people. However, EINs are only given to entities and not individuals.
Here are the most common times when you need an EIN:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If you answered yes to any of these questions, your LLC is required to get an EIN.
An SSN can technically be used to file taxes for single-member LLCs. But, you'll still need an EIN if you want to open a business bank account. Having one will also help prevent fraud and simplify some administrative tasks.
You can apply for an EIN through the IRS website or by filling out Form SS-4 and sending it in. Doing it online is faster, as it will only take a few minutes. But either way, it won't cost you a dime.
Read More: How to Get an Employer Identification Number in Kentucky
First Tasks After Registering your Kentucky LLC
Forming a Kentucky LLC is a great first step, but there's still more that you can do. To ensure your business will run smoothly, you should complete the tasks outlined below.
Open a Business Bank Account
Using an LLC bank account to separate your personal assets from company funds is a wise decision. It will let you have a greater amount of flexibility and better protection if something goes wrong with your business.
Opening a bank for your LLC provides many benefits, including:
- Convenience: Keeping things separate makes your LLC’s bookkeeping much simpler.
- More business opportunities: Your LLC can only receive credit card payments through a business account. You can also do business with people who won’t take personal payments.
- Personal asset protection: Mixing your personal and business funds could cause you to be held responsible for the LLC’s debts.
The third advantage, asset protection, is crucial.
An LLC can offer protection for your personal assets. This is because the “corporate veil” stops creditors from taking them to pay off company debts.
However, if you mix your personal money with business funds or use company assets for personal expenses, the corporate veil can be “pierced” in a lawsuit. This means that you may be held personally liable for any debt incurred by the LLC.
Opening an LLC bank account helps separate your personal and business finances. In the event that the business gets sued, this will help protect you and your personal assets from liability.
Get Business Insurance For Your Kentucky LLC
We suggest that you buy a business insurance policy when setting up your Kentucky LLC. You can choose the coverage you need to protect from any potential hazards associated with your industry.
The most common types of business insurance are:
- General liability insurance: You’ll need this if there’s an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
- Workers’ compensation insurance: Kentucky law requires most employers to obtain workers' compensation insurance coverage. You can decide to buy a policy from a private insurance company or get approved by a court to self-insure.
- Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.
Keep Your Kentucky Company Compliant
Once you start a business in Kentucky, you need to abide by a set of rules. For example, working in certain industries may require you to obtain a business license or pay taxes.
It's essential to stay up-to-date with the latest legislation in your LLC’s area. This will ensure you don't miss any changes and can keep up to date with the local requirements.
Kentucky Business Permits and Licenses
The type of business you are starting may require a specific permit or business license. To find out if your LLC needs a license or permit, you can search the Occupational Licenses/Permits database in the Kentucky Business One Stop Portal.
Kentucky Tax Requirements
As a new Kentucky LLC, you’ll need to get a Commonwealth Business Identifier (CBI) number to pay various state taxes. You can do this by registering on the Kentucky Business One Stop Portal.
Federal LLC Tax Filing Requirements
LLCs are “pass-through” business entities, which means they do not get taxed. Instead, your business’ profits must be reported on a Schedule C and submitted with your own taxes.
You must also pay Social Security and Medicare taxes, even if you don’t have any employees. If you do have workers, you will also need to withhold payroll taxes from their paychecks.
Annual Report and other Filing Requirements
Kentucky Revised Statute 14A.6-010 says all LLCs must file an annual report with the Kentucky Secretary of State. You can file your annual report online, by mail, or in person. There is a $15 filing fee.
Kentucky Business Formation Quick Links
- Internal Revenue Service — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Name Availability Search (SOS)
- Guidelines to Name Availability (SOS)
- Fees List (SOS)
- Annual Report Filing (SOS)
- Kentucky Business One Stop Portal
- Name Requirements: Kentucky Revised Statute 14A.3-010
- Name Reservation: Kentucky Revised Statute 14A.3-020
- Assumed Name: Kentucky Revised Statute 365.015
- Registered Agent: Kentucky Revised Statute 14A.4- 010
- Articles of Organization: Kentucky Revised Statute 275.025
- Annual Report: Kentucky Revised Statute 14A.6-010
Kentucky LLC FAQs
How much does it cost to start a Kentucky LLC?
According to the Secretary of State’s Fees list, the filing fee for Kentucky LLC articles of organization is $40.
What is the processing time to form my Kentucky LLC?
Articles of organization are typically processed the same day they are received, but it can take up to three business days.
What are the benefits of a Kentucky LLC?
An LLC can protect you from personal liability for business debts, while a sole proprietorship does not. There are also tax advantages of an LLC as compared to a corporation.
Where do I check if my Kentucky LLC name is available?
After you’ve chosen the name of your new LLC, you can use the Secretary of State’s Name Availability Search to make sure it is available.