How to Start an LLC in Kentucky (Step-by-Step Guide)

Forming an LLC in Kentucky is a straightforward process that protects your assets and provides tax advantages. It is one of the cheapest states for LLC formation.

The state is known for its business-friendly laws and low filing fees, making it a great place to start.

To establish your KY LLC successfully, you must choose a unique business name, designate a registered agent, file Articles of Organization, and register for Limited Liability Entity Tax (LLET).

But there’s more.

Filing your Articles of Organization in Kentucky costs $40, and you are expected to renew your LLC annually by filing an annual report, which costs $15.

This guide compiles all the information you need to start an LLC in Kentucky today.

What Are the Steps to Start an LLC in Kentucky?

To start an LLC in Kentucky, you need to:

• Step 1. Choose a Name for your Kentucky LLC
• Step 2. Designate a registered agent in Kentucky
• Step 3. File Articles of Organization with the state
• Step 4. Create an Operating Agreement
• Step 5. Get an EIN from the IRS
• Step 6. Register for Limited Liability Entity Tax (LLET)
• Step 7. File annual reports

Let us dive more in-depth into these steps so I can show you how to get them:

Step 1: Choose a Name for Your Kentucky LLC

Choosing a name for your Kentucky LLC is an essential first step. Your name must be unique and not too similar to another business in the state.

Start by checking availability through the Kentucky business portal or calling the Secretary of State’s office at 502-564-3490.

Your LLC name must include Limited Liability Company, Limited Company, LLC (or L.L.C.), or LC (or L.C.). You can also shorten “limited” to “Ltd.” and “company” to “Co.” Professional LLCs use Professional limited liability company, Professional limited company, PLLC, or PLC.

Once you find an available name, you can reserve it if you’re not ready to file. This keeps your name safe from being taken by others. You must file the reservation or renewal of reserved name with the Secretary of State.

To reserve your name, you can file online, by mail, or in person at the Secretary of State’s office. The reservation lasts for 120 days and costs $15.

However, you’re not obligated to operate under the name listed on your original documents. You can apply for a certificate of assumed name through the business portal. This “assumed name,” often referred to as a “DBA” (doing business as), serves as an alias for your business.

Step 2: Designate a Registered Agent in Kentucky

In Kentucky, every LLC must have a registered agent. This person or business acts as your official contact. They will receive important legal documents and government notices for your business.

Who Can Be a Registered Agent?

You have a few options for who can be your Registered Agent in Kentucky:

• You: You can act as your registered agent, but remember you must be available during business hours to receive documents.
• A Family Member: A trusted family member can be your registered agent.
• An LLC Formation Service: Professional services offer expertise in handling official correspondence and ensuring compliance with state regulations.
• A Lawyer: A legal service firm can also serve as your registered agent, providing additional legal support if needed.

Requirements for Kentucky Registered Agents

Kentucky law requires registered agents to have a physical street address, not just a P.O. Box. The address must be where the agent can consistently receive legal documents and official mail during regular business hours.

Additionally, the registered agent must be at least 18 years old and available to accept service of process. This means they must be present to handle any legal notices or court documents delivered to the LLC.

When you file your Articles of Organization, your registered agent must either sign these documents or give you permission in writing to list them.

What registered agents do I recommend for Kentucky?

I highly recommend Northwest registered agent services for obvious reasons.

They offer a range of benefits that set them apart, including a free year of registered agent service, which helps you save (about $300) on initial costs.

You’ll receive a complimentary operating agreement essential for outlining your LLC’s internal structure. My favorite part? Northwest also allows you to use their office address for your LLC filing, keeping your address off public records and enhancing your privacy.

Their free email forwarding service ensures you stay on top of important correspondence, and their exceptional customer support is always available to assist you whenever needed.

Step 3: File Kentucky LLC Articles of Organization

Filing the Articles of Organization is crucial in starting an LLC in Kentucky. The state requires this document to create the LLC officially.

To file your Articles of Organization in Kentucky, follow these steps:

Step #1. Complete the Form: Obtain and complete the Articles of Organization form from the Kentucky Secretary of State website.

Include the following:

• LLC Name: Ensure it’s unique and follows Kentucky naming rules.
• Registered Agent: Provide the name and address of your appointed agent.
• Main Office Address: List the physical address of your LLC’s principal office.
• Management Structure: Indicate if your LLC will be managed by the owners or appointed managers.

