Starting your own business can be a big step and can feel quite overwhelming.
You'll need to consider the type of business structure you want to use, how much capital you need to get started, and the time you'll require to succeed.
There are a lot of decisions to make, and it can be challenging to know which route is the best. One of the most important decisions you'll need to make is whether or not to form an LLC.
But if you're considering starting your own business in Kentucky, forming an LLC may be the right choice.
This article will provide you with key information to help you understand the process of setting up an LLC in Kentucky.
Why Start a Limited Liability Company?
There are incredibly beneficial reasons to start a limited liability company. These reasons include the following:
- It offers personal asset protection from business debts and liabilities
- The owner will enjoy tax benefits, as the profits are not subject to double taxation like other business structures
- Provides a smooth transition of ownership without the need to dissolve the business
All these benefits make forming an LLC in Kentucky a desirable option for business owners. With LLCs, you can also benefit from the flexibility of a pass-through entity. This will allow you to customize your business structure to meet your specific needs without giving up voting rights.
Additionally, Kentucky offers a business-friendly environment with low filing fees and minimal paperwork.
Set up a Kentucky LLC the Right Way
Forming an LLC in Kentucky is a straightforward process, but it is important to have the necessary legal documents and take the time to do it correctly.
First, you'll need to choose a name for your business that is distinguishable from other entities registered with the Kentucky Secretary of State. Once you have chosen a name, file a Certificate of Formation with the Secretary of State either online or through the mail.
The following steps will ensure that you set up your Kentucky LLC correctly.
Step 1: Name Your Business
Naming your business is an essential step in setting up a Kentucky LLC.
You'll need to make sure the LLC name you choose is available in Kentucky and complies with the state's rules and regulations. The best way to do this is to search business name databases and check with your county clerk's office.
To ensure that your business name is legally registered and protected, you should file it as a "Doing Business As" (DBA). You can also file through the county's clerk office.
When filing, you should provide the name of your LLC, a description of the services you will offer, and the name and address of the LLC's registered agent.
If the LLC name is available, you can register it with the state by paying a $25 fee. The fee reserves the name for 180 days, after which it will become available again to other businesses.
Once you've confirmed all the due steps in business naming, you can move on to the next step in setting up your LLC.
Step 2: Find a Registered Agent
The second step in setting up your Kentucky LLC is to find a registered agent.
A registered agent is someone who is authorized to accept legal documents on behalf of your LLC. It is important to choose a registered agent in Kentucky who is reliable and knowledgeable about the legal requirements of a Kentucky LLC.
You can find a registered agent by researching online or asking around your local business community.
Registered agents must have a physical address in Kentucky and be available during regular business hours.
The agents must also be of age and have the correct citizenship requirements. They must also pass the Kentucky Bureau of Investigations background check.
If you hire a registered agent service, you can expect to pay an annual fee for their services. You may also choose to be your own registered agent.
Step 3: Submit Kentucky Certificate of Formation
Submitting a certificate of formation is vital in setting up your LLC correctly. It's the official document that establishes your business in the state.
This document must include the following:
- LLC name and address of the registered office
- Name and address of the registered agent
- NAICS code
- LLC manager's signature and management, and any other information required by the state
Additionally, you will need to include a filing fee of $50. Once you have submitted your certificate, the LLC processing time in Kentucky is usually about 5 days. Upon receiving your Kentucky LLC certificate, file it with the Secretary of State's office.
Check our guide for more information on how much an LLC costs in Kentucky.
Step 4: Put Together an LLC Operating Agreement
An LLC Operating Agreement document outlines the ownership and management of your Kentucky LLC.
This document should include the following information:
- LLC names and address
- The percentage of ownership each member has
- Who will manage the LLC
- How profits and losses will be distributed
- How decisions will be made
Take your time to put together an LLC Operating Agreement that clearly outlines the rights and responsibilities of each member. You should also review and update the document regularly.
With the help of an attorney or online resources, you can craft an LLC operating agreement tailored to your business's specific needs. Consult a professional lawyer if you have any questions or need help in the LLC formation process in Kentucky.
Step 5: Get an Employer Identification Number
Once you've decided on a name for your LLC and registered with the state of Kentucky, the final step is to get an Employer Identification Number (EIN). An EIN is a nine-digit number issued by the IRS that helps identify your business for tax purposes.
Applying for an EIN is easy and free of charge. Go to the IRS website and fill out the online application.
You do not need an EIN if you do not plan to hire employees. But, an EIN is a must for tax purposes of Kentucky LLC when operating as a corporation and if you have employees.
File LLC Annual Reports
Filing an annual report is vital in maintaining an LLC in Kentucky. It's the responsibility of each LLC member to ensure that these reports are filed on time.
The annual report includes essential information such as the LLC's name, registered agent, address, and members. You can create a management company to file the reports for you.
To file, you must have your state-issued business identification number (EIN). The report is due by April 15th annually. Filling Kentucky LLCs is also free. However, foreign LLCs must pay a $250 fee.
Once you have completed the report, mail it to the Kentucky Secretary of State. Failure to file the annual report can lead to the dissolution of your LLC.
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Get a DBA Name for Your LLC
Operating your LLC under a different name than its legal one can be beneficial. It makes it easier for customers to remember and recognize your business. You can register a DBA or "Doing Business As" in Kentucky with the Secretary of State.
Although it isn't legally required, getting a DBA name for your LLC in Kentucky is a good idea. Banks and creditors may require it during financing applications.
Open an LLC Business Bank Account
An LLC business bank account ensures that your personal and business finances are kept separate. This makes tracking your business expenses and monitoring your cash flow more manageable.
To open a business bank account, you'll need to provide:
- Your LLC's formation documents
- Copy of your business license
- And a valid ID
FAQs
How Much Tax Does an LLC Pay in Kentucky?
The LLC pays a minimum tax of $175. This tax by KY LLET serves the same purpose as a corporate income tax but is calculated differently. The tax is either $0.095 per $100 of Kentucky gross receipts or $0.75 per $100 of gross profits, whichever is lower.
Can I Set Up an LLC on My Own?
Yes, you can set up an LLC on your own. However, be aware of the state's specific regulations and requirements. You'll need to file the appropriate paperwork with the Kentucky Secretary of State, obtain an employer identification number from the IRS, and register with the Kentucky Department of Revenue.
What Are the Requirements for an LLC in Kentucky?
The requirements for an LLC in Kentucky are:
- Name your business
- Find a registered agent
- Submit the certificate of formation
- Organize an LLC operating agreement
- Get An EIN
- File LLC annual reports
- Open an LLC bank account
How Long Does It Take To Get LLC Approved in Kentucky?
It will take four to six weeks to get an LLC approved in KY. However, if your application needs you to provide additional information, it may take up to six weeks or longer for your LLC to be approved.
Conclusion
Starting an LLC in Kentucky is a great way to protect your business and ensure its success. Following the steps outlined in this article ensures that your LLC is set up correctly and efficiently.
It is possible to complete these steps on your own. However, it's always best to consult with a professional if you're unsure how to do something or about any other legal matters.
ZenBusiness, for example, provides a range of services to help you start your LLC in Kentucky.
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