If you want to start a private business in the US, you’ll hit the spot with the state of Kentucky. Recently, it has hit the top in the lists and rankings of the most business-friendly US states. Here is why.
First and foremost, Kentucky boasts a central location right in the heart of a huge 34-state area that gives it the advantage of being a perfect distribution hub. With a well-developed transportation network covering highways, railways, river traffic, and dozens of airports, Kentucky has unmatched logistics making shipments to vast industrial and consumer markets a quick and easy task.
To continue, the cost of running a business in Kentucky is by far the lowest in the US. Attractive tax incentives and flexible financial regulations are of great help both for new projects and for business expansion or relocation. Multiple entrepreneurial and investment state programs provide a solid background for small businesses and startups. Besides, Kentucky welcomes young specialists and sponsors educational and training programs for the younger specialists to improve the workforce quality.
Finally, the state offers high living standards and lower costs of living that will make your life beyond the office maximum comfortable. So, whatever your aim of moving to Kentucky or opening a private venture here, you simply can’t go wrong with it.
Speaking of the best legal structure for your future Kentucky enterprise, a limited liability company is a good choice for a variety of business situations and scenarios. If you think that start an LLC might be too difficult for you, in our article below, you’ll find detailed and accurate instructions on the following issues:
Just put off all your doubts and keep on reading.
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Many beginner entrepreneurs think that having a good business idea is the key to starting a successful venture. While a viable idea is certainly important, establishing an enterprise is also about formalities. And giving your future company a name is where those formalities start.
Naming an LLC is a bit different from naming a sole proprietorship or partnership that are usually named after their owners by default. While you still can make your first or last name a part of your company’s moniker, there are also rules that place some restrictions on this concern.
In most states, naming rules are stipulated in the state statutes. Kentucky is not an exception. Kentucky Revised Statute sets forth the following requirements for LLC names:
Along with the words to be used in your Kentucky LLC name, there are words that are prohibited and can’t be a part of your company moniker:
A sensitive group of words to use in LLC names is professions. Thus, to make some words denominating professional activity or referring to certain specialists, most likely than not, you’ll need a license for that type of professional activity. It’s recommended that you double-check the naming rules in this concern before filing.
Inventing a good company name often appears easier said than done. A good name is one that is catchy and memorable. At the same time, it shouldn’t be too long, the shorter the better. And it should be relevant to the activity you are going to run. In other words, the name of your company should give an idea of what you are doing or of the industry you operate in. Some quick naming tricks include using acronyms, mixing fancy word combos, or joining meaningful word parts into single non-existent words. All of these will help create an original name.
Once you come up with some name versions, don’t rush into filing, though. First, you need to make sure the desired name is available and you can take it. Doing a business name search will be of great use here. On the Kentucky Secretary of State’s website, you can find a business name search tool and check all name versions you have for free. In our turn, we recommend checking not only a full phrase but also separate words.
In case the name is not occupied, you can reserve it for a period of 120 days. That’s a good option to have if you are not ready to proceed to business registration yet. In Kentucky, it will cost you only $15. Just submit a Name Reservation Application to the Secretary of State.
Unlike in many states where fee payment should be confirmed to the Secretary of State, in Kentucky, you should pay filing fees to the State Treasurer.
One more thing specific for Kentucky is that you can’t put an LLC name on hold online. You can either mail it to:
Michael AdamsOffice of the Secretary of State
P.O. Box 718
Frankfort, KY 40602-0718
or bring it in person to the office located at:
Room 154, Capitol Building700 Capital Avenue
Frankfort, KY 40601
With an LLC in Kentucky, you’ll get the privilege of using a different company name for marketing and operational purposes. It’s a so-called DBA (doing business as), fictitious, assumed, or trade name. What you’ll get with a DBA straight away is the ultimate flexibility. Thus, instead of forming multiple LLCs to support your diverse business portfolio, you can register a separate DBA for each product line, brand, or service you operate.
To add more, DBAs need no “LLC” tag, which makes them easier to remember and more appropriate for daily business operations. Besides, DBAs are more marketing-friendly. A shorter and catchier name is more relevant for a logo, advertisement, outdoor signs, infomercials, etc.