Step #2: File Online, in-person, or by Mail: You can file your Articles of Organization online through the Kentucky Secretary of State website or by mailing the completed form to:

Division of Office of the Secretary of State
P.O. Box 718,
Frankfort KY 40602

You can also file in person between 8:oo am to 4:30 pm ET at:

Room 154, Capitol Building
700 Capital Avenue,
Frankfort KY 406012

Step #3: Pay the Filing Fee: The filing fee is $40. For online submissions, pay by credit card. Your check should be made payable to the “Kentucky State Treasurer.”

Once your articles are filed, the state will review and approve them. This process usually takes a few business days. After approval, your LLC is officially recognized, and you can start your business activities, obtain your EIN, open a bank account, etc.

If any information changes later, you need to update your Articles. You can amend them by filing the proper form with the Secretary of State. This costs $40 to file and keeps your business details current and compliant with state requirements.

Step 4: Prepare the Kentucky LLC Operating Agreement

An operating agreement is an essential document for your Kentucky LLC. It details how your business will function and outlines the roles of its members. Although not legally required, having one can help avoid confusion later on.

Your operating agreement should cover essential topics, such as:

• Management: How will the LLC be run?
• Ownership: Who owns what percentage of the LLC?
• New Members: How can new members be added?
• Meetings: How often will meetings be held, and who must attend?
• Voting: What voting rights do members have?
• Contributions: What are the requirements for financial contributions?
• Compensation: How will profits and losses be shared among members?
• Dissolution: What happens if the LLC needs to close?

Creating this internal document helps define clear guidelines for your LLC and makes it easier to manage relationships among members.

In Kentucky, having a detailed operating agreement supports smoother operations and decision-making. It acts as a reference point if any disagreements arise. Plus, it shows potential partners and investors that your LLC is organized and professional.

Take the time to draft an agreement that meets your specific needs. This preparation can save you trouble and keep your business running smoothly.

Step 5: Obtain EIN for Your Kentucky LLC

An Employer Identification Number (EIN) is a unique nine-digit number the IRS assigns. It is necessary for your Kentucky LLC for several reasons.

You will need an EIN to open a bank account, hire employees, file taxes, and apply for business licenses and permits.

How to Apply for an EIN:

• Online: Visit the IRS website. This is the fastest way to get your EIN.
• By Mail: Fill out Form SS-4 and send it to the IRS. This option takes longer.
• By Fax: You can also fax the completed Form SS-4.
• Phone: U.S. residents can call the IRS at 1-800-829-4933 to apply.

How Much Does It Cost To Get EIN?

Obtaining an EIN is free. However, some services charge $100 or more to help you with the entire process.

How Does it Take to Obtain my EIN?

• Online: Get it immediately.
• By Mail: Expect 4 to 6 weeks.
• By Fax: Usually within four business days.

Step 6: Register for Limited Liability Entity Tax (LLET)

Every LLC in Kentucky must register for the Limited Liability Entity Tax (LLET) each year. This tax is essential for maintaining good standing with the state.

If your business earns less than $3 million annually, the minimum LLET is $175. Most LLCs owe this minimum amount. For LLCs that exceed the $3 million mark, the LLET increases based on a sliding scale. This means your tax will rise with your earnings.

You can register for the LLET online. The registration process is straightforward, using the Kentucky DOR: Business One Stop Portal.

Remember to pay your LLET on time to avoid any penalties. Staying on top of this tax is crucial for your LLC’s compliance and growth.

Step 7: File an Annual Report

As a Kentucky LLC, you are required to file an Annual Report each year. This is important for keeping your business in good standing with the state.

The cost to file the Annual Report is $15. This fee applies every year.

Your Annual Report is due by June 30 each year. However, you can start submitting it and paying the fee as early as January 1.

Your first Annual Report is due in the year after your LLC is approved. For example, if your LLC was approved on May 20, 2024, your first report will be due by June 30, 2025.

Your first annual report should confirm the names and addresses of your entity’s officers, members, managers, or similar personnel. You can amend annual reports if necessary.

File your report on time each year to maintain your LLC’s status and avoid penalties. Remember, staying compliant is critical to running a successful business in Kentucky.

What are the Different Methods To Start a Kentucky LLC?

To form an LLC in Kentucky, you have three options: the DIY approach, the hands-off approach using an LLC formation service, or an attorney. Each method is unique but comes with its perks and drawbacks.

