Guide to Starting a Kentucky LLC

What is an LLC?

An LLC, or limited liability company, is a popular business structure that combines elements of corporations and sole proprietorships or partnerships. It provides the limited liability protection of a corporation, meaning that the personal assets of the owners are typically protected from business liabilities and debts. At the same time, it offers the tax efficiencies and operational flexibility of a sole proprietorship or partnership. This structure is known for its versatility and is a preferred choice for many business owners due to its balance of protection and ease of management.

Step 1: Name your Kentucky LLC

To start an LLC in Kentucky, you first need to name your business. Kentucky has rules about what you can and can’t call your business. This is because customers can confuse companies if the names are too similar. Naming rules allow companies to compete against each other more fairly.

Kentucky Business Naming Rules

So what are the Kentucky business naming rules?

First, the name needs to be distinguishable from all the other business names in the commonwealth. Adding additional inconsequential words to the name (like “the” or a different entity designator) doesn’t make it distinguishable.

In Kentucky, that means that if “Rose Water LLC” is taken, then so is “The Rose Water LLC” or “The Rose Water Corporation.”

Here are some other essential naming rules to keep in mind:

• The business name can’t make it sound like you do something that your business isn’t authorized to do (for example, illegal activity or something that requires a special license where you don’t have one).
• Your LLC name must contain the words “limited liability company” or “limited company” or the abbreviation “LLC” or “LC.” This is called a designator.

You can check to see if your business name is available by contacting the Kentucky Secretary of State via phone, email, or the online contact form. Or, you can use our Kentucky business name search page for instructions for checking business name availability.

Note that checking the availability of the name doesn’t guarantee that it will be available when you register your business. Nor does it mean that it will be available when you’re ready to form your company. All it does is let you know if it’s available as of when you check. 

You officially reserve a business name when you file the paperwork to start an LLC in Kentucky or by completing the name reservation process. Let’s go over the name reservation process now.

Optional Business Name Reservation Process

The name reservation process is a way for you to snag your choice of a business name before establishing the business. Knowing that the business name is yours can give you peace of mind while you prepare to take the next step in creating the company. You can use this extra time and space to hammer out the rest of the details. 

Kentucky allows you to reserve a business name for 120 days for a small fee. You can renew the name reservation for another 120 days for an additional cost.

Considerations for Your Business Name

Naming your business is an essential step on your entrepreneurial journey. While there is no magic formula for coming up with the perfect name, here are some things to keep in mind:

• Where do you want your business to be in the future? If you start selling candles but want to branch out to catering, you might not want to name your business Curious Candle LLC.
• Are there other businesses that have the same or a similar name? Even if your exact business name is available, it can cause problems for you if other companies have a similar name.
• Is the .com domain name available for your business? Many customers expect your domain name to match or be close to your business name. Use our Domain Name Registration Service to find and book the perfect domain name before it’s gone. 
• Is the name catchy or memorable? One of the hardest things for new companies is to stick out to customers. Part of how you overcome this hurdle is by coming up with a descriptive, catchy, and memorable name.
• Does it meet Kentucky’s naming requirements? Those are the rules that we talked about before. Your business name needs to be different from the other business names in the state and have the correct designator at the end.

A good name says what your company does and what it stands for memorably while meeting the state’s naming requirements. 

Is your Kentucky LLC name available as a web domain?

Having a domain name (preferably, the “.com” version) that matches your business name can make a big difference. Customers need to know the name of your business. If you call your business The Kentucky Derby, LLC (just kidding; that one’s taken) and the domain is chocolate.com, it may be difficult for people to find you.

Check if your business name is available as a domain name and, if not, what names are available. This process can also help you search for the perfect name.

We have a domain name service to help you find and purchase a domain name for your business. We can also help you create a business website and provide domain name privacy.

Federal and State Trademark Registration

The state-level search doesn’t take into account trademarks. The state could approve your LLC’s name and you could spend big money on signage, business cards, advertising, etc. only to have someone serve you notice that you’re infringing on their trademark.

To see if any words in your LLC name are trademarked on a national level, do a search at the U.S. Patent and Trademark Office website. You can also try applying for a federal trademark of your own, but this can be a long and costly process. Getting a state trademark is simpler and less expensive, though it applies only within the state’s borders.

To see if your name is trademarked at the state level, go to the Trademarks and Service Marks section of the Kentucky Secretary of State website.

