How to Start a Kentucky LLC: Step by Step

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LLC Kentucky state flag waving in the wind.

Estimated reading time: 14 minutes

Kentucky’s low business costs, robust shipping and logistics options, dedicated workforce, and large network of economic development experts/resources make the state a great choice as a top location for any business.

So, let’s dive into how to start an LLC in Kentucky step by step.

Choose a Business Entity for Your Kentucky LLC 

To understand how to start a small business in KY, you need to understand entity formation.  Limited Liability Companies (LLCs) and Corporations are the most popular business types.

Corporation

A corporation is a legal entity created separately from those who own and operate it. A corporation’s debts and taxes are separate from its owners, thereby offering the greatest personal liability protection of all business structures. The two most common types of corporations are S and C corporations.

Limited Liability Company

LLCs are the most popular business structure, blending the aspects of corporations, partnerships, and sole proprietorships into a simple and flexible business entity. Like corporations, LLC formation protects the owner’s personal assets and also shields them from personal liability similar to a corporation. They also possess the “pass-through” tax benefits of a partnership.

There are two types of LLCs. LLC run by just own person (single-member LLC) and LLCs run by multiple people (multi-member LLCs)

Starting a Kentucky business can be difficult and confusing, especially as a first time business owner. But with a company like Inc Authority in your corner, you’ll not only have your LLC formed for you, but you’ll also get expert guidance beyond startup formation, so you never have to wonder or worry about what to do next!

What About DBAs?

DBAs (which stands for “doing business as”) grant business owners the ability to conduct business under an assumed name. A DBA is also referred to as a fictitious business name and is an authorization by the state for your business to operate under an assumed name. 

For sole proprietors and owners of LLCs, DBAs offer an affordable way to gain legal recognition for the secondary name of your choice.

  • Sole proprietors: For sole proprietors starting a new business, DBAs are a budget-conscious way to gain legal status and work under a creative company name.
  • LLC owners: If the name on your LLC paperwork and your business name differ, DBAs offer the opportunity to operate as an LLC under a different legal name.

A DBA provides privileges like the ability to open a bank account, create enforceable contracts and establish federal employer tax status (getting an EIN). It’s possible to file multiple DBAs, allowing a single LLC to operate different businesses under the same legal umbrella. If you’re starting a business or expanding your LLC in KY, get the proper legal recognition early on to start off on the right legal footing. 

Our entity-setup service is 100% free.
We’ll waive our service charges, labor costs, and overhead. You only pay the state fees and postage, which are mandatory regardless of who incorporates for you. Start now for free!

Create a Business Name

Under Kentucky law, an LLC name must contain the words “limited liability company” or “limited company” or the abbreviation “LLC” or “LC.” If you wish to abbreviate “limited company,” you must use the abbreviation “LTD CO.”

Your LLC’s name must be distinguishable from the names of other business entities already on file with the Kentucky Secretary of State. Names may be checked for availability by searching the Kentucky Secretary of State’s business name database.

You may reserve a name for up to 120 days by filing a Reservation or Renewal of Reserved Name (Form RES) with the Secretary of State. The reservation may be filed online or by mail. The filing fee is $15.

Using an Assumed Business Name

You don’t have to use your LLC’s official legal name registered in your Articles of Organization when you do business. Instead, you can use an assumed business name, also called a fictitious name, a DBA, or trade name. To do so in Kentucky, you must file a Certificate of Assumed Name (Form ASN) with the Kentucky Secretary of State. You may file by mail or online. The registration is good for five years. The filing fee is $20.

Kentucky LLC Registration  

Let’s take a look at how to register a business in KY, including payables such as the cost, government fees, and so on.

Filing Fee

The Kentucky Secretary of State charges $40 to file the Articles of Organization. In addition, you can reserve your LLC name with the Kentucky Secretary of State for $15.

Articles of Organization

A Kentucky LLC is created by filing Articles of Organization (called called articles of incorporation for corporations) with the Kentucky Secretary of State. The articles must include:

  • the LLC’s name
  • the LLC’s street address
  • the name and address of the LLC’s registered agent
  • the mailing address of the LLC’s initial principal office
  • whether the LLC is managed by members or a manager
  • the effective date of the articles
  • checked boxes showing the LLC’s size and general nature of business
  • signatures of the LLC’s organizer and registered agent.

The articles may be filed online or by mail. 

Operating Agreement

An LLC operating agreement is not required in Kentucky, but is highly advisable. This is an internal document that establishes how your LLC will be run. It sets out the rights and responsibilities of the members and managers, including how the LLC will be managed.

