Many entrepreneurs are well aware that the Bluegrass State is an excellent spot to establish a business. Kentucky is an economically attractive area to live in, with housing costs 23% more affordable than the national average. And, thanks to low labor expenses, Kentucky ranks 10th in the nation for the cost of doing business.
However, there are a few things to consider before starting your Kentucky business. A business concept, a name, capital, and a business structure are all required.
Depending on the type of business you start, you may additionally require licensing. To help your business prosper, you should also consider tax credits and a reliable payroll system.
Are you ready to learn everything you need to know to launch a successful business in Kentucky?
Follow our step-by-step instructions.
1. give your company a name
A great business would be incomplete without a fantastic name. More importantly, ensure that the name you choose for your new firm complies with Kentucky’s legal requirements.
What you must do is as follows:
- Check the Kentucky Secretary of State website to determine if the name you want is available.
- Check Kentucky’s statute on entity names to ensure your chosen name meets all requirements.
- Check with the US Patent and Trademark Office to ensure your chosen business name has not already been trademarked.
- Submit an application to reserve a business name and a $15 filing fee to secure your name.
This is also an excellent time to purchase a domain name and any social media profiles that correspond to your business name to maintain a consistent online presence.
In some cases, you may also be required to file a certificate of assumed name (commonly known as a DBA or “doing business as” certificate).
This is only necessary if you want to conduct business under a name other than your registered business name.
2. investigate your financial alternatives
Business owners can fund their operations in a variety of ways, ranging from bootstrapping with their own money to obtaining private investments and business loans.
You have numerous alternatives in Kentucky for funding your new business. Here are a few to consider:
The Cabinet for Economic Development assists entrepreneurs by matching them with grants, tax credits, and incentives to help them access the cash they need to build their enterprises in Kentucky.
The Kentucky branch of the federal SBA provides funding, counseling, federal contracting certifications, and other services to small businesses in the Bluegrass State.
- Federal and State Government Grants
Each year, the federal, state, and local governments allot funds to grants for local businesses. Visit usgrants.org to learn more and to apply.
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3. choose a business structure
Whether you’re starting a mom-and-pop shop, a tech startup, or a non-profit, you’ll need to choose the best company structure for your purposes.
Your chosen structure will impact how you pay taxes, segregate your personal assets from business assets, and other legal factors. The four most frequent types of business entities in Kentucky are listed below.
| Type of business | What exactly is it? | Pros | Cons |
| Sole Proprietorship | It is a single-owner, unincorporated business whose ownership is limited to one person. |
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The proprietor is personally liable for any business taxes, lawsuits, and obligations. |
| LLC (Limited Liability Company) | A firm that can be run by a single owner or by two or more partners who agree to share ownership equally. |
|
The general partner is personally liable for everything that goes wrong. |
| Limited Partnership (LP) | A company run by a controlling partner (also known as the general partner) and at least one limited partner (the investment partner). |
|
The general partner is personally liable for everything that goes wrong. |
| Limited Liability Partnership (LLP) | A company owned and managed by at least two people who have equal control over the company but have limited liability. | Partners are not liable for their partners’ activities, mistakes, errors, or even fraud. | Partners who invest more in the company assume more accountability and risk. |
| Corporation | A firm that is separate from its owners (shareholders), who elects a board of directors to manage operations. | Because the corporation carries tax and legal responsibilities, it shields owners from culpability. | Many corporations are “double taxed” on their income and dividends. |
4. register your company in kentucky
Now comes the exciting part: it’s time to register your company!
There is no requirement to register a sole proprietorship with the Commonwealth. Otherwise, before you can begin operations, you must register your business with the Kentucky Secretary of State, submit formation documents, and pay a filing fee. Here’s what you should know.
| Business Type | How to register | costs |
| Limited Liability Company (LLC) | To begin your Kentucky LLC, go to the Secretary of State’s online portal and follow the instructions. You must also submit your articles of incorporation and operating agreement. | $40 |
| Limited Partnership (LP) | To begin your LP, go to the Secretary of State’s online portal and begin filling out the forms. | $40 |
| Limited Liability Partnership (LLP) | To get started, visit the Secretary of State’s online portal and follow the directions. | $40 |
| Corporation | To begin your corporation, go to the Secretary of State’s online portal and begin filling out the forms. Along with your online application, you must send your articles of incorporation. | $40 for Profit
$8 Non-profit |
5. select a registered agent
Every Kentucky firm must have a registered agent named on the company’s statement of information who may receive tax and other legal paperwork on its behalf.