With a DBA, you can also start small and grow big over time. If you expand your activity at some point, you won’t have to change a registered LLC name. It will be enough to register a new DBA, which is faster and easier.
If you start as “Angela’s Cakes” and eventually, add cookies, chocolates, donuts, or even lollypops to your assortment, you can switch to “Angela’s Sweets” over time.
In Kentucky, DBAs are rather called assumed names. To use an alternate name, under the Kentucky Revised Statute, you should file a Certificate of Assumed Name with the Secretary of State’s office. Here again, the online submission is not available, you’ll have only mail and in-person options. And mind paying a $20 registration fee to the treasurer.
Once formed, your Kentucky LLC will become an independent legal entity with its own duties and obligations. There will be a number of regulatory requirements to follow to stay in good standing with the state and maintain its eligibility. For that purpose, your LLC should be always in contact with the state. Since the government, state authorities, and public institutions will mostly communicate with your company via mail, there should be someone to consistently handle that correspondence and do it with due diligence. This role for LLCs is performed by a registered agent. And this function is a must.
Under the Revised Statute of Kentucky, it’s up to you to choose a registered agent for your LLC. It could be either a physical person over 18 years old or a legal entity. The main requirement is that a registered agent should be a state resident permanently present at the registered address during business hours on weekdays. Though an agent’s main function is simply to receive mail, this position is vital for an LLC.
Should you fail to get a lawsuit, tax notification, or some official request in time and fail to respond to it accordingly, your company might have some law issues or legal problems that will put its compliance status at stake. Hence, a registered agent is your business compliance guarantor in a way.
Forming an LLC for the first time, many entrepreneurs don’t treat this function seriously and often choose to serve as their own registered agents. It’s free of charge since you don’t have to pay anyone for the service. It’s the easiest way to follow since you’ll be the one responsible for the mail. And it looks reliable since no one will have access to your correspondence but you.
In practice, though, being your own registered agent can bring quite a lot of trouble and inconvenience:
If you are inclined to find a good professional assistant for this position, in our Best Registered Agent Review, we provide quite a number of decent alternatives to consider.
To avoid all the above-mentioned problems, we recommend hiring a dedicated service. It will cost you something about $100-150 a year, which is not a high price to pay for a professional approach and the peace of mind you’ll get. Besides, if you decide to move to another state or expand your business geography, you’ll already have a registered agent in any other location because most of those professional services operate across the country.
With a company name chosen and a registered agent appointed, now, you stand at the doorstep of your LLC’s official registration. By and large, state registration is a formality that gives your LLC the status of a legal entity. To finalize your Kentucky LLC formation, you need to file the Articles of Organization with the state. This document is of a rather general character and covers basic company info that will be made a part of public records. At the same time, it’s a vital document for your Kentucky LLC that makes it eligible and legally existent once it’s reviewed and approved by the Secretary of State.
If you want to skip the filing routines and are not too eager to do handle formation formalities on your own, you can hire one of the professional services to help you out. In our Best LLC Service ranking, you’ll find a number of options to match any pocket and business needs.
As stated above, the LLC Articles of Organization or Formation Certificate as they call it in other states is a pretty much standard document. Normally, it covers the following info:
Actually, you can mention in the Articles of Organization any info you deem necessary, be it operation procedures or control rules. However, we advise that you consider those issues in the company bylaws we’ll talk about below.
When it comes to filing methods, you can submit your Articles of Organization to the state using one of the three different routes. The quickest and easiest way to follow is online filing. On the Kentucky Business One Stop Portal, you’ll find a digital template for your formation doc you can fill in and submit. Two other routes are sending a paper version of the Articles of Organization via mail or bringing the document to the Secretary of State’s Office in person.
Whatever option is more convenient for you, there is a filing fee you’ll have to pay. In Kentucky, it’s $40, which is one of the lowest rates as compared to about $100 accepted in most other states.
