Starting a Corporation in Kentucky | What You Need to Know

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
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Start a Corporation in Kentucky

In Kentucky, starting a corporation can benefit entrepreneurs looking to establish a separate legal entity for their business. Incorporating your business provides liability protection for its owners and offers potential tax benefits and a professional image. This comprehensive guide will walk you through Starting a Corporation in Kentucky, from choosing a corporate name to fulfilling ongoing compliance requirements. Some people consider starting a corporation since it has advantages and benefits rather than Starting an LLC in Kentucky.

Webinarcare Editorial Team will help you gain knowledge in starting a corporation with thorough research and market study. It would be best to cross-check all the factors in this article before forming a corporation.

What is a Corporation in Kentucky?

A corporation in Kentucky is a business organization recognized as a separate legal entity from its owners, also known as shareholders. When a corporation is formed, shareholders invest capital by purchasing shares of stock and, in return, become partial company owners. The corporation is managed by a board of directors elected by the shareholders to oversee the company’s operations and make important decisions. Corporations in Kentucky are required to have at least Three directors. One of the main advantages of a corporation in Kentucky is that it provides limited liability protection to its shareholders, meaning their assets are not at risk if the corporation incurs debt or is legally sued.

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Common Types of Corporations

Before you start with a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation

C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.

S-Corporation

S-Corporation in Kentucky is set up similarly to a C-corporation but has different tax implications and owner limits. An S-Corporation has no more than 100 stockholders and is not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.

Nonprofit Corporation

Religious, educational, and charity institutions frequently use nonprofit businesses to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations.

It is recommended to Start a Corporation in Kentucky if you would like to provide limited liability protection to your shareholders rather than Kentucky LLC. However, you may want to consult to LegalZoom’s Business Attorney before starting a business.

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How to Start a Corporation in Kentucky

To start a corporation in Kentucky, you must follow the below steps that, include choosing a corporate name, hiring a Registered Agent, appointing directors, filing for Articles of Incorporation, creating corporate bylaws, holding the initial board of directors, issuing stock, obtaining required licenses and permits, registering with state tax agencies, and annual reporting and ongoing compliance. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choosing a Corporate Name

The first step in starting a corporation is choosing an available name that complies with Kentucky naming rules. Most states require that the name of a corporation be distinguishable from other registered business names and include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or an abbreviation thereof.

Here are some guidelines you must follow while naming your corporation in Kentucky-

  • Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
  • Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

To check the availability of your desired corporate name, you can search the Kentucky Secretary of State‘s business name database and Business Name Search in Kentucky. If the name is available, you may choose to reserve it for a specific period of 120 days by filing a name reservation application and paying the online name reservation fee of $15 and mail name reservation fee of $15. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.

The DBA filing can be done by two methods, by mail and in person., which costs around $20. In addition, the DBA’s validity in Kentucky is five years, which you can file in Kentucky Secretary of State.

You can check out How to File a DBA in Kentucky for clearer understanding.

Step 2: Hire a Registered Agent

Hiring a Registered Agent is essential in starting a corporation. Registered Agent is a person or company responsible for receiving important legal documents, tax notices, and other correspondence on behalf of your corporation. They ensure that your corporation remains compliant with state regulations and requirements. There are Kentucky Registered Agent Services to check in forming Kentucky Corporation. We reviewed some of the best-registered agent services and provided features as an add-on with their packages.

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Step 3: Appointing Directors

Corporations in Kentucky are required to have at least Three directors, though some states may require more. Directors are responsible for overseeing the corporation’s management and making major decisions on behalf of the company. In Kentucky, directors must be at least 18 years old and do not need to be state residents.

When appointing directors, it is essential to consider individuals who are knowledgeable, trustworthy, and capable of making sound business decisions. Maintaining a record of appointed directors, including their names, addresses, and terms of service, is also a good idea.

Step 4: Preparing and Filing Articles of Incorporation

After you appoint the initial board of directors in your Kentucky corporation, the next step is to write and file a Articles of Incorporation. In writing, the Kentucky Articles of Incorporation, the corporation name, principal place of business, the purpose of business, Registered Agent contact information, and the names and addresses of incorporators and initial board members, should be written.