Small business owners can act as their own registered agents as long as they live in Kentucky, or they can engage a professional registered agent.
The price often fluctuates depending on the length of the engagement and the services you want to include; things like 24/7 service are more expensive. Several businesses in Kentucky offer registered agent services for roughly $100 per year.
6. obtain an employer identification number
You’ll need a federal Employer Identification Number (EIN) before hiring your first employee. This number is similar to your company’s social security number and is also required when opening a business bank account, filing taxes, or applying for a loan.
Obtaining an EIN is simple, quick, and accessible. Complete Form SS-4 and return it to the Internal Revenue Service (IRS). The IRS will assign your EIN within a few weeks.
7. become acquainted with business tax credits
While Kentucky businesses benefit from relatively low corporate tax rates, looking for ways to decrease your tax burden is always reasonable.
Fortunately, Kentucky provides a few appealing tax benefits for business owners around the state. Consider the following:
The Kentucky Small Business Tax Credit Program (KSBTC) provides between $3,500 and $25,000 in tax credits to small firms that create new jobs and invest in qualifying technology in the local economy. Most companies with 50 or fewer full-time employees qualify.
The state offers income tax credits of up to 5% of the purchase price, up to $25,000 per calendar year, to small farmers who sell qualifying agricultural assets to beginning farmers.
Angel investors in counties with high unemployment rates can obtain a tax credit of up to 40% of their investment in startup companies – or up to 25% in all other counties.
8. keep track of filing deadlines and taxes
All businesses in Kentucky must file an annual report with the Secretary of State and the Kentucky Department of Revenue. The report must be filed annually between January 1 and June 30, along with a $15 filing fee.
Businesses must keep track of their state and federal tax filings in addition to their yearly filing. The business structure you select will determine the state tax you must pay; you might have to pay income, sales, payroll, and other taxes.
More information is available on the Kentucky Department of Revenue website.
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9. locate a payroll solution
Hiring workers or contractors in Kentucky necessitates navigating a new set of rules. To prevent penalties and fines, you must first ensure that they are accurately classified.
Then, you must ensure that you adhere to all local laws and regulations regarding minimum pay, overtime, and work hours. In Kentucky, for example, employees who work more than 40 hours per week are entitled to 1.5 times their regular hourly rate.
Payroll software is the most convenient way to keep track of everything. A solution like Countick eliminates the time-consuming manual effort of running payroll while guaranteeing that your employees and contractors are paid correctly.
faqs
- in Kentucky, do I need a company license?
In Kentucky, while there’s no general business license, specific activities like pollution control, alcohol sales, finance, and construction may require permits or licenses. More information can be found in the guide to permits and licenses.
- do I need a business bank account in Kentucky to start a business?
As a sole proprietor, a separate business bank account isn’t mandatory. Yet, separating personal and business expenses is crucial for liability protection. Opt for distinct business accounts and credit cards.
- is it necessary for me to obtain company insurance?
The answer is dependent on your company’s structure and needs. If you perform professional services, for example, you should consider professional liability insurance to protect yourself and your company. Alternatively, the state may force you to have workers’ compensation insurance if you hire people.
- what are the state payroll taxes in kentucky?
In Kentucky, all employers must pay State Unemployment Tax Act (SUTA) levies ranging from 0.3% to 9.0%.
Employers are also required to deduct income tax from their employee’s paychecks. Kentucky has income tax reciprocity agreements with the following states: Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, and Wisconsin.
This means that if an employee lives in one of these states and works in Kentucky, their employer is required to withhold income tax for their home state.
