Step 1) Secure Your LLC's Name
If you haven’t yet, you need to choose a unique name for your business. Your company name must:
- Contain “Limited Liability Company,” “Limited Company,” “LLC,” “LC” or “LTD CO.”
- Not contain any restricted/prohibited words. Restricted words like bank, engineer, and insurance require approval by the state. The word cooperative is completely prohibited in Kentucky business names, in addition to all vulgarities.
- Be distinct from any existing business in Kentucky. You can check if your ideal business name is available by doing a name search online.
What To Do:
You can conduct your business name search through the secretary of state website or an online filing service. Keep in mind that business names are first come first serve, so if yours is available when you look it up and you are confident you’ll use it, hop on it -- just in case.
You’ll also want to check that a decent URL is available for your business name, which you can easily take care of through GoDaddy. This part isn’t necessary for legal compliance, but it’s important to make it easy for customers to find your business online. Keep in mind, even if you don’t intend to create a website immediately, you’d be wise to buy your domain name now.
Remember, this isn’t optional in Kentucky-- it’s mandatory.
Quick Note: Before you commit 100% to a name, you may also want to check that there’s a decent URL available for your business. Use Weebly to search your options. If there’s a quality domain name for purchase, we advise buying it right away. Even if launching a business website isn’t on your radar right now, it’s going to be soon, and you might as well nail down a domain name that’ll make it easy for customers to find you!
Step 2) Appoint A Registered Agent
Kentucky requires you to have a registered agent for your LLC. A Kentucky registered agent is a business or individual that’s responsible for receiving tax forms, service of process notices, and other official documents on behalf of your business.
Your registered agent has to have a legal address in Kentucky (other than a P.O. Box) and be available during normal business hours (9 am to 5 pm Monday through Friday).
You are legally allowed to act as your own registered agent in Kentucky, but there are a number of instances where you shouldn’t. For example:
- If you don’t maintain normal business hours.
- If you’re concerned about making your home address public (for those who run a business online or at home).
- If you don’t want the risk of being served in front of customers or family.
In our professional opinion, it’s usually best to appoint a third-party business or individual to act as your registered agent. The possibility of missing or misplacing an important notice simply isn’t worth the risk!
What To Do:
First, learn more about registered agents and decide whether or not you’re up for the task yourself. If you’re not, the cheapest way to get these services is by forming a Kentucky LLC with IncFile. This way, they’ll throw in a year of registered agent service for free, and $99/year after that.
Step 3) File Articles Of Organization
Next you’ll need to officially form your business. Forming an LLC in Kentucky requires filing Articles of Organization with the state, which you can do on your own, with the help of a lawyer, or through an online LLC filing service.
Filing on your own:
- Saves you money in the short-term, since you won’t have to pay for legal assistance.
- Risky, because it’s important to file these properly the first time.
- Could have legal/financial repercussions later if you don’t know what you’re doing or make a mistake.
Filing with an attorney:
- Risk-free, since you’ll be entrusting a professional to handle it.
- The most expensive option, as their fees can add up.
Filing through an online service:
- Also risk-free.
- No need to meet with anyone in-person -- you can do it all online.
- Still a financial investment, but far cheaper than attorney fees.
What To Do:
If you choose to file on your own, you can download the form, fill it out (carefully) and mail it to the Secretary of State, along with a check for $40 made out to the “Kentucky State Treasurer.”
Recommendation: We do highly recommend taking advantage of an online formation service since they’ll make sure your Articles of Organization are prepared and filed properly, act as your registered agent, and provide tons of other helpful services for a reasonable price. However, it’s up to you to approach this step however you feel most comfortable.
Step 4) Get An EIN
Your EIN is your Employer Identification Number, or Federal Tax ID. It basically functions as your business’ SSN. Legally, you need an EIN if:
- Your LLC has multiple members (i.e. you’re not a single-member LLC)
- You’re going to open a business bank account (which you should -- we’ll get to that later).
- You’re going to hire employees.
Even if you don’t fit this criteria, there are some less common circumstances that require you to obtain an EIN, so it’s worth consulting the IRS website.
What To Do:
The best way to get your EIN is by filling out the IRS online application. It’s very simple, and doesn’t cost a dime. If the online method doesn’t suit you, however, you can also apply via phone, mail, or fax -- check out our EIN guide for more information on this.
Step 5) Draft An Operating Agreement
An operating agreement is a document that describes the ownership/financial structure of your business and the working relationship of its members. Although your Kentucky LLC is not required to have an operating agreement, it’s a good idea to have one in place.
In case of any major shift in your business, your operating agreement will make sure your business remains functional without having to defer to the default LLC-management laws of Kentucky. In order to maintain the highest level of control over your business, even in the midst of chaos, having a solid LLC operating agreement is essential.
What To Do:
When it comes to actually writing your operating agreement, there are a couple ways you can go about it.
- Option 1) Use a Kentucky-specific online template. We’ve ranked the best LLC operating agreement templates online for your convenience.
- Option 2) Take care of it through an online filing service at the same time you register your business with the state. This will cost a little more, but it may be worth it depending on the complexity of your business structure.
Again, this step isn’t legally required when forming a Kentucky LLC, but it’s an important part of protecting yourself.
Step 6) Open A Business Bank Account
Don’t make the mistake of running your business out of your personal bank account. Even if you’re forming a single-member Kentucky LLC, it’s still important to differentiate your personal and business expenses. Opening a business bank account will:
- Keep you out of a whole mess of potential trouble come tax time.
- Allow you to take advantage of all the incentives and waived fees.
- Allow your LLC to build credit so that in the future you won’t need to put your personal credit on the line.
What To Do:
Don’t rush into this. It’s worth investing the time to find a bank account with the lowest risk and highest reward for your business. Shop around local banks and credit unions like KY Bank and find out what perks they offer small businesses. Check out a few national banks, too -- they actually have some great incentives.
Once you have your business bank account set up, you’ll want to sync it with accounting software to start properly managing your financials. You’re going to need accounting software for as long as your LLC is in business, so you might as well invest now. Take a look at our top 7 accounting software tools for information on our favorite programs.
Step 7) Tackle LLC Taxes & Licensing
Finally, you’ll need to take care of any permits, licenses or taxes your business requires. It’s possible that your LLC will only need a general business license, but it’s not safe to assume -- especially in the face of potential fines or other legal consequences.
Depending on the nature of your business you may need to acquire a few special permits, and remember to think on a federal, state and local level.
What To Do:
- Federal: The Small Business Association website is a great resource for information on federal licenses and permits. They provide all the links you’ll need to apply for special licenses and permits, too.
- State: You should be able to find everything you need to know about KY-specific license and permit requirements and state tax registration on the Kentucky One-Stop Business Portal. However, we noticed certain links are inactive as of this writing, so you may have to contact the Kentucky SBA District Office if you’re unable to track down the information you need.
- Local: Give your local chamber of commerce a visit or ring to find out about city and county-specific taxes, permits and licenses.
If you could use some help with this step, look into a business license service. They’ll research all the licenses you need to legally conduct business, and send all the necessary applications to your door.
Need Help Forming an LLC?
If you'd rather have professionals form a Kentucky LLC for you, here are the three services we recommend looking into. Choose the service based on your needs:
- IncFile ($49 + state fee) = Best Price & Overall Value
- LegalZoom ($79 + state fee) = Best For Brand Recognition