How Much Does an LLC Cost in Kentucky (All You Need to Know)
Starting a Kentucky limited liability company may be a great way to safeguard your assets and take advantage of favourable tax circumstances. However, if you're considering forming an LLC in the state, you should know the fees levied by the Secretary of State.
As a Mergers and Acquisitions specialist and a Master's Degree holder in tax law, I assisted several businesses and individuals in forming LLCs and creating joint organizations.
With the help of our business experts in the state, we'll share our insights regarding the most common and relevant filing costs of forming an LLC in Kentucky.
- It costs $40 to file the Articles of Organization for an LLC in Kentucky.
- Upon approval, additional expenses you may incur include licenses and permits, registered agent service, taxes, annual reports, and other relevant LLC documents.
- The federal self-employment tax rate for Kentucky is 15.3%, according to the Internal Revenue Service (IRS).
- Through my experience, I learned that Kentucky's primary rural industry is agriculture and LLCs that intend to start a business in the state should consider the industry.
Cost to Start an LLC in Kentucky
Before an LLC can do business in the state, there are mandatory expenses and optional costs you may have to cover.
1. LLC Formation Filing Fee ($40 - Mandatory)
The filing fee for a Kentucky limited liability company is $40 to file the Articles of Organization - the legal paperwork required to incorporate an LLC in Kentucky .
The state does not offer expedited processing. However, since the state standardized the processing time for all filing methods to 1-5 business days, my application was approved on the next day.
Check our article for more information on how long does it take to form an LLC in Kentucky.
2. Registered Agent Fee ($80-$300 Annually – Optional)
As per Kentucky law, all LLCs must appoint a registered agent to do business legally in the state. Registered agents are in charge of accepting service of process and other crucial legal matters on behalf of your LLC.
If you want to save money, you can act as your own registered agent for $0. Alternatively, you can delegate these duties to a professional Kentucky registered agent service and pay a filing fee between $80-$300 per year.
3. Name Reservation Fee ($15 - Optional)
A name reservation holds your business name for a maximum of 12 months and costs a $15 filing fee. If you're making the payment via checks, you need to mail the checks to the Kentucky State Treasurer's office.
For clients who want to reserve a business name, I remind them to check if their preferred name is available and if it is compliant with state regulations.
Learn how to change a LLC name in Kentucky if you need to.
4. Certificate of Authority ($90 - Mandatory for Foreign LLCs)
You must submit an Application for a Certificate of Authority to the Secretary of State to lawfully manage a foreign LLC in the Commonwealth of Kentucky. You must pay the $90 filing fee.
Kentucky Limited Liability Entity Tax
While Kentucky LLCs are not liable to Corporate Income Tax, they must pay a Limited Liability Entity Tax (LLET) annually . According to the Kentucky Department of Revenue, the LLET calculation starts with the federal taxable income, adjusts based on state tax laws, apportions the net income to Kentucky, and finally applies a 5% tax rate to this apportioned income, highlighting the state's specific approach to taxing business entities.
The minimum LLET is $175 for a standard-income LLC. However, note that if your LLC generates more than $3 million in net income, you'll have to pay a higher rate.
Expenses Following the Approval of Your LLC
Here are the additional Kentucky LLC fees you may anticipate during the formation process.
1. Business License (Depending on the Line of Business - Mandatory)
The state does not require a statewide business license. However, depending on the type of industry, you may need special licenses and permits.
To illustrate, a client of mine in the livestock industry was issued a Brand License for $10 and a Chronic Wasting Disease Program Permit for $150 per year.
2. Annual Reports ($15 - Mandatory)
To keep the details about your company and LLC members current in Kentucky, you must file the annual report for a $15 filing fee with the Commonwealth of Kentucky.
Timely submissions of your annual report also help your Kentucky LLC to stay in good standing and adhere to all regulations to continue operating.
The failure to submit a Kentucky LLC annual report is not subject to late costs. However, if no report is received by 30th June, your business will be legally disbanded or canceled.
