LLCs are the most popular business entity type, even surpassing the corporation. That’s mostly because LLCs have a more simple structure and provide business owners with more legal and financial protection. It’s also typically a bit faster to get an LLC approved than a corporation. But how long does it take to get an LLC in Kentucky? We’ll go over it all in this guide.
Discovering Kentucky
The Bluegrass state is home to forests, mountains, hills, caves, and coal fields. It gets its nickname from a particular type of grass that grows there with a bluish tint. The Eastern Kentucky Coal Field has 10, 500 square miles of coal. Another interesting thing about Kentucky is that Pennyroyal, a type of mint which has been used in the region for its medicinal properties. Because of its vast forests, Kentucky is one of three of the country’s top producers of hard wood. It also produces a lot of limestone, and it’s third in the country for coal production.
Economic Overview of Kentucky
Kentucky has a gross state product (GSP) of $203.8 billion, with a growth rate from 2018-23 of 18.2k%. The biggest industries in the state by revenue are Health and Medical Insurance, Automobile and Light Duty Motor Vehicle Manufacturing, Automobile Wholesaling, Hospitals and Gasoline and Petroleum Bulk Stations. The top companies in the state by employment are the State of Kentucky, Walmart Inc., United Parcel Service, Inc., Amazon.com, Inc., and Norton Healthcare. And the industries that contribute the most to the state’s GSP are Manufacturing, Real Estate and Rental and Leasing, Healthcare and Social Assistance, Wholesale Trade, and Retail Trade.
Business Environment in Kentucky
According to USnews.com, Kentucky’s business environment ranks #41 in the nation. It’s #44 in employment, and #33 in growth. When they measured job growth, Kentucky came in at -0.3%, whereas the national figure is 0.2%. And Kentucky’s net migration is 0.2%, while the national average is 0.1%. That means that because there isn’t much job growth, many people are leaving the state.
And unfortunately, the numbers don’t get better from there.
Kentucky ranks #36 in education, so the workforce isn’t well-trained. Under the Fiscal Stability section, Kentucky scored #47 for long-term fiscal stability. That means the people running the survey don’t have an optimistic outlook for Kentucky’s economy in the future. When they checked into the state’s liquidity, it scored a 1.7, and the national average is 3.6.
This probably isn’t a total surprise given that the state produces so much coal and hardwood, but Kentucky scored a mediocre 6.3% in renewable energy usage, while the national average is 12.3%. That dropped its ranking in the Energy category to #29. The state actually has good air and water quality, which is surprising. But they rank #29 for pollution because they have 1,293 pounds/mile squared of industrial toxins (national is 926).
When it comes to the Opportunity section of the survey, it’s a mixed bag. The state ranks #4 in terms of affordability and #8 for equality, but #44 for economic opportunity. That sort of makes sense when you consider the job growth statistic. The cost of living index in the state is 89.1, while the national figure is 100, so it costs less to live here than in some other states. But the median household income is $55,573, compared to the national average of $69,717. Unsurprisingly, the state has a high poverty rate of 16.5% (national is 12.8%).
So, while it may be cost-effective to run a business in Kentucky thanks to low business costs and the low cost of living, you’ll struggle to find qualified employees, and the questionable long-term fiscal stability of the state’s economy are concerns, as well as the pollution.
State-Specific Regulations and Incentives for Forming an LLC in Kentucky
There are loads of regulations and incentives for forming an LLC in Kentucky.
- Kentucky Business Investment (KBI) Program: This program provides tax credits for both new and existing agribusinesses, manufacturing companies, hospital operations, coal severing and processing companies, carbon dioxide transmission pipelines, technology related companies, or alternative fuel, gasification, energy-efficient alternative fuels, or renewable energy production companies that either move to or expand their businesses in the state.
- Kentucky Enterprise Initiative Act (KEIA): The KEIA is a refund on the sales and use tax on approved construction and building materials used to improve real property, as well as equipment used for data processing, research and development and flight simulation.
- Direct Loan Program: The Direct Loan Program provides business loans to qualifying businesses to supplement financing from other sources in an attempt to encourage business expansion, economic development and job creation.
- Industrial Revenue Bonds (IRB): These bonds (which both the state and local government can issue) can be used to fund manufacturing projects and warehousing areas, communication facilities, major transportation projects, mineral extraction and processing projects, and healthcare facilities.
- Community Development Block Grants Loans (CDBG): These are low-interest loans that are federally funded and are available through the Department for Local Government.
- Cryptocurrency Projects: Kentucky has allocated resources for cryptocurrency and mining projects.
- Kentucky Reinvestment Act (KRA): This provides tax credits to businesses that already exist in Kentucky that are involved in agribusiness, manufacturing, non-retail or technology, hospital operations, coal severing and processing, headquarters operations, carbon dioxide transmission pipelines or alternative fuel, gasification, energy-efficient alternative fuels, or renewable energy. The credits are valid for equipment and other costs of at least $2,500,000 for owned property and $1,000,000 for facilities that are leased (not rented).