To officially form your Kentucky corporation, you must prepare and file Articles of Incorporation with the Kentucky Secretary of State. The Articles of Incorporation is a legal document that outlines essential information about your corporation, such as its name, address, purpose, and details about its stock.

The specific requirements for Articles of Incorporation vary by state, but generally, the document must include the following:

  • The corporate name
  • The purpose of the corporation
  • The name and address of the registered agent
  • The names and addresses of the initial directors
  • The number of authorized shares and their par value
  • The name and address of the incorporator(s)

Once the Articles of Incorporation are complete, please submit them to the Kentucky Secretary of State’s office, along with the required filing fee. Fees vary by state, but in Kentucky, the Articles of Incorporation filing fee costs around $40 for filing online and by mail. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything.
  • Offline filing: Send the form by mail to Michael G. Adams, Office of the Secretary of State, P.O. Box 718, Frankfort, KY 40602

Step 5: Creating Corporate Bylaws

Now you are done filing Articles of Incorporation in Kentucky, the next step is to draft corporate bylaws. While not always required by law, creating corporate bylaws is essential in establishing Kentucky corporation. Bylaws are the internal rules and regulations that govern the corporation’s operations and management. They outline the rights and responsibilities of directors, officers, and shareholders and provide guidelines for holding meetings and making decisions.

Key provisions to include in your corporate bylaws may include:

  • The corporation’s purpose and principal place of business
  • The roles and responsibilities of directors, officers, and shareholders
  • The process for appointing and removing directors and officers
  • The procedures for holding annual and special meetings
  • The methods for amending the bylaws and Articles of Incorporation
  • The procedures for issuing stock and maintaining shareholder records

Once the bylaws are drafted, they must be adopted by the corporation’s board of directors. Keeping a copy of the bylaws with your corporate records and updating them to reflect changes in the corporation or applicable laws is essential.

Step 6: Holding the Initial Board of Directors Meeting

The initial board of directors meeting is a crucial milestone for your Kentucky corporation. During this meeting, the directors will adopt the corporate bylaws, elect officers, and make other key decisions to set the foundation for the corporation’s operations.

The agenda for the initial board meeting may include the following:

  • Adopting the corporate bylaws
  • Ratifying any pre-incorporation actions taken by the incorporator(s)
  • Electing corporate officers (e.g., president, vice president, secretary, treasurer)
  • Designating a corporate bank account
  • Authorizing the issuance of stock
  • Approving necessary licenses, permits, and tax registrations

It is essential to keep detailed minutes of the initial board meeting, documenting the decisions made and actions taken. These minutes should be stored with your corporate records.

Step 7: Issuing Stock

Corporations in Kentucky are required to issue stock to their owners, also known as shareholders. When preparing to issue stock, you must determine the number of authorized shares and their par value, as outlined in your Articles of Incorporation. You may choose to issue different classes of stock, each with its rights and privileges, such as voting rights and dividend preferences.

The process for issuing stock typically involves the board of directors approving a stock issuance resolution, determining the price per share, and recording the issuance in the corporation’s stock ledger. Maintaining accurate and up-to-date records of all stock transactions, including transfers and cancellations, is crucial to ensure proper ownership tracking and compliance with securities laws.

Step 8: Obtaining Required Licenses and Permits

Depending on the nature of your corporation’s activities and location, you may need to obtain various licenses and permits to operate legally. These may include federal, state, and local requirements, such as:

  • A Federal Employer Identification Number (EIN) for tax reporting and employee withholding purposes.
  • State sales and use tax registration, if your corporation sells taxable goods or services
  • Professional or occupational licenses for specific industries (e.g., healthcare, construction, food service)
  • Kentucky Business Licenses, zoning permits, and health department approvals

Researching and obtaining all required Kentucky licenses and permits before commencing operations and maintaining compliance with any ongoing renewal or reporting requirements is essential.

