Kentucky boasts the country’s tenth-lowest business costs and fourteenth-lowest sales taxes. With innovative tax incentive programs for businesses and a low cost of living, the state of Kentucky provides a fantastic customer base for those who want to start a new business there.
How to Start a Business in Kentucky:
1. Determine your business structure.
When starting a business, one of the most important decisions that you make will be choosing the type of legal structure for your company. Your choice will have an impact on taxes, paperwork, personal liability, and your ability to raise funds.
You can choose from the following legal structures:
A sole proprietorship is the simplest structure and usually involves one individual who is solely responsible for the enterprise while a partnership is suitable for businesses with two or more owners. A corporation is a standalone entity with shareholders while a Limited Liability Company (LLC) is the most popular type because of minimal paperwork, flexibility, tax benefits, and simple implementation process. LLC business owners are not obligated to file a corporate tax return.
2. Write a business plan.
Your business plan is the foundation of your new business and will serve as an invaluable guide for how to structure, run and grow your company. The business plan can fall into one of two common categories: traditional or lean startup.
The traditional plan is very detailed, takes more time to write, and is quite comprehensive while the lean startup plan is streamlined and fast to write.
A strong business plan can help you to get funding and make the process of opening a new business easier.
You can consult with the Kentucky Small Business Development Center which is a free service that offers business planning and consulting for small business owners in Kentucky.
3. Sign up for business banking.
A small business bank account is a necessity when you are starting a business. Your business and personal finances must be kept separate to maintain accurate records. With a business bank account, you can obtain statements and access products that would not be available to you as an individual.
4. Seek funding.
Opening a new business often requires capital. If you are unable to fund your new business on your own, you will need to take out a loan. You can get funding for your business through three common ways: commercial loans, business lines of credit, and small business loans.
A popular organization that can assist you with small business loans in Kentucky is the Kentucky Economic Development Finance Authority.
5. Decide on a business name.
Make a list of the names that you like and perform a Google search to find any conflicts with other Kentucky business names.
Once this is done, you will need to do a trademark search to ensure that the business name that you chose has not already been trademarked. You can perform the trademark search at the U.S. Patent and Trademark Office and the Trademark Electronic Search System. These databases have a comprehensive list of business names that are registered together with their classification.
After you have confirmed that your business name is not trademarked, you need to check the Kentucky Secretary of State website, to ensure that your business name is not the same or similar to another corporation registered in Kentucky.
If you are satisfied that your business name is available, you can then register it on the U.S. Patent and Trademark Office website. You can check out our guide on How to Name a Business to assist you with naming your business.
Once you have found a suitable name, make sure to register the matching web domain and social media handles, should you wish to market your business online.
6. Request an Employer Identification Number (EIN).
Every business needs to have an Employer Identification Number (EIN). Registering for an EIN is very easy—all you need to do is go to the IRS website. You can complete the application online, and save your EIN confirmation notice once you receive a number from the IRS.
7. Acquire business licenses and permits.
The state of Kentucky does not require businesses to have a statewide business license. You may, however, require specific business licenses and permits, depending on the type of business that you want to start in Kentucky. You can refer to the Kentucky One Stop Business Portal to view the most common types of businesses together with information on the licenses and permits required for those types of businesses.
In addition, if your new business in Kentucky is selling physical products, you will need to register for Kentucky Sales and Use Tax through the Kentucky Department of Revenue.
8. Hire employees.
If your business plan included the addition of new employees to your business, it is time to start the hiring process. Consider compiling an employee handbook that describes your legal obligations as an employer and your employees’ rights.
You will need to register at the Kentucky New Hire Reporting Center when you employ staff. Each employee will need to be reported to the registry within 20 days of their employment date. This does not apply to independent contractors.
With reference to the pre-employment screening process in Kentucky, an employer is entitled to view a job applicant’s criminal history and obtain the relevant records from the criminal justice system.