- Kentucky Entertainment Incentive (KEI): This program provides qualified applicants with a refundable tax credit for qualified expenses. It’s designed to grow the entertainment and production industry in the state.
- Commonwealth Seed Capital, LLC: This is an independent program that makes equity and debt investment in Kentucky business entities that are in their early stages to help them grow and commercialize various technologies or innovative ideas. The program typically invests in information technology and communications, health and human development, environmental and energy technologies, advanced manufacturing and materials science, and bioscience. To qualify, a company usually needs to have a significant presence in the state, the potential for a lot of growth, and the possibility to generate a return on the investment.
- Kentucky Enterprise Fund: This fund from the Kentucky Science and Technology Corporation provides seed capital to businesses in Kentucky that commercialize tech-based products or processes. It’s designed to promote private investments in tech-based companies in Kentucky with high-earnings potential.
- Kentucky Small Business Credit Initiative (KSBCI): This initiative was developed to create jobs and increase credit availability because they reduce risks that lenders take on when they give loans to small businesses. This allows lenders to invest in small businesses that would ordinarily fall outside of the lending guidelines.
- Small Business Loan Program: This program’s intent is to help small businesses get the funding they need to either start or grow their company. Loans can be used to purchase land or buildings, equipment, or for working capital. Loans rainge from $15,000- $100,000. Companies must be involved with service and technology, manufacturing or agribusiness.
- Kentucky Small Business Tax Credit: This program was created to stimulate small business growth as well as job creation. It provides a nonrefundable tax credit to businesses that hire eligible individuals and invest a minimum of $5,000 in certain equipment and technology. There are of course some exceptions, but for the most part, any for-profit business entity with 50 or less employees qualifies for the program.
- Angel Investment Tax Credit: This program provides a credit of 40% of the investment for investments made in a Kentucky small business. Both the investor and the small business must fill out forms prior to the investment.
- Bluegrass State Skills Corporation Skills Training Investment Credit: This program provides credit against income tax to businesses that have occupational or skills upgrade training programs for their employees.
- Kentucky Investment Fund Act: This provides tax credits to a person or company that invests in small businesses using venture capital funds approved by the Kentucky Economic Development Finance Authority.
- Tourism Development Act: This provides developers with new or expanding tourism projects with a way to recover as much as 25% of a project’s development costs for a 10-year term.
Pros and Cons of Establishing an LLC in Kentucky
There are plenty of benefits to forming an LLC in Kentucky.
The low cost of living makes it affordable to rent or purchase property in the state. It’s also more affordable to do business there. CNBC actually ranks it #1 in the country for the lowest cost of doing business.
Thanks to the cheap fuel, energy costs are ridiculously low in Kentucky. When it comes to energy costs, Kentucky is typically around 17% lower than other states.
The logistics and networking of the state are great because it has 2 international airports, as well as 3 global shipping hubs. Plus, there are 20 interstates or major highways, rail networks, five commercial airports, more than a dozen regional airports, and barge traffic that runs along the Mississippi and Ohio rivers.
There are drawbacks, as well.
While it’s cost-effective to run a business in Kentucky, the poverty rate is high for a reason. The median household income in the state is well below the national average, sending the poverty rate soaring.
There’s an alarming amount of pollution in the state. We won’t bore you with the details as to why that probably is, but everybody knows that coal isn’t the cleanest energy source.
An under-educated workforce isn’t great for a new business because it means that they’ll struggle to find qualified workers for their company.
And the fact that Kentucky ranked so low in terms of long-term fiscal stability is a big red flag for any business owner.
Procedure of Establishing an LLC in Kentucky
Here’s everything you need to know about the legal procedure of establishing an LLC in Kentucky.
Necessary Documentation for Filing an LLC in Kentucky
It can be really helpful to gather all of the documents you need before filing for your LLC to make the process go more smoothly. Here’s a look at everything you’ll need.
- Employer Identification Number (EIN): An EIN can be used for everything from hiring employees to opening a business bank account, and can even qualify your company for certain incentives. You can get your EIN through the IRS for free, using Form SS-4.
- Name Reservation Application: Once you choose a business name, you have to register it and reserve it with the state government so that other businesses can’t use it.
- Articles of Organization: This is the form primarily associated with forming an LLC in Kentucky. It will contain information like your business name, business purpose, duration, primary business address, ownership and management style, your registered agent, and more.
- Operating Agreement: The Operating Agreement for your Limited Liability Company is an internal business document that you’ll use a lot- especially during your first year of business. It contains information about each LLC member, their jobs, their income, how your business should run, and more.
- Initial Report: LLCs in Kentucky must file an annual report every year. The first one is called an initial report and will be filed when you submit your Articles of Organization.
- Tax Registrations: In Kentucky you’ll need to register your business with the Department of Revenue to collect sales tax.
- Business Licenses: Most states require you to obtain state, county and local business permits. You can find out more about which licenses you’ll need here.