Step 10: Registering with State Tax Agencies

In addition to obtaining licenses and permits, your Kentucky corporation may also need to register with various tax agencies. This may include registering for sales and use tax, obtaining an Employer Identification Number (EIN) in Kentucky for payroll tax purposes, and filing state income tax and franchise tax returns.

An EIN will serve as the tax ID for your Kentucky corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Kentucky can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Each state has tax requirements, so consult a tax professional or Kentucky Department of Revenue for guidance on your specific obligations.

Step 11: Annual Reporting and Ongoing Compliance

Once your Kentucky corporation is up and running, you must fulfill ongoing reporting and compliance requirements to maintain good standing. This may include filing Annual Report with the Kentucky Secretary of State, updating your corporate records to reflect changes in directors or officers, and staying current on any required licenses or permits.

In addition, it is essential to stay informed about changes in corporate laws and regulations that may impact your business and to seek professional advice when needed.

Paying Your Taxes in Kentucky

Even if you have established your corporation in Kentucky, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Kentucky has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Kentucky are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Kentucky

In forming a corporation in Kentucky, a filing and Annual fee must be paid. Without it, your corporation won’t operate. A corporation’s initial filing fee may vary from state to state. However, in Kentucky, it costs $40 for filing online and by mail. The corporation in Kentucky also has to file an Annual Report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly.

