How to Incorporate in Kentucky (August 2024 Update)

If you’re looking to legally establish a corporation in Kentucky, you’ve come to the right place. Incorporating formally registers your business with the state by creating a separate legal entity that can enter into contracts, sue and be sued, maintain Continuous operations, and more. It’s an important step for scaling your business while limiting personal liability.

This comprehensive guide will walk you through everything you need to know to successfully incorporate in the state of Kentucky, from choosing a business name all the way through keeping your corporation compliant after formation. You’ll learn key details on taxation, registered agents, annual filing requirements, and more so you can make the best decisions when starting your KY corporation. Let’s get to it!

Why Incorporate in Kentucky?

There are a few reasons why you may choose to incorporate your business in Kentucky rather than forming in another state:

• You plan to operate/have a physical presence within KY
• Kentucky has favorable corporate tax rates
• You want to take advantage of KY’s business-friendly legal environment

Incorporating provides benefits like personal asset protection, tax savings, and credibility with customers. It also makes ownership transfer simpler through sale/transfer of stock shares.

Kentucky Corporate/Personal Income Tax Rates

Whether an LLC or corporation, Kentucky actually has reasonably low income tax rates:

• Corporations pay a flat 5% corporate income tax
• Individual income tax is also a flat 5%

For pass-through entities like LLCs, owners just pay 5% personal income tax on their share of profits. Kentucky does however charge an extra Limited Liability Entity Tax (LLET) on gross receipts from sales of tangible property. This starts at a minimum of $175.

Steps to Forming a Kentucky Corporation

Follow these main steps to properly set up your corporation in KY:

Choose a Business Name

Your legal entity name must include a corporation identifier like “Corporation” “Incorporated” or “Corp.” It also can't conflict with names already on file with the Secretary of State.

Appoint a Registered Agent

A registered agent accepts official documents/correspondence on behalf of your KY corporation. They must have a physical address within Kentucky available during normal business hours.

File Articles of Incorporation

This document makes your corporation official with the state. It must include details like your business name, shares structure, registered agent/office, and the incorporators.

Draft Corporate Bylaws

Bylaws legally establish operational rules and procedures for your corporation. Get guidance from templates then customize as needed.

Hold an Organizational Meeting

Document the initial corporate board meeting where you adopt bylaws, elect directors, issue stock certificates, and more.

Obtain an Employer Identification Number (EIN)

An EIN serves like an SSN for tax purposes. It’s required to pay employees, file returns, open business bank accounts, and complete other IRS paperwork.

Consider S-Corp Election

Filing IRS Form 2553 elects a special “pass-through” tax status for your corporation where profits/losses pass onto owners’ tax returns. This avoids ‘double taxation’ and may lower overall rates.

Get Licenses and Permits

Make sure to register for any federal, state or local licenses needed to operate your Kentucky corporation legally. Requirements vary by location and business type.

File Annual Reports

All KY corporations must submit annual reports to the Secretary of State to stay compliant. This costs $15 and closes on June 30th each year.

Maintaining Your Kentucky Corporation

Stay on top of these key compliance tasks to keep your corporation in good standing:

• File annual reports
• Hold/document annual shareholder meetings
• Send annual IRS tax returns
• Keep records of stock, bylaws changes, meeting minutes, etc
• If you ever need to dissolve the corporation, voluntarily file Articles of Dissolution with the state then submit IRS Form 966.

Who Serves on the Board of Directors?

Kentucky corporations must have at least one director listed in the articles of incorporation or appointed later. Shareholders elect board members who oversee policies, financials, public image, executive performance and more. Common roles like Chairman, Vice President, Treasurer and Secretary carry out day-to-day management.

Difference Between S-Corp and C-Corp

All Kentucky corporations default to a standard “C-Corp" tax status. If more favorable, you can file IRS Form 2553 to elect S-Corp taxation. The key differences include:

C-Corp

• Separate taxable entity
• "Double taxation” on profits
• Lower rates on dividends
• Can have unlimited shareholders

S-Corp

• Profits/losses pass onto owners
• Avoids double taxation
• Limits of 100 shareholders
• Can only issue one class of stock

For most small businesses, S-Corps offer the better tax treatment. But C-Corps allow for greater fundraising flexibility which tends to benefit larger corporations.

How to Contact the Kentucky Secretary of State

You can call the Kentucky Secretary of State’s office at 502-564-3490 or submit questions online for any corporation formation needs. Their office at 700 Capital Avenue, Suite 152 in Frankfort is open 8:00am to 4:30pm on weekdays.

Should I Get an Assumed “DBA” Name?

Registering a Doing Business As (DBA) name establishes an alternate trade name for your Kentucky corporation. This opens up branding flexibility without forming a separate legal entity. It also aids marketing efforts and pursuit of trademarks. If interested, first check availability with the Secretary of State then file a simple Certificate of Assumed Name Form.

And that covers the core steps for incorporating your small business in the state of Kentucky! Follow this guide to get your corporation legally compliant then maintain good standing each year.

Here’s to officially launching your Kentucky corporation on a path to future growth and success!