Assumed Name for Your Business

Want to change your business name? No problem. The Kentucky government lets you adopt an assumed or doing business as (DBA) name for your business — without having to dissolve and reform the company.

With an assumed business name, you can shorten your business name by removing the designator at the end. For example, you can change it from Awesome Business, LLC to Awesome Business. Or you can change the name altogether.

You can also have multiple assumed names to represent different aspects of your business. Assumed names still need to be different from the names of other Kentucky businesses and meet the other naming rules.

You can get into big trouble if your LLC does business under a name that’s not registered with the Kentucky Secretary of State. The Kentucky government may impose fines or keep you from doing business in the commonwealth.

Check out our helpful guide on How to Get a DBA Name in Kentucky. 

Step 2: Appoint a registered agent in Kentucky

The next step in how to get an LLC in KY is selecting a registered agent for your business. A registered agent is a person or entity that receives official or legal communications on behalf of the company.

For example, if someone sues your business, the registered agent receives the legal paperwork on behalf of the company. Likewise, the person receives certain government notices and other official paperwork on behalf of the company. They collect the information and pass it on to the business.

Who can be a Kentucky registered agent?

There are four main requirements to be a registered agent for a business:

• You must have your registered office in Kentucky.
• If a person, the agent must reside in the commonwealth and have a business address identical to the registered office.
• If an entity, the agent must be an entity or foreign entity qualified to transact business in the commonwealth and have a business address identical to the registered office.
• The agent must agree in writing to act as the business’s registered agent.

Remember that the registered agent must accept the appointment in writing by filing the acceptance form with the Kentucky Secretary of State. If you skip this step, the appointment isn’t valid, and your company can be in bad standing with the government. Or, the Kentucky Secretary of State may reject your filing.

Professional Registered Agents

You can act as your business’s registered agent or have a friend do it for free. But there are advantages to hiring a professional registered agent service:

• You’re free to leave the office. The registered agent must always be available at the registered address during business hours to receive legal and official communications. You can free up your time with a professional agent and even go on that out-of-state vacation without worrying about missing something.
• Keep the company’s business confidential. The last thing you want is someone to serve you with legal paperwork in front of your customers. Protect your privacy and that of your business by hiring a professional agent.

Our Kentucky Registered Agent Service matches you with qualified professional registered agents in the Bluegrass State. We store all the business documents you file with or receive through us on your convenient dashboard — goodbye to wasting your Saturday tearing apart your office to find your legal documents. We’ve got you covered.

Step 3: File Kentucky LLC Articles of Organization

Filing the Articles of Organization is the next step to forming a Kentucky LLC. The Articles of Organization is your company’s birth certificate. It proves that your business exists, says what its name is, and gives other important information.

What are the Articles of Organization?

The Articles of Organization is a form that you file with the Kentucky Secretary of State:

Kentucky Secretary of State – Business Filings
700 Capital Ave.
P.O. Box 718
Frankfort, KY 40602

The Articles of Organization is the document that, when accepted by the Secretary of State, means that your business is official.

When you file the Kentucky Articles of Organization, you will need to have the following information:

• The name of the LLC, one that meets the requirements we went over above
• The name of the registered agent (remember: the registered agent needs to accept the appointment by filing a document with the government)
• The address of the registered office
• The mailing address of the LLC’s principal office
• An indication of whether the managers or the members of the LLC will manage the LLC
• Signature of the LLC organizer

The LLC Organizer files the Articles of Organization. Their sole job is to ensure that the Articles of Organization is filed on time and contains the correct information. You or another member or manager of the LLC can act as the LLC organizer. You can also use a professional service, like our Business Formation Service, to file the Articles accurately and appropriately.

How much does it cost to file the Articles of Organization?

As of this writing, the Kentucky Secretary of State charges a $40 filing fee for you to file the Articles of Organization. There are additional filing fees if you want to expedite the filing process or need to file an amendment or another form.

Protect your investment by using our Worry-Free Compliance service. Let our expert team keep track of and file your ongoing paperwork with the Secretary of State. 

Member-Managed or Manager-Managed?

A limited liability company can be managed by its members (member-managed) or managers (manager-managed). Whoever manages the LLC can or must be involved in important decisions, like accepting investments or new members. 

For a single-member LLC, you may keep it simple and have the LLC be member-managed. If you have or plan to have more than one member, you may want to have the managers manage the LLC. Having the managers manage the LLC simplifies holding votes and ensuring all members are present for management meetings.

