Companies that want to operate in Kentucky but are registered in a different state will have to register as foreign business entities. This means filing the correct LLC paperwork in Kentucky. Doing this will legalize the business and prevent any issues.
The Foreign Qualification Process
Before proceeding with the process, a company will have to first understand what foreign qualification means. Generally, it enables a foreign company to do business in Kentucky.
“Foreign,” in this context, does not refer to business entities organized abroad. Any company formed in a state other than Kentucky is considered foreign.
For example, a limited liability company (LLC) organized in Tennessee wants to do business in Kentucky. It will be considered a domestic LLC in Tennessee and a foreign LLC in Kentucky.
There are various reasons why companies choose to register as foreign business entities. Here are some of them:
- Establish new markets
- Address an increase in the volume of customers
- Provide additional services
- Establish a brand
- Expand expertise
- Reduce possible risks
For a more detailed discussion on this topic, check out our article 6 Good Reasons To Register For Foreign LLC.
Doing Business In Kentucky
Not all types of business activities would entail registration. The key to knowing whether an LLC has to register is to figure out whether it is transacting business in Kentucky. So what does that mean?
Kentucky, like most states, does not specifically define transacting business when it comes to foreign companies. However, there are certain instances that are considered doing business in the state.
Generally, if a company has a physical presence in the state and is required to collect sales taxes, it is transacting business. Physical presence means:
- Having a warehouse in Kentucky
- Maintaining a store in the state
- Having an office in the state
- Having a sales representative or employee in Kentucky
Activities Exempted From Foreign Qualification
Aside from the activities that constitute transacting business, it is equally important to take note of those that are exempt.
Like most states, Kentucky laws have specified certain activities that are not considered doing business in the state. These include the following:
- Defending or settling a lawsuit
- Dealing with internal affairs like holding member or manager meetings
- Maintaining a bank account in Kentucky
- Having an office, agency, or people in Kentucky handling the securities of the company
- Selling products through independent contractors
- Soliciting or getting orders that require acceptance outside the state before they become contracts
- Acquiring or creating indebtedness, mortgages, and security interest in real, personal, or intangible properties
- Securing and collecting debts
- Owning real or personal properties
- Conducting an isolated transaction, which is completed within 30 days and does not require similar repeated transactions
- Doing business in interstate commerce
Aside from those previously mentioned, there may be other exemptions. Check the Revised Statutes of the state of Kentucky for a full legal description of all listed items.
Consequences Of Not Registering As A Foreign LLC
Doing business in Kentucky without proper registration comes with consequences. There are two major penalties LLCs should take note of.
The first one is the financial penalty. The company will have to pay $2 for each day that it does business in the state without registration.
The second penalty can be much more damaging. The LLC will be prohibited from maintaining a proceeding in any court in the state. That means third parties can fail to honor contracts with the LLC and the company will not be able to take legal actions against them. The LLC will not be able to bring a lawsuit in any Kentucky court.
Understanding The LLC Paperwork In Kentucky
To formally register as a foreign LLC, the company will have to submit the appropriate LLC paperwork in Kentucky. In this state, this document is known as the Certificate of Authority (Foreign Business Entity). It requires the following pieces of information:
- The business entity structure (LLC)
- The company name stated in the formation documents in the state where the LLC was organized
- The different name that the LLC will be using in Kentucky (if applicable)
- The state where the LLC was originally formed
- The date when the LLC was organized
- The duration of the LLC
- The principal office street address
- The street address of the company’s registered office in Kentucky
- The name of the registered agent in Kentucky
- Whether the company is manager-managed
- Names and business addresses of managers (if manager-managed)
- A statement certifying that the existence of the LLC is valid in its home state at the time of filing of the application for foreign qualification
- The date the application will take effect, which can be upon filing
- A signed consent statement of the registered agent in Kentucky
- The authorized signature of an LLC member or manager
After filling out the form, the company will have to file it with the Secretary of State. It should be accompanied by the $90 filing fee and the registered agent’s statement of consent. Unlike most states, Kentucky does not require a Certificate Of Good Standing from the home state of registration.
Other Requirements In The State
Aside from submitting formal paperwork, a foreign LLC should also make sure that it complies with other state requirements. Research about state laws and obligations to prevent any problems. Here are some of the things you have to remember:
- Naming Guidelines – The LLC name has to abide by the naming regulations in the state of Kentucky. It has to include a proper designator, which can be the phrase “Limited Liability Company” or any of its abbreviations like “LLC” or “L.L.C.” The state prohibits the use of any term that could confuse the company with a government agency.Another important requirement is that the company name is distinctive. LLCs, whether domestic or foreign, need to ensure that their names are unique. So before submitting the Certificate of Authority, a foreign LLC will have to check if its business name is still available in Kentucky. To accomplish this, do a business entity name search on the database of the Secretary of State. In case the company name is already being used by an entity registered in Kentucky, the LLC will have to choose a different name.
- Registered Agent – Like in other states, Kentucky requires the appointment and maintenance of a registered agent. It can be an individual or a third-party organization like DoMyLLC that agrees to receive and forward any services of process, business mail, and government correspondence on behalf of the LLC. The registered agent will also collect and maintain contact information for the company.Individual registered agents should:
- Be a resident of Kentucky
- Have an address in the state that is not a post office box
- Be available in the listed address during regular business hours
- Be at least 18 years old
A commercial registered agent needs to:
- Be authorized to transact business in Kentucky
- Be a different company because the foreign LLC cannot act as its own registered agent
To figure out how to select an agent, read the article Five Traits Of A Good LLC Registered Agent For Your Business.
- Annual Reports – All business entities registered in Kentucky will have to file annual reports online or by paper form. These are due every June 30. A foreign LLC will have to pay $15 along with the report. The state does not charge late fees for companies that fail to file their annual report. However, it may decide to administratively dissolve the company.
Getting Expert Help
The process for registering a foreign LLC in Kentucky is not as complicated as some may think. However, that does not mean companies have to take it lightly.
It is important for a foreign business entity to properly fill out and file the LLC paperwork in Kentucky, pay the corresponding fees, and ensure compliance with various state obligations to prevent any issues. Fortunately, there are business filing service providers like DoMyLLC.
Our team of experts can take care of the registration documents for you. We are also authorized to serve as a registered agent in Kentucky. Additionally, companies can request personalized solutions to make sure that our service is suitable for their specific needs.
Getting in touch with our team is easy with the help of our live support feature. Contact us now to get started.
Business Filing Section