9. Check your business employer requirements.
Business employer requirements are specific to the type of business that you are starting and include various labor, safety, and tax obligations that need to be met. You should consider hiring a tax or business attorney to ensure your business is fully compliant with the laws in Kentucky.
If you are starting a business in Kentucky, you will need to take note of the following important items:
Kentucky’s law requires all employers to provide workers’ compensation coverage to their employees. You can obtain more information at the Kentucky Department of Workers’ Claims website.
Health insurance isn’t a requirement for small businesses in Kentucky. If your business does offer health insurance to your employees, Kentucky’s laws require health insurance to cover specified services. You can get more information on the Kentucky Online Gateway website.
The Kentucky One Stop Business Portal
The Kentucky One Stop Business Portal is managed by the Kentucky Secretary of State and is designed to guide you through your business registration process. The Kentucky One Stop Business Portal provides business planning and advice as you prepare to register your new business.
In Kentucky, your small business is required to establish a Kentucky unemployment insurance tax account with the Office of Employment and Training. If your business is required to contribute towards unemployment insurance, you will be required to file quarterly reports.
Every individual or entity selling personal property in the state of Kentucky is required to pay a sales tax. Services rendered are not taxable. Kentucky Sales and Use Tax is imposed at the rate of 6% of gross receipts or the purchase price. You will need to register for a sales tax permit with the Kentucky Department of Revenue.
Kentucky Formation and Registration Fees:
Domestic corporation for profit
Domestic corporation not for profit
Articles of merger
You can view a comprehensive list of costs when starting a business in KY on the Kentucky Secretary of State website.
How much does it cost to set up an LLC in KY?
Kentucky articles of incorporation for LLCs start from $40.00.
How do I start an LLC in Kentucky?
How much does a business license cost in KY?
Business license fees start from $10.00 annually and depend on the type of business that you have. You can get more information at the Kentucky One Stop Business Portal.
Do you need a business license in Kentucky?
You may require specific business licenses and permits, depending on the type of business that you want to start in Kentucky. Refer to the Kentucky One Stop Business Portal to view the most common types of businesses together with information on the licenses and permits required for those types of businesses.
Who can be a registered agent in Kentucky?
Both state residents and companies that provide registered agent services can act in this capacity. Kentucky registered agents need to have a physical address in the state of Kentucky where they can accept legal documents and official mail.
How do I register my business in Kentucky?
You can register your business with the Kentucky One Stop Business Portal which is managed by the Kentucky Secretary of State.
How much does it cost to start a business in Kentucky?
Articles of incorporation in Kentucky cost $40.00 and must be filed with the Kentucky Secretary of State.
What are the best banks for small business in Kentucky?
What mandatory posters should be at a Kentucky business premises?
- Safety and Health on the Job.
- Wage and Hour.
- Unemployment Insurance.
- Equal Opportunity.
- Fair Housing.
How do I start a business in Kentucky with no money?
- Use services to generate cash flow and fund a product-based business.
- Get creative to discover funding sources.
- Grind it out and look for business, even if you don't get paid for it.
- Use your current resources in different ways to generate income.
- Get a loan or a line of credit to help with the early stages of your business.
- Locate an accelerator if you can hit the market swiftly.
- Crowdfund and allow the public to invest a small percentage of money in return for future buy-in.
- Use a business incubator to provide funding designed specifically to financially assist a startup company.
How can I protect the name and logo of my business in Kentucky?
The easiest way is to register your business name on the U.S. Patent and Trademark Office website. Prior to registration, remember to check on the Trademark Electronic Search System and the Kentucky Secretary of State databases to ensure that your business name is not already registered by another company.
Do I need workers' compensation for my new business in Kentucky?
Yes, all employers in Kentucky are compelled to provide workers’ compensation coverage to their employees.
Does my business in Kentucky need to contribute to health insurance?
Health insurance isn’t a requirement for small businesses in Kentucky.