The standard timing for processing your formation documents in Kentucky is up to 3 business days to the max. Depending on the overall workload of the Secretary of State’s Office, your filing might be complete even on the same day. And there is no extra charge for the expedited service
Setting up a company is only one of the steps toward a successful business. Efficient management and operational control are two other important aspects when getting your business up steam and striving to make it move in the right direction. This is where an Operating Agreement will come to help.
This instrument is an internal document that needs no state registration. At the same time, it’s crucial to any LLC irrespective of how many members it has. In single-member LLCs, this agreement creates a solid base for future cooperation with new members, should you want to engage some more co-owners. In multi-member LLCs, the document enables avoiding disputes, conflicts, and disagreements between the company members by stipulating common business management rules acceptable to all parties.
To give you a better understanding of why you need an Operating Agreement for your Kentucky LLC, let’s take a look at the major points it covers:
Notably, without an Operating Agreement in place, you’ll have to observe default laws when governing your LLC. Those laws are mostly generic and are not business-specific. An Operating Agreement, on the other hand, allows customizing the management rules to your current business situation and conducting business your way.
An EIN is an Employer Identification Number or a Federal Tax ID. The latter speaks for itself. the number is a nine-digit code assigned to a legal entity to identify it as a taxpayer. It’s similar to SSNs issued for individuals.
Most single-member LLCs don’t need an EIN and use the Social Security Numbers of their owners for tax purposes. However, no matter the number of members, your Kentucky LLC will need an EIN in the following cases:
From the administrative and practical points of view, your best choice is to get an EIN right after the LLC formation. This way, you’ll demonstrate your business’s legal independence and easier avoid fraudulent financial schemes.
Getting an EIN is a piece of cake. The number is issued by the Internal Revenue Service (IRS) and you can file an application form via the IRS portal in mere minutes. And it will cost you nothing. You’ll get your EIN back the same day.
To further support your Kentucky LLC at a legal level and make it smoothly move in the right direction, there are a few more steps you need to take right after the LLC formation.
Are you thinking of using your personal bank account for LLC purposes? We strongly recommend that you refrain from doing so and open a separate account for your legal entity. The benefits you’ll get with it are hard to argue:
To make sure that your corporate veil is safe and functional, don’t neglect setting up a separate checking account for your newly-formed LLC.
Providing protection to your assets, an LLC needs protection too. No one knows what will be waiting for you ahead and what problems might arise on the way while conducting business. Those issues and problems might be related to your LLC property, your company commitments, professional activity, types of work you perform, etc. Though you can’t shield your company from all possible risks and threats, you can make it “feel” safer to some extent by getting business insurance.
The most common types of insurance appropriate for different businesses include general liability and commercial property insurance, professional liability insurance, business income insurance, and worker’s compensation insurance all employers should have. On top of that, you might need some more specific policies that will work for your business activity. It’s advisable that you consult with a business insurance expert to create an efficient and functional insurance portfolio for your LLC.
It’s highly important to keep your LLC in good standing with the state to avoid any law problems and retain its eligibility. Below, we’ll consider basic state requirements your LLC is to observe to stay compliant.
It’s not a secret that many US states call for all LLCs to get business licenses to operate on their territory. Kentucky has no such requirement, yet, most likely than not, your LLC might need some sort of license or permit there too. Those are not only state licenses but also local permits issued at city or county levels. On Kentucky Business One Stop Portal, you can find a detailed license database to check what licenses you need for your LLC in Kentucky.
At a federal level, your business profits will be taxed as those of a pass-through entity. You’ll have to file business incomes on your personal tax return, with a Schedule C attached. When it comes to state taxes, you’ll need to register on the above-mentioned Business Portal to get a Commonwealth Business Identifier (CBI), which is a must for paying state taxes in Kentucky.
The types of taxes your LLC is exposed to will largely depend on the type of activity you run or the industry you operate in. To learn more, we suggest that you consult with a business accountant or tax specialist.
LLC annual reports help the state update business information about those companies. And companies confirm their compliance status this way. Under Kentucky Revised Statute, you’ll have to file a business report to the Kentucky Secretary of State. You can do it online, via mail, or in person. A filing fee is $15.
A limited liability company is a welcoming legal structure for many businesses. Start an LLC is easy. Select your state to start.