DIY LLC Formation in Kentucky

Forming an LLC by yourself is a straightforward option. You will fill out and submit the Kentucky Articles of Organization and pay the required filing fee.

All by yourself, no third party!

Pros:

• Cost-Effective: You save money by not hiring anyone.
• Control: You have complete oversight of each step.
• Learning Opportunity: You gain knowledge about the process.

Cons:

• Time-Consuming: It may take longer if you are unfamiliar with the process.
• Complexity: You must ensure all forms are correctly filled out.
• Privacy issue: If you serve as your registered agent, you risk having your address out there.
• Lack of Guidance: You might miss the necessary steps.

Using a Professional/Online LLC Formation Services

Many online services can help you form your LLC. These platforms guide you through the entire process, handling most paperwork.

Pros:

• Convenient: They manage the filing, saving you time.
• User-Friendly: Most platforms have easy-to-understand instructions.
• Support Available: Many offer customer service for questions.
• Privacy benefits: Most services allow you to use their address for free, so your address doesn’t get compromised

Cons:

• Costs: You’ll pay a service fee.
• Variable Quality: Some services may not be as reliable as others.

Hiring an Attorney

Working with an attorney is another option for forming your LLC. This method ensures you have professional legal guidance throughout the process.

Pros:

• Expertise: An attorney knows the legal requirements and can avoid pitfalls.
• Customization: Your LLC can be tailored to your specific business needs.
• Support with Complex Situations: Ideal for businesses with unique circumstances.

Cons:

• Higher Costs: Legal fees can be expensive.
• Dependence on Others: You may rely heavily on the attorney’s schedule.
• Potential Delays: The process may take longer due to attorney workloads.

What is The Cheapest Alternative Way to Form an LLC in Kentucky?

If you’re looking to start an LLC in Kentucky on a budget, the most affordable option is to do it online. By filing the Articles of Organization directly with the Kentucky Secretary of State, you can keep costs between $40 and $100, depending on your needs.

This DIY approach helps you avoid the extra fees of hiring a service or lawyer, saving you money for other business expenses.

However, while DIY is cost-effective, it requires some effort. You’ll need to understand all the forms and regulations, and missing a detail could delay your application or create problems later.

Consider using a registered agent if you prefer not to handle everything yourself.

They can make the process smoother by ensuring you receive important documents and helping you stay compliant with state requirements. Although this adds a bit to the cost, it can provide valuable support and peace of mind.

Who Provides the Best LLC Services in Kentucky?

There are a myriad of Kentucky LLC services from which to choose. Choosing the wrong one can affect your Kentucky LLC formation timeline—I know this from my experience using a few and researching a dozen over the years.

Here are some top-rated options you should consider:

Best Kentucky LLC Service	Google Rating	LLC Formation Cost	Registered Agent Fee
Northwest Registered Agent	4.7/5	$39	Free for 1 year
Doola	4.6/5	$0 (plus state fees)	$297/year
Tailor Brands	4.4/5	$0 (plus state fees)	$199/year
ZenBusiness	N/A	$0 (plus state fees)	$199/year

Besides, the fact that other services bill you for their registered agent in the first year, and Northwest offers it for free, is a HUGE plus for me.

Northwest Registered Agent stands in Kentucky LLC formation due to its commitment to transparency, customer service, and privacy. Using their address helps protect your personal information, making them a reliable choice.

How Much Does It Cost To Form an LLC in Kentucky?

Forming an LLC in Kentucky involves several costs. The main expense is the $40 filing fee for the Articles of Organization.

Here’s a breakdown of the costs:

Requirement	Cost
Filing fee for Articles of Organization	$40
Name reservation (optional)	$15
LLC formation service	$39 (via Northwest)
Registered Agent Fee	$0 (via Northwest)
Annual Report	$15
Limited Liability Entity Tax	From $175
Estimated Cost	$230 – $300

When forming a new company in KY, budgeting about $230-$300 for the first year is ideal. Then, if you want to go further, you can get other bells and whistles like a virtual mailbox, custom website, trademark services, premium EIN services, etc.

The most significant (and essential) expense for every Kentucky business owner is filing the Articles of Organization, which costs $40.

