How to Form a Kentucky Professional Limited Liability Company

A Kentucky professional limited liability company (PLLC) is a business formed by licensed professionals. As you would expect, there’s a lot to do when starting a new business venture, but it can be simpler than you might think. Let’s start from scratch.

Which professions can form a Kentucky professional limited liability company?

The first question is usually, what is a professional limited liability company in Kentucky? Simply put, it’s a business formed by one or more professionals who are licensed by the state. Its purpose is to offer the skills of its members to customers from one or more locations. The type of professions that can form a Kentucky PLLC include:

• Attorneys
• Engineers
• Certified public accountants
• Dentists
• Architects
• Physicians
• Veterinarians

Professionals may also consider forming a professional corporation (PC) in Kentucky. In a PC, the shareholders hold an ownership interest based on their percentage of overall shares issued by the PC rather than members. Revenue from a PC is generally taxed at both the corporate and individual shareholder level, while PLLC members usually only pay tax on the profits from the business at the individual shareholder level.

Choosing the right business structure from the start is vital. In a nutshell, there are two questions any potential business owner should ask themselves.

1. What impact will the business type have on my personal liability if something goes wrong?
2. What taxes will I need to pay?

Need more information? To read more on this topic, see our PC vs PLLC page. If deciding between an LLC or PLLC, check out our comparisons page.

How to Form a Kentucky Professional Limited Liability Company

Choose a name for your Kentucky PLLC

The Kentucky Office of the Secretary of State enforces strict rules about the type of name a new business can choose. A PLLC can’t choose a name that’s already on file with the state. The name must also contain the words “professional limited liability company” or a recognized equivalent, such as “professional limited company” or the abbreviation “PLLC” or “PLC.” You can make an application to use an indistinguishable name for a fee. If partners are not ready to start their business, they can have the Secretary of State reserve their chosen name.

At ZenBusiness, we offer a service that lets you reserve your preferred business name for up to 120 days. It’s also wise to register a business domain name if you plan on starting a website. This will ensure they’re not snapped up by someone starting a similar type of business. ZenBusiness can help with our domain name service.

Select a Kentucky registered agent

Every new business must designate a registered agent who has a physical office in the Commonwealth of Kentucky. The agent’s role is to accept documents from the Secretary of State as well as legal notices, such as subpoenas. ZenBusiness’s registered agent services can match you with a qualified agent for your Kentucky professional limited liability company, which can free you from the burden of staying on-site during business hours, which is another legal requirement for registered agents.

Complete and file Articles of Organization

To make your business official in the eyes of the state, you need to prepare your Articles of Organization. You can file the documents online. Alternatively, you can submit a paper application along with two identical copies to the Secretary of State’s office along with a $40 check payable to the Kentucky State Treasurer. Paper applications can be submitted in person or by mail to the address on file. Two file-stamped copies will be returned to the PLLC. It must then file one with the county clerk in the county where its registered agent’s office is located.

Articles of Organization record the business structure, such as the names and roles of the Kentucky PLLC’s members. It must also record whether the business will be member-managed or manager-managed. Typically, a Kentucky professional limited liability company will be member-managed. This occurs when members oversee the day-to-day activities of your PLLC and make decisions on the PLLC’s behalf. Manager-managed occurs when you appoint a member(s) or hire an individual(s) from outside the PLLC with or without a stake in ownership to manage your PLLC.

Handle your tax obligations

Most PLLCs need to apply for an EIN from the IRS to file tax returns and open a business bank account, which is helpful for separating members’ business and personal assets. The number is also needed when hiring employees. ZenBusiness can provide this service for you.

Federal Requirements

By default, PLLCs and LLCs are taxed as pass-through entities, meaning that the business itself isn’t taxed on profits before they’re distributed to the members, who then pay taxes on their share of the profits on their personal tax returns. This avoids the “double taxation” experienced by C corporations, which are taxed at the business level and again at the personal level when profits are distributed to shareholders. PLLC members also have the option of being taxed as a C corporation or S corporation, which can be financially advantageous to some PLLCs. A tax professional can provide further information about your options.

State Requirements

A Kentucky professional limited liability company doesn’t pay corporate income tax at the state level, but Kentucky does have a Limited Liability Entity Tax (LLET) that you will be responsible for paying.

How the state taxes you will depend on various factors, including the nature of your business and the number of employees. Some examples are listed below.

• Sales and use tax
• Health care provider tax
• Telecommunications tax
• Unemployment tax
• Motor fuels tax
• Nonresident withholding tax

Local Requirements

There may be various local taxes at the city or county level depending on the location of the LLC. Check with your local government offices to find out what your obligations are.

Obtain Kentucky business licenses and permits

Kentucky doesn’t require PLLCs to hold a general business license, but individual members require active professional licenses, and the business may have to meet other industry-specific standards. The state requires the company’s members to have these licenses and permits before starting the business. ZenBusiness’s license reporting service can help you determine what’s required.

Acquire insurance for your Kentucky PLLC

There are two types of insurance that businesses must have in Kentucky if they intend to hire employees: unemployment insurance and workers’ compensation insurance. The company must register with the Office of Unemployment Insurance to open an unemployment insurance account. With few exceptions, companies must source workers’ compensation insurance from private insurance carriers or self-insure. You may also want general liability or commercial property insurance, which can be combined in a business owners’ policy.

Open a business bank account

Opening a business bank account allows all the company’s income and expenses to flow through the account. This separates the business and personal finances of its members, which can help at tax time and for general record keeping. To open a business bank account, the PLLC will need a nine-digit EIN.

Ready to launch your business?

At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or are looking to register a domain, our goal is to help you succeed. Check out our services and contact us today to see how we can help you grow your company.