We made our Business Formation Service with business owners like you in mind. We know that you probably have better things to do than to sit around and fill out paperwork. At the same time, you understand that you need to follow certain steps to set yourself up for success. That’s where we come in. We have it down to a science, saving you time and money while you begin your dream business.

Amend the Articles of Organization as needed

As your business grows, its information can change. Maybe your company started as a member-managed LLC, but you want to transition to a manager-managed LLC. You can make changes by filing an amendment to the Articles of Organization. Help make sure it’s done right by using our Amendment Filing Service.

Step 4: Create an operating agreement

Write an operating agreement for your Kentucky business. An operating agreement is an internal document that lays out how to run the LLC. It answers questions like:

• Who manages the company? 
• Who has an ownership interest in the LLC (and how is this determined)?
• How are new members or managers added to the LLC?
• How often does the LLC hold meetings?
• Who gets to vote on important decisions?
• What financial contributions have people made to the company?
• Can a member or manager delegate their managerial authority to someone else?
• What is the process for dissolving the LLC?
• How are the profits divided up among the members?

It’s not uncommon for small business owners to be tempted to forgo writing up an operating agreement. After all, they may think, “It’s going so well. Why do I need to talk to everyone about all this legal stuff? Won’t that jinx it?”

Unfortunately, most business disputes, especially those involving new or small businesses, stem from the same thing: misunderstandings. In many cases, everyone could have avoided the misunderstanding by simply putting an agreement in writing.

Do it right the first time and write an operating agreement.

Do I need an operating agreement even if I’m the only owner?

An operating agreement is a good idea, even if you’re the only member. Potential investors, future business partners, and vendors may want to see your operating agreement.

It’s additional evidence that your business is real and separate from you (much like evidence that you have a business and a personal bank account). An operating agreement also indicates how everything is to be handled if something happens to you and you can’t run the business anymore.

Feeling unsure as to how to create an operating agreement for your LLC? We offer a customizable template to help get you started.

Step 5: Apply for an EIN

Apply for an Employer Identification Number (EIN) with the federal government. An EIN acts like your business’s Social Security number. A federal EIN can be used to open a bank account, hire employees, and pay taxes. Kentucky refers to the state tax ID as the Commonwealth Business Identifier (CBI). 

Register with the Internal Revenue Service

You get a Federal EIN by applying with the IRS. You can do this online or by mailing in a form. Note that if you file online with the IRS, you must complete the process in one sitting. The IRS cautions that you can’t save the form and go back later. Make sure you have all your business’s information ready when you file to save time.

If you’d rather deal with the IRS as little as possible, we can get your Employer Identification Number for you. Our EIN service is quick and eliminates the hassle.

Register with the Kentucky Department of Revenue

As we discussed, you’ll need to register with the Kentucky Department of Revenue to get a CBI. You do this after you have an EIN from the federal government. You accomplish this by filing a separate form online.

Other Important Registrations

Before you’re off to the races, you must sign up for workers’ compensation insurance if you intend to have employees. In addition, you have to register to pay payroll taxes, sales taxes, unemployment taxes, and other filings.

Some Kentucky businesses must also register for special tax applications, like motor vehicle usage and business personal property taxes.

Step 6: Submit your LLC’s beneficial ownership information report

Now that your LLC is active in Kentucky, it’s time to meet one of the newest requirements for LLCs: filing a beneficial ownership information report, or BOI report. This requirement was enacted by the Corporate Transparency Act, which went into effect at the beginning of 2024. The act’s primary goal is to help deter financial crimes by making it more difficult for organizations to use shell companies to hide illicit financial activities. 

To accomplish that goal, the act requires LLCs and other small businesses to disclose information about their beneficial owners. A beneficial owner is anyone who receives substantial economic benefit from the LLC’s assets, exercises significant control over it, or holds 25% or more ownership interest. In your BOI report, you’ll be asked to give the name, address, and identifying documents for each beneficial owner. Failing to file and disclose this information can have heavy civil and criminal penalties. 

You can file your BOI report online or by PDF upload to the Financial Crimes Enforcement Network’s (FinCEN) website. It’s free to file, and there’s only a federal iteration of the form; Kentucky doesn’t have a state form. Just be sure to file on time. LLCs created in 2024 will have up to 90 days after getting their Articles of Organization approved to file the BOI report. LLCs that organize in 2025 and beyond will have just 30 days. Any LLCs that started before 2024 have until January 1, 2025.

