Individuals interested in starting their own business, such as a consulting company or rental property, should strongly consider forming a Limited Liability Company (LLC) through which to operate. Fortunately, forming one in Kentucky is relatively simple.
Creation
The first step in forming a Kentucky LLC is to visit the KY One Stop business portal, create a log-in, and select “Register a new business.” From there, you will be guided through a series of prompts, including selecting a business name and a person to represent the new business. There is a $40 filing fee to register the Articles of Organization for the new LLC.
Once the business has been created, the next step is to get an Employer Identification Number (EIN) from the IRS. Depending on the tax structure of the LLC, an EIN may not be necessary – if the LLC is to be taxed as a partnership or a corporation an EIN is needed, but if it is taxed as a sole proprietorship, the owner can use his or her SSN in place of an EIN. An EIN can be obtained through the IRS website or by filing a Form SS-4 with the IRS.
Registration
After an EIN has been granted for the company, tax account registrations will need to be filed with the KY Department of Revenue and with local taxing authorities. These registrations notify the state and local agencies of the type of LLC that has been formed, as well as the nature of the business the LLC is conducting. If products are sold or certain services are performed, the LLC may need to file for a Sales Tax account.
Tax registrations for Kentucky can be done through the KY One Stop business portal. If the business is formed in Louisville, registration can be done through the LMRC eMints portal; if the business is formed in Lexington, paper forms to be filed with Lexington can be found on the Lexington government’s website.
Additional Considerations
Although initial set up of an LLC is relatively simple – formation, EIN, and tax registration – many other factors need to be considered once the creation is complete. In order to better ensure liability protection, a separate bank account should be created for the entity. In addition, assets that are to be used by the company, such as real estate or vehicles, will need to be retitled. If the entity rents property, commercial insurance may need to be obtained. If the company will employ individuals, a payroll provider will be necessary. Accounting systems should also be put in place to ensure accurate reporting of income and expenses. Lastly, the entity’s activities will need to be reported on Federal, State, and local tax returns.
If you would like to speak with someone in our office regarding the content in this article, please contact us at 502-753-0609 and we will be happy to assist you. The statements contained herein are not intended to constitute written tax advice within the meaning of IRS Circular 230 §10.37. These statements are solely intended to communicate general information for discussion purposes and should not be interpreted as written tax advice nor should they be relied on as such.