This agreement also helps preserve your limited liability by showing that your LLC is truly a separate business entity. In the absence of an operating agreement, state LLC law will govern how your LLC operates. If you want to have a solid business plan of action, you need this document.

Inc Authority can remind you to do or do for you if you choose to have us handle the paperwork.

Kentucky State Filing Fee:$40
Filing Time:2-3 business days
Annual Report$15

Mail to:

Alison Lundergan Grimes
Office of the Secretary of State
PO Box 718
Frankfort, KY 40602

Our entity-setup service is 100% free.
We’ll waive our service charges, labor costs, and overhead. You only pay the state fees and postage, which are mandatory regardless of who incorporates for you. Start now for free!

Get Your Employer Identification Number or EIN

The next step you’ll want to tackle is getting your EIN or Tax ID number (TIN). This number is like your business’s social security number, separating you from your business. This protects you from fraud and identity theft.

Additionally, an EIN is required by your bank to open a Business Checking Account, file tax returns, obtain payroll services and credit cards, and pay for any LLC cost that KY laws require.

To apply for your EIN, you’ll need to complete form SS-4, which can be found on the IRS website.

Assign a Registered Agent for your LLC in Kentucky

There are an estimated 38 million home-based businesses in the U.S., so if you’re thinking about starting a business in your home, you’re definitely not alone.

But did you know that all businesses are required by law to have an address where they can accept service of legal documents (like a service of process) from the state or government agencies during normal business days and hours? Without an office, that would be your street address or P.O. box.

As you can imagine, that’s not always possible (or advisable) with a home-based or foreign-filed business. That’s where a registered agent comes in.

A registered agent is a responsible third-party in the same state as your business who receives official government notifications (usually tax forms and notice of lawsuits) on behalf of your LLC in KY.

Even if you aren’t planning on starting a home-based business or foreign LLC, having a registered agent is still advisable because it will:

  • Limit third party access to your personal information
  • Ensure that you never miss important documents
  • Protect the privacy of owners
  • Eliminate junk mail
  • Ensure you’re never served with legal papers in front of your clients
  • And more!

Setting up a Registered Agent Service

Every Kentucky LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC’s behalf if it is sued. A registered agent may be an individual who resides in Kentucky, or a domestic or foreign business entity authorized to do business in Kentucky. The registered agent must have a physical street address in Kentucky.

Open a Business Bank Account

To keep your personal and business expenses separate and to stay in good standing with the Internal Revenue Service (IRS), you need to open a business bank account for your LLC or corporation.

Setting up a separate bank account for your company makes it easier to for you do business, manage a cash balance, complete, and file your income tax returns with the KY Department of Revenue, deduct business expenses for taxes, conduct proper accounting, and execute employee payroll. Bank accounts also provide better protection in the event of legal action.

Additionally, business bank accounts create historical relevance through the relationship established with the bank, and can create unrestricted access to long-term funding options, business credit cards, and other financial solutions.

Types of Business Bank Accounts

Not all business bank accounts are created equal. That’s why it’s important to distinguish between the good, the bad, and the best business bank accounts.

Checking Accounts

A business checking is the most common type of business bank account and the first one you’ll want to open for your business. This because business check accounts allow you to: 

  • Accept deposits (over-the-counter cash, checks, credit card, and electronic deposits). 
  • Pay for business-related expenditures (payroll, taxes, business insurance, vendors, lenders, and everything imaginable that you’ll need to operate your business). 
  • Keep detailed records of all expenses and income.
  • Protect your money. This account is Federal Deposit Insurance Corporation (FDIC) insured, meaning you’re covered up to $250,000 by the federal government should anything happen to the bank or your money.
  • Support dual signatures. If you have a partnership or employees, you may wish to make it required that two signatures be present whenever a withdrawal or deposit is made.

Savings Accounts

This one should come as no surprise. A business savings account (like a personal savings accounts) lets you safely save money in a bank.  You don’t need this right away though, only when you have an abundance of capital sitting in your business checking account, will you need to open a savings account. It allows you to: 

  • Make saving money a habit. The most successful companies (think blue chips like Wal-Mart, Amazon, General Mills, Hershey’s, and General Electric) all have solid reserves of capital.
  • Protect your business during a cash-crunch. Incidentally, 80% of businesses fail because of cash flow problems.
  • Save money so that you don’t have to take out expensive business loans.
  • Maintain liquidity. With a business savings account, you can liquidate assets to buy equipment, purchase real estate, and make other big purchases for your business. 
  • Build business credit. Yes, having a business savings account can actually help you establish and build business credit.