Legal Requirements for Starting an LLC in Kentucky
Here’s a step-by-step guide on how to start an LLC in Kentucky.
- Get Your Articles of Organization Form: The Articles of Organization form is the main form you’ll need to start your Limited Liability Company. You can get yours from the Secretary of State.
- Decide on a Business Name: There are a lot of legal requirements involving business names. For instance, because you’re forming an LLC, your business name must contain “Limited Liability Company”, or some abbreviation of the words such as “LLC”, “L.L.C.”, “Ltd.” or “Co”. Furthermore, your business name can’t be too similar to a business name already being used in the state, and if your chosen business name is already being used by another Kentucky business then you can’t use it. To find out whether you can use your chosen business name, search the business name database of the Kentucky Secretary of State. Once you’ve chosen a business name that fits all of the legal requirements, you also need to file a Reservation or Renewal of Reserved Name form.
- Designate a Registered Agent: A registered agent is a legal requirement of most every business entity in the state of Kentucky. It’s a person or company that will receive official mail and service of process on behalf of your business during business hours. You’re allowed to choose a trusted friend or family member for the role, but they must meet all of the registered agent requirements- such as having a physical address. You can also choose to use a professional registered agent service.
- Choose Your Business Address: Your business address may seem obvious to you, but it’s really not. Your company business address will be listed on the public record, so even if your base operation is in your home, it’s not a good idea to list your home address as your business address for privacy and security reasons. Some registered agents will allow you to list their address as your business address, or you could research virtual offices or a virtual address.
- Sign and File Your Articles: Once you’ve entered all the information and gathered all of your documents, it’s time to sign and file your Articles of Organization to start your Limited Liability Company. It’s important to note that whoever signs and files your Articles of Organization will be listed on the public record as your LLC organizer. To protect your personal information you may wish to use a professional LLC formation service. You’ll need to file your Articles of Organization with the Secretary of State Division of Business Filings.
Once you’ve submitted your Articles of Organization, you’ll have to wait for the Secretary of State to contact you. How long will that take?
Time Frame for Establishing an LLC in Kentucky
Since you’re here to learn about how long it takes to get an LLC in Kentucky, this section will teach you about the time frames for Limited Liability Company formation in the state.
How Long Does the Initial Paperwork Take in Kentucky?
You can get an LLC instantly if you file online, and approval times by mail can take around a week. The difference between approval times and processing times is that approval time is the total amount of time to get your LLC approved, including processing time, while processing time only accounts for how long it takes for the Secretary of State’s office to review your documents and enter them into their system.
Processing Times in the State of Kentucky
Processing times for mail filings are one day, and online filings are immediate.
Common Delays in the LLC Formation Process in Kentucky
Here are some of the things that can hold up the formation process in Kentucky.
- Issues with your documents: Your documents have to be 100% correct. That means that all the information has to be entered correctly with no errors or typos, and they have to be perfect- down to the correct number of copies. If you don’t get this right then your filing could be rejected, which means you’ll have to start the formation process all over again.
- Weekends and Holidays: The Secretary of State’s office only processes filings on business days, which excludes weekends and holidays. So, if you file right on or before a weekend or holiday, it will delay your formation.
- Filing Volume: The state government receives a large volume of filings at the beginning and end of each year. If you’re one of the companies that files during those times, or during another high-volume time, then your filing could be delayed.
Expedited Processing for LLC Formation in Kentucky
Expedited LLC formation processing is an excellent idea for any business owner who wants to get their LLC fast and doesn’t mind paying a little extra to get their LLC faster.
What are the Expedited Options Available?
Kentucky doesn’t have expedited processing because they have immediate processing on online filing.
Additional Costs for Expedited Services in Kentucky
Because there isn’t expedited filing in Kentucky, there aren’t additional costs.
Comparing LLC Formation Time Frame in Kentucky with Other States
To find out how Kentucky stands in terms of formation time frames, here’s a look at other states. This can be helpful in deciding whether you want to form a domestic or foreign Limited Liability Company.
Brief Comparison with Key States
Kentucky has immediate processing on online filings, one-day processing on mail filings, and no expedited processing options.
Kentucky has pretty fast processing times compared to other states. Online filings take 14-16 days in Arizona. And mail processing times in Maryland take 5-8 weeks, and 8 months in New York. And expedited processing takes 7 days and 5 days in Maryland and Arizona, respectively.
There aren’t states with faster mail processing times. Several other states have immediate processing on online filings, putting them on par with Kentucky. But when it comes to expedited processing, West Virginia, Delaware, Montana, Nevada, and Michigan all have 1-hour processing.
You’re not really going to find faster time frames than Kentucky, unless you want 1-hour processing.
Why is Kentucky a Favorable Place for Forming an LLC?
Kentucky is a good place to form an LLC because they have a low cost of doing business. Electric bills in the state are far lower than other states.They also have a wide variety of regulations and incentives for businesses that can help new and existing business owners in the state. And the logistics and infrastructure of the state mean that you’ll have no problem delivering your products and services throughout the state and beyond.