You can read more about the new BOI requirements on FinCEN’s website. And if you’d like help with this form, check out our BOI report filing service.

Pros and Cons of Forming a KY LLC

A Kentucky LLC is a popular entity choice, but it’s not right for every single business. There are disadvantages and advantages to it. When you’re deciding if an LLC is right for you, it’s essential to consider them. 

Pros

Forming an LLC in Kentucky offers several benefits. Firstly, it provides limited liability protection, meaning personal assets of the members are generally protected from business debts and liabilities. Secondly, there is tax flexibility, as LLCs can choose to be taxed as a sole proprietorship, partnership, C corporation or S corporation, offering potential tax benefits. Additionally, Kentucky LLCs enjoy operational flexibility with fewer compliance requirements than corporations, making them easier to manage, especially for small businesses.

Cons

However, there are drawbacks to consider. Forming an LLC in Kentucky can involve complexities and costs related to compliance, such as filing annual reports and maintaining proper business records. Furthermore, raising capital can be challenging for LLCs, as they don’t have the ability to issue stock like corporations. Lastly, the limited liability protection can be compromised if the LLC fails to maintain proper formalities.

Types of Kentucky LLCs

Kentucky actually offers a variety of different LLC types. While they’re all pretty similar, there are a few essential differences that are important to know.

Single-Member LLC

A single-member LLC in Kentucky is a normal LLC. The only unique factor is that a single-member LLC is owned and operated by one individual, providing the benefits of limited liability while allowing the owner to report business profits and losses on their personal tax returns.

Multi-Member LLC

This type of LLC is operated by two or more members. Similar to partnerships, multi-member LLCs offer limited liability protection while profits and losses can be passed through to the personal income of the members.

Professional LLC

Designed for licensed professionals, such as doctors or lawyers, a professional LLC (PLLC) in Kentucky provides the same liability protection and tax benefits but is tailored to meet the specific regulatory requirements of certain professional services.

Foreign LLC

For businesses that are established as LLCs in another state but wish to operate in Kentucky, a foreign LLC designation is required. This type of LLC must register for a Certificate of Authority from the Kentucky Secretary of State to conduct business in the state.

Non-Profit LLC

A non-profit LLC in Kentucky is designed for entities that operate for charitable, educational, religious, or similar purposes. Their primary aim is not to generate profits for members. It’s important to note that the non-profit status primarily pertains to state tax purposes and that obtaining federal tax-exempt status requires meeting IRS criteria, which may involve additional steps and considerations.

Each type of LLC caters to different business needs, offering flexibility and protection to suit various business models and structures.

Top Kentucky Cities to Form Businesses

Louisville, KY: Louisville is the largest city in Kentucky and a significant hub for business activity. It’s known for its diverse economy, with companies in healthcare, manufacturing, logistics, and technology sectors. The Louisville metropolitan area includes surrounding cities and counties that contribute to its economic vitality.

Lexington, KY: Lexington, often referred to as the “Horse Capital of the World,” is another major city in Kentucky. It has a strong presence of businesses related to horse breeding, agriculture, and the equine industry. The city also has a growing technology sector and is home to the University of Kentucky.

Northern Kentucky: The Northern Kentucky region, including cities like Covington, Newport, and Florence, is part of the Cincinnati metropolitan area. It’s a strategic location for businesses due to its proximity to Cincinnati, Ohio, and its accessibility to major transportation routes.

Bowling Green, KY: Bowling Green is a city in south-central Kentucky and is known for its manufacturing industry, particularly in automotive production. It’s home to the General Motors Bowling Green Assembly Plant, where the Chevrolet Corvette is manufactured.

Owensboro, KY: Owensboro, located in western Kentucky along the Ohio River, has a diverse economy with a focus on healthcare, agriculture, and manufacturing. It’s the region’s economic center and a hub for businesses in the area.

Paducah, KY: Paducah is situated in western Kentucky and has a strong presence in healthcare, education, and transportation-related industries, thanks to its location near the confluence of the Ohio and Tennessee Rivers.

These cities and regions in Kentucky have historically seen significant business activity and may continue to be attractive places for entrepreneurs and businesses to form and operate. However, for the most current and detailed information on business formations in specific areas of Kentucky, we recommend consulting official government sources or local business organizations. They can provide you with precise data on where businesses are being formed and what industries are prominent in each region.