Pros and Cons of Forming an LLC in Kentucky

6 Important Things To Do After Forming Your Kentucky LLC

After forming your Kentucky LLC, you should take several key steps to ensure your business runs smoothly. These steps will help you comply with state laws and solidify your LLC’s foundation.

1. Research the Best Licenses and Permits for Your Business

Depending on your type of business, you may need specific licenses and permits to operate legally in Kentucky. Research what is required for your industry. Some common examples include health permits, business licenses, and zoning permits.

Check with local city or county offices to find out what you need. Use resources like the Kentucky Secretary of State’s website or the Small Business Administration (SBA) for guidance.

Getting the correct permits upfront helps you avoid fines or business interruptions later.

2. Create Business Accounts for Your KY LLC

Opening a separate bank account for your LLC is essential for keeping your business finances organized and distinct from your funds. This separation simplifies your accounting and helps safeguard your assets by clearly distinguishing between personal and business transactions.

When choosing a bank, look for one that offers business-friendly services, such as waived fees, free online banking, and other features that can benefit your business.

To open the account, be prepared to provide your EIN and a copy of your Articles of Organization.

A dedicated business account streamlines your financial management and simplifies tax preparation.

Having all your business transactions in one place lets you easily track your income and expenses, ensuring everything is well-organized and accessible when tax season rolls around.

3. Understanding Kentucky Tax Requirements and Managing Your Taxes

Kentucky has specific tax requirements that LLC owners should know. LLCs are usually considered pass-through entities, meaning income is reported on your tax return.

Kentucky imposes an LLET (Limited Liability Entity Tax) on LLCs. The LLET features two taxation principles based on a business’s annual earnings.

If an LLC’s annual earnings fall below $3 million, the owners will have to pay $175 at least. Businesses earning over $3 million must calculate taxes according to gross receipts or profits.

For example, the owners will be taxed $0.095 per $100 gross receipts. Similarly, if you consider gross profits, calculate $0.75 per $100 of gross profits. The resulting figure will be your payable tax amount. 

Companies selling goods and services as retail businesses pay a 6% sales and use tax on their income.

4. File your Annual Report

All LLCs in Kentucky must file an annual report. This report updates the state with your business’s current information, such as registered address and members. The filing fee for the annual report is $15.

File this report on time to keep your LLC in good standing and avoid penalties. You can easily file your report online using the Kentucky Secretary of State’s website.

5. Get Business Insurance for your LLC

Just as you wouldn’t leave your home without coverage, your LLC also needs the right business insurance to guard against potential risks and liabilities. Insurance protects your company’s assets and ensures financial stability in case of unforeseen issues or legal claims.

Your insurance needs will vary based on your business operations.

For example, general liability insurance covers risks such as slip-and-fall accidents or property damage if your LLC operates from a physical storefront.

Conversely, if you run your business as a consultant and work remotely, you might only need professional liability insurance to cover potential service errors or omissions. Assessing your business needs helps you choose the appropriate coverage to protect your LLC.

6. Setup Your Business Online Presence (optional)

In today’s digital world, online presence is vital for attracting customers and can significantly benefit your business. Start by creating a professional website. This platform allows you to showcase your services and connect with customers.

Choose a domain name that matches or relates to your LLC name. It’s best to keep it simple, memorable, and user-friendly.

Consider using social media to engage your audience. Platforms like Facebook, Instagram, and LinkedIn can enhance your visibility, help you connect with potential customers, and build brand awareness before your official launch.

Kentucky LLC vs. S Corp vs. Partnerships vs. Sole Proprietorship vs. Corporations

When starting a business in Kentucky, you have several structure options. Each has its advantages.

Sole Proprietorship

A Kentucky sole proprietorship is the most straightforward way to start a business. Imagine you’re running a lemonade stand on your own. You make all the decisions and keep all the profits.

However, there’s no legal separation between you and your business. If your lemonade stand faces financial trouble or legal issues, your assets, like your car or home, could be at risk.

It’s easy to set up and manage, but it does leave you personally responsible for any business debts.

Partnership

A Kentucky partnership involves teaming up with one or more people to run a business together.

Think of it as joining forces with a friend to open a café. You share the profits and responsibilities, and you both make business decisions.

However, like a sole proprietorship, each partner is personally liable for any business debts or legal issues. If the business encounters financial trouble, your assets could be at risk, too. Partnerships are relatively easy to set up but require clear agreements between partners to avoid conflicts.

LLC (Limited Liability Company)

An LLC offers a blend of flexibility and protection.