Business Certificate of Deposits

A business certificate of deposit (CD) is a term account that offers maximum security and a guaranteed rate of return. You agree to lend your business’s money to the bank for a set period of time at an agreed-upon interest rate. The interest rates are usually higher than you’d receive from a business savings account or interest-bearing business checking account. 

Here are the main features of a business certificate of deposit:

  • It pays out 1% or more in interest. Some CDs pay over 2% in interest
  • You cannot liquidate the account until the term expires. This means you can’t spend the money. 
  • The longer the term, the higher the interest rate.
  • Different banks offer different term limits. Some CD terms are for a week, months, or even years.

Money Market Accounts

This is a lesser-known type of business a bank account and isn’t for every business owner. You’ll want this type of account if you have a lot of money saved, want higher interest rates than a business savings account or interest-bearing business checking account, but still want some access to your money.

Here are the main features of a business money market account:

  • Six withdrawals per month. 
  • Deposit money anytime.
  • Deposit as much money as you like.
  • Higher interest rates (currently between .1% and 1.6% APY)
  • Require a minimum balance.
  • Penalties if you withdraw more than six times in a month. Ask your banker what the penalty is if you withdraw more than six times.

How to Open a Business Bank Account

Opening a business bank account is as simple as gathering some information together and completing an application. Here are the steps to open a business checking account:

1.    Do your due diligence. Research different banks and discover what each one offers. Then decide which one will work best for your business type. An easy way to do this research is to check out some of our business bank reviews.

2.    Get a tax ID number. You can get one free EIN from the IRS. If you think you already have one, here’s how to look up an EIN.

3.    Gather your business formation documents (for LLCs and Corporations).

4.    Gather your business license or business name filing paperwork.

5.    Call the bank and find out what other items you’ll need to open a business bank account. Every bank has different requirements, so make sure you check with them first before attempting to open a business bank account. Sometimes this information will be listed on the bank’s website.

6.    Go in person or online to complete all necessary paperwork and submit your business documents.

At Inc Authority, we make getting a business bank account easy. How so? Well, when you form your business with us, you gain access to a free Bank of America business checking account. So, don’t wait! Form your LLC in KY today!

Tax and Regulatory Requirements

Additional business tax/federal tax and regulatory requirements may apply to your Kentucky LLC. These may include:

EIN: If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN). This is necessary even if it has no employees. If you form a one-member LLC, you must obtain an EIN only if you elect to have it taxed as a corporation – instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website. There is no filing fee.

Business Licenses: Depending on its type of business and where it is located, your LLC may need to obtain other local and state business licenses. For local licenses, check with the clerk for the city where the LLC’s primary place of business is located (or county if it is in an unincorporated area). You should also consider getting workers’ compensation insurance. Your business needs this so you can protect yourself and when you hire employees.

Department of Revenue: In some cases, if you have employees or will be selling goods and collecting sales tax, you’ll need to register with the Kentucky Department of Revenue.

File Annual Reports

All LLCs doing business in Kentucky must file an annual report with the Secretary of State by June 30th every year. When filing your first annual report, you must submit the names and addresses of your LLC’s members and managers, confirm the principal and registered office/agent, and sign and date the report. Subsequent annual reports must confirm the same information.

The initial annual report is due between January 1 and June 30 of the year following the calendar year in which the LLC was formed. Subsequent annual reports must be filed with the Secretary of State between January 1 and June 30 of the following calendar years. The report may be filed online, by returning the annual report postcard your LLC will receive in January, or by printing out and mailing the annual report. The filing fee is $15.

Getting Started with Your Kentucky LLC

Forming a professional LLC or corporation in Kentucky is an exciting opportunity, but like starting any business it can be overwhelming. Why not let the business experts at Inc Authority do all the heavy lifting for you?

We’ll form your LLC or corporation, run a business name check, get your EIN, and make sure you have all the licenses and permits needed to run your business. We can also advise you on the things you need to pay, such as LLC cost, KY state fees, and other payables.

Not to mention we offer a ton of free management and report tools to help make running your business as simple as possible. Please contact us or visit our website today to get started!

Incorporating is the most powerful thing you can do to legitimize your business. And at IncAuthority.com, our setup LLC services are 100% free. Always. So, don’t wait. Form your free LLC today and enjoy the protection due to you and your business under the law.