3. LLC Taxes (Depending on Income Bracket - Mandatory)
After completing the Kentucky LLC incorporation procedure, you will be liable for paying different Kentucky LLC business taxes (at federal and state levels).
- State income tax: A flat 5% state income tax is levied by the Secretary of State. Regardless of how much money you make during the tax year, this is the amount you'll have to pay on your tax returns.
- Sales tax: Sales tax in Kentucky is levied at a rate of 6%.
- Self-employment tax: 15.3% is the federal self-employment tax rate for Kentucky, according to the Internal Revenue Service (IRS).
- Withholding tax on salaries: After submitting your incorporation paperwork, the state of Kentucky requires you to deduct 4.5% of your employees' paychecks to establish your company as a legal LLC.
4. Operating Agreement (Optional, but Recommended)
A Kentucky LLC operating agreement is a statutory form that defines your LLC's managerial ownership, member duties, and business filings.
Although an operating agreement is not necessary for Kentucky to incorporate an LLC, I advise clients to draft one. In the absence of an operating agreement, state laws will apply.
You can draft an operating agreement for your LLC for free ($0) using free online tools.
Alternatively, you can hire an attorney or a professional LLC service to draft the operating agreement at a filing fee between $100-$200, depending on the company.
"While not mandatory in Kentucky, having an LLC operating agreement is strongly recommended as it outlines the management structure, member and manager duties, and helps affirm the LLC's status as a distinct entity, with state laws applying in its absence."
- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions
5. DBA Registration ($20 - Optional)
If you plan to register different DBAs for your Kentucky LLC, you must submit a Certificate of Assumed Name for each DBA name you employ.
When filing for a DBA name, pay the filing fee of $20, and after approval, you'll be issued an assumed name certificate that is valid for five years, after which you can renew it.
6. Certificate of Existence ($10 - Optional but Recommended)
A Kentucky Certificate of Existence costs $10.
When clients ask the importance of obtaining this document, I tell them that it could be used to apply for loans, enter into long-term contracts, or seek venture capital.
This document verifies that your LLC is lawfully constituted and in operation. It also indicates that your business has submitted its financial reports and has paid all necessary fees, levies, and fines.
7. Certified Document Copies ($5 + $0.50 per additional page - Optional but Recommended)
Each certified copy in Kentucky costs $5 plus an extra $0.50 for each page for a document with more than 5 pages.
The Secretary of State can provide these certified copies, essential for setting up your Kentucky LLC in various jurisdictions and applying for investment capital.
Certified copies are also an excellent tool for LLC owners to prove the legitimacy of their businesses.
8. Employer Identification Number ($0 - Optional but Recommended)
To identify each company entity in Kentucky, an EIN is given by the IRS. This nine-digit number is required to register a business bank account, recruit staff, or submit tax returns to the Internal Revenue Service.
You may apply for an EIN on the IRS website for free. But you can pay a professional to handle this task on your behalf. Depending on the firm you pick, the service fee for EIN acquisition ranges from $50 to $100.
Is There A Penalty For Paying My Taxes Late In Kentucky?
There is a penalty for paying your taxes late in Kentucky. You are required to pay 2% of the amount due for each month of late payment.
What Payment Methods Can I Use To Pay Kentucky's State Fees For Filing My LLC?
The payment methods you can use to pay Kentucky's state fees for filing your LLC include checks or money orders payable to Kentucky State Treasurer, and debit or credit cards.
Do You Need Professional Help with Your Kentucky LLC?
You must submit several forms to the Kentucky Secretary of State to form an LLC there. Each document must be filed with a processing fee, and you must shell out a yearly report payment to the Kentucky Secretary of State each succeeding year after that.
If you want to streamline this process and stay compliant, hiring the best Kentucky LLC formation services is a step in the right direction.
These are solid choices for forming an LLC in Kentucky. In addition to assisting you with registration paperwork, they also provide continuing aid with bookkeeping, tax, and corporate guidance.