Picture it as a protective umbrella over your lemonade stand. This structure separates your assets from your business, so if your LLC faces legal issues or debts, your personal belongings are generally safe.

LLCs are more formal than sole proprietorships or partnerships but offer management and tax treatment flexibility. They are ideal for small—to medium-sized businesses that want liability protection without the complexity of a corporation.

S-Corporation

An S Corporation is a more structured business form.

Think of it as a business where owners are shareholders, much like a small-scale company with multiple investors. It protects liability and allows profits to pass through to your tax return, avoiding double taxation.

This means you report the income and losses on your tax return, which can be beneficial for tax purposes. However, S Corps have stricter operational requirements and formalities compared to LLCs.

Corporation

A Kentucky corporation is the most complex structure, suitable for larger businesses aiming for significant growth. Imagine a big company with many shareholders. A corporation offers robust liability protection and is a separate legal entity from its owners, meaning your assets are protected.

Corporations can raise capital more efficiently by issuing stock and can offer employee benefits.

However, they come with extensive regulatory requirements, formalities, and paperwork, making them more suitable for businesses with significant resources and expansion plans.

My Final Thoughts: Forming an LLC in Kentucky

Starting an LLC in Kentucky is an exciting step toward bringing your business idea to life. Although it might seem like many steps initially, breaking them down makes the process more manageable and ensures you cover all the essential bases.

Starting your LLC in Kentucky involves several key steps:

• Choose a unique name for your LLC.
• Designate a Registered Agent
• File the Articles of Organization online or by mail.
• Create an operating agreement (recommended).
• File for an Employer Identification Number (EIN) if needed.
• Register for Limited Liability Entity Tax (LLET)
• File an Annual Report

The filing fee for the Articles of Organization is $40.

After forming your LLC, prepare for annual reports, which cost $15 yearly, and the Limited Liability Entity Tax (LLET), which costs a minimum of $175 yearly.

Kentucky does not have a state-level annual fee for LLCs, which makes it cost-effective.

Learn More About Starting an LLC in Kentucky

If you need additional help to start an LLC in Kentucky, check out these valuable resources:

Frequently Asked Questions

Can I change my registered agent in Kentucky?

Yes, you can change your registered agent in Kentucky. You must file a form to update this information with the state.

How do I change my Kentucky LLC’s name?

To change the name of your LLC, you must file an amendment with the Kentucky Secretary of State. This usually requires a form and a fee.

How do I renew my Kentucky LLC?

You can renew your Kentucky LLC by filing an annual report. This report is due on June 30 each year and has a filing fee.

How do I dissolve an LLC in Kentucky?

You must file a dissolution statement with the Kentucky Secretary of State to dissolve your LLC. First, make sure all debts and taxes are settled.

How do I add a member to a Kentucky LLC?

You can add a member by following the procedures outlined in your LLC’s operating agreement. This may involve drafting an amendment and updating the records.

How do I add a DBA to an LLC in Kentucky?

To add a Doing Business As (DBA) name, file a form with the county clerk where your LLC is based. This process usually includes a small fee.

Can a minor own an LLC in Kentucky?

Yes, a minor can own an LLC in Kentucky. However, they may need an adult to serve as a managing member or agent.

What is the cost of the Kentucky Annual Report?

The Kentucky Annual Report costs $15 to file. This report is necessary to maintain your LLC’s good standing.

Does LLC expire in Kentucky?

LLCs do not expire in Kentucky if you file annual reports and pay the necessary fees. If you fail to do this, your LLC may become inactive.

Can a non-resident open an LLC in Kentucky?

Yes, a non-resident can open an LLC in Kentucky. However, you will still need a registered agent with a physical address in the state.

Can I buy a house or car with my LLC in Kentucky?

Yes, you can buy a house or car through your LLC. This is common for business purposes but follow proper procedures.

Can you have multiple businesses under one LLC in Kentucky?

Yes, you can operate multiple businesses under one LLC. However, remember that this may complicate your accounting and liability protections.

Is Kentucky an excellent state in which to form an LLC? Is it worth it?

Kentucky can be a good state for forming an LLC due to its low fees and relatively simple process. Assess your needs to determine if it is your best choice.

Can one person form an LLC in Kentucky?

Yes, one person can form an LLC in Kentucky. This is a single-member LLC, and you will have complete control over the business.