For many startups, the best way to legally structure a business is by forming a Kentucky LLC (limited liability company). An LLC offers many benefits to both a company and its owners.
Here are some of the benefits that make it an appealing option:
- An LLC is a separate legal entity.
- It provides limited liability protection to the owners, who are called members. That means the members will not be held personally liable for any of the actions and debts of the LLC.
- The filing, compliance, administration, and management processes for an LLC are quicker and easier to complete compared to a corporation.
- LLCs can enjoy flexibility in taxation. They can even prevent double taxation, which occurs when a company pays taxes twice on the same source of income: at the corporate and personal levels.
Starting A Kentucky LLC
Before enjoying the benefits of an LLC, it is important for a company to properly register its business with the state. For instance, in Kentucky, that means the filing of formal paperwork, payment of the corresponding fees, and completion of multiple tasks.
Follow this simple step-by-step guide to start an LLC in Kentucky and get your business up and running:
Step 1: Choose an appropriate name for the LLC.
Kentucky requires all LLCs to follow the naming regulations set by the state. The LLC name has to contain the phrase “Limited Liability Company” or “Limited Company.” Any of the abbreviations of these phrases are also accepted. These include “LLC,” “L.L.C.,” “L.C.,” or “Ltd. Co.”
The company name should also be distinguishable. If the desired business name is already on file with the Secretary of State, the startup can not use it. The best way to ensure that there will be no issues is to check for the availability of the company name. Conduct a search on the business name database of the Secretary of State.
Companies that already have a business name in mind but are not yet ready to go through the registration process can choose to reserve the name. Filing a Reservation or Renewal of Reserved Name with the Secretary of State and paying the $15 fee will reserve the name for 120 days.
The state also allows having an assumed name, which is also known as a fictitious name or doing business as (DBA). That means the LLC can use a different name from the one it stated in its formation documents when it does business. To do so, it has to submit a completed Certificate of Assumed Name form to the Secretary of State and pay the $20 filing fee. However, it is important to remember that an LLC can only apply for an assumed name after it has successfully formed the business in the state.
Step 2: Select a registered agent.
Kentucky LLCs should also have a registered agent or an agent for services of process. The role of the agent is to receive legal papers and government correspondence on behalf of the LLC. They can be an individual or a third-party organization like DoMyLLC.
If the company decides to appoint an individual, they have to:
- Be a resident of Kentucky
- Be at least 18 years old
- Have a physical street address in the state ( a P.O. box will not suffice)
- Be available at the listed address during regular business hours
If the LLC opts to nominate a commercial registered agent, they have to be:
- A corporation, non-profit corporation, foreign corporation, non-profit foreign corporation, or LLC that is authorized to transact business in the state
- A different company from the LLC applying for registration
- Available during regular business hours
Step 3: File the necessary paperwork with the state.
To formally register the LLC with the state, the company will have to submit a completed Articles of Organization to the Secretary of State by mail, online, or in person. The filing fee for this is $40.
In completing the form, a company will have to disclose certain pieces of information related to the business. These include the following:
- LLC name
- Physical street address
- Name and address of the registered agent
- The mailing address of the company’s initial principal office
- Management structure, whether it will be member-managed or manager-managed
- The date when the Articles of Organization will take effect
- The size and general nature of the business
- Signatures of the company organizer and registered agent
Companies that decide to mail the documents should use the following address:
Office of the Secretary of State
P.O. Box 718
Frankfort, Kentucky 40602
Meanwhile, those that choose to submit in person should proceed to this location:
Room 154, Capitol Building
700 Capital Avenue
Frankfort, Kentucky 40601
Step 4: Create the company’s operating agreement.
Kentucky does not require LLCs to have an operating agreement. However, it is highly advisable as it can further protect the business and the LLC members. This internal document will establish the rights, powers, responsibilities, and duties of the members and managers. It will also set out the procedures in running the business, including how it will be managed.
Additionally, having an operating agreement helps preserve the limited liability feature of the LLC. That is because it shows that the company is indeed a separate entity. In cases wherein a company has no operating agreement, the state laws on LLCs will govern how the company will operate. Read this article to find out more about this document.
Step 5: Get an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
The EIN is a nine-digit number from the IRS. It helps identify a business for tax purposes. In short, it is the social security number of a company.
The EIN may be necessary for filing and managing federal and state taxes. It will also be needed to open a business bank account and hire employees.
To get an EIN, the company can send a completed application form online or by mail. It is free of charge.
Step 6: Comply with other tax and regulatory requirements.
Depending on the industry the Kentucky LLC is in, its business activities, and the location of its primary place of business, it may be necessary to secure other local or state business licenses and permits. To find out if the company needs to get local licenses, it will have to check with the clerk for the city or county where its primary place of business is located. As for the state level, visit the Occupational Licenses or Permits section of the One Stop Business Portal of the state.
There may also be required state taxes. For example, a company selling goods may have to collect and report sales taxes. Those with employees will have to report payroll taxes. In such cases, it will have to register with the Department of Revenue. That can be accomplished online through the One Stop Business Portal or on paper through the filing of a Tax Registration Application form.
Getting Help From Experts
Forming a Kentucky LLC comes with many benefits. However, the company will also have responsibilities. It is important to properly complete each and every step included in the business formation process of the state. This way, the company minimizes the risks of facing issues. Additionally, doing this will ensure that all of the operations of the company in the state are legal.
While the steps and tasks may be simple and easy to follow, they may still be a bit overwhelming for those who have never done them before. For some entrepreneurs, the whole ordeal may also be time-consuming.
Fortunately, the state does not require a startup to do everything alone. There are business filing service providers that can help. One of these is DoMyLLC.
Our team is composed of experts who have the necessary skills, knowledge, and experience in handling business formation in all 50 states, including the District of Columbia. We are also authorized to serve as a registered agent. Additionally, we offer personalized solutions to ensure that our clients are getting the services that will address their specific needs and suit their circumstances. Contact us now to find out how we can help Kentucky business entities ensure compliance with the state.
Business Filing Section