FAQs

What is a corporation in Kentucky?
A corporation in Kentucky is a legal entity that is wholly separate from its shareholders.
How can I form a corporation in Kentucky?
You can form a corporation in Kentucky by filing the necessary paperwork with the Secretary of State.
Do I need to file Articles of Incorporation in Kentucky?
Yes, you need to file Articles of Incorporation in Kentucky to establish your corporation.
What information needs to be included in the Articles of Incorporation in Kentucky?
The Articles of Incorporation in Kentucky typically require information about the company’s name, purpose, number of shares, and registered agent.
What is the registration fee for a corporation in Kentucky?
The registration fee for a corporation in Kentucky is $50 for domestic corporations.
Is it necessary for me to hire a lawyer to form a corporation in Kentucky?
It is not required to have a lawyer, but it can be helpful.
Do I need to elect a board of directors for my corporation in Kentucky?
Yes, you need to elect a board of directors for your corporation in Kentucky.
How do I prepare corporate bylaws for my corporation in Kentucky?
You can prepare corporate bylaws for your corporation in Kentucky by hiring an attorney.
Can I file Articles of Organization for a corporation in Kentucky?
No, you cannot file Articles of Organization for a corporation in Kentucky.
How does the corporation become a separate legal entity in Kentucky?
The corporation becomes a separate legal entity in Kentucky once the Articles of Incorporation are filed with the Secretary of State.
What are the requirements for the Board of Directors in Kentucky?
The Board of Directors in Kentucky must have at least one member.
Can anyone become a Director in Kentucky?
Yes, anyone that meets the requirements can become a Director in Kentucky.
Do I need to have a Registered Agent for my corporation in Kentucky?
Yes, you need to have a Registered Agent for your corporation in Kentucky.
Can I have a PO Box as my corporation’s office address in Kentucky?
No, you cannot have a PO Box as your corporation’s office address in Kentucky.
How long does it take to get my corporation registered in Kentucky?
It typically takes 3 to 5 business days to get your corporation registered in Kentucky.
Can I form an S-Corporation in Kentucky?
Yes, you can form an S-Corporation in Kentucky.
Do I need to register my corporation’s name before filing the Articles of Incorporation in Kentucky?
No, you do not need to register your corporation’s name before filing the Articles of Incorporation in Kentucky.
Can I register my corporation online in Kentucky?
Yes, you can register your corporation online in Kentucky.
Do I need to obtain a business license for my corporation in Kentucky?
Depending on the nature of your business, you may need to obtain a business license for your corporation in Kentucky.
Is Kentucky a good state to incorporate in?
Kentucky can be a great state to incorporate in depending on the corporation’s nature.
How can I check whether my corporation’s name is available in Kentucky?
You can check whether your corporation’s name is available in Kentucky online through the Secretary of State’s website.
Are there any publication requirements for getting a corporation registered in Kentucky?
No, there are no publication requirements for getting a corporation registered in Kentucky.
What is the cost to update my corporation’s information in Kentucky?
The cost to update your corporation’s information in Kentucky is $20.
Can I change my corporation’s name in Kentucky after formation?
Yes, you can change your corporation’s name in Kentucky after formation.
Is an Operating Agreement necessary for a corporation in Kentucky?
No, an Operating Agreement is typically not required for a corporation in Kentucky.
Can non-US residents form a corporation in Kentucky?
Yes, non-US residents can form a corporation in Kentucky.
How many directors do I need to form a corporation in Kentucky?
You need at least one director to form a corporation in Kentucky.
Do all shareholders need to be listed in the Articles of Incorporation in Kentucky?
No, not all shareholders need to be listed in the Articles of Incorporation in Kentucky.
What is the process of incorporating a business in Kentucky?
The process generally involves filing Articles of Incorporation with the Kentucky Secretary of State, along with the associated filing fees and any required additional documentation.
How much does it cost to incorporate a business in Kentucky?
As of 2021, the filing fees for Articles of Incorporation in Kentucky range from $40 to $275, depending on factors such as the type of corporation and number of shares authorized.
What types of corporations can be formed in Kentucky?
Kentucky law recognizes several types of corporations, including stock and non-stock corporations, benefit corporations, and professional service corporations.
Do I need to have a registered agent in Kentucky to incorporate a business there?
Yes, every Kentucky corporation must have a registered agent located in the state, who is authorized to accept legal documents on behalf of the corporation.
Can I form a corporation if I live outside of Kentucky?
Yes, it is possible to incorporate a business in Kentucky even if you do not live in the state, provided you have a registered agent located in Kentucky.
How long does it take to incorporate a business in Kentucky?
The time it takes to incorporate a business in Kentucky depends on several factors, such as the complexity of the Articles of Incorporation and the workload of the Secretary of State’s office. However, in general, it may take around 15-20 business days.
Is there a minimum or maximum number of shareholders required for a Kentucky corporation?
No, there is no minimum or maximum number of shareholders required for a Kentucky corporation.
What is the process for naming a corporation in Kentucky?
The name of a Kentucky corporation must be distinguishable from the names of existing businesses on record with the state. A name reservation may be made for up to 120 days prior to incorporation.
Are there annual reporting requirements for Kentucky corporations?
Yes, Kentucky corporations are required to file an annual report with the Secretary of State’s office, which includes information about the corporation’s business activities and ownership.
Can a Kentucky corporation be formed solely for the purpose of holding real estate?
Yes, a Kentucky corporation can be formed for any lawful purpose, including the purpose of owning and managing real estate.
Is there a publication requirement for new Kentucky corporations?
No, Kentucky does not have a publication requirement for new corporations.
Can a Kentucky corporation be owned by non-US residents?
Yes, there are no restrictions on the ownership of a Kentucky corporation by non-US residents.
Can a foreign corporation operate in Kentucky?
Yes, a foreign corporation can register with the Kentucky Secretary of State’s office in order to conduct business in the state.
Does forming a corporation protect personal assets from business debts?
Forming a corporation typically offers limited liability protection for shareholders’ personal assets in the event that the business incurs debts or legal liabilities.
Are there any tax benefits to incorporating a business in Kentucky?
There are tax incentives and credits available to businesses that locate and invest in Kentucky, depending on the type of business and its location.
How do you dissolve a corporation in Kentucky?
To dissolve a Kentucky corporation, the corporation must file Articles of Dissolution with the Kentucky Secretary of State and pay the associated fee.
Are there any continuing education requirements for Kentucky corporation directors and officers?
No, there are no continuing education requirements for Kentucky corporation directors and officers.
Is it necessary to have a board of directors for a Kentucky corporation?
A Kentucky corporation is required to have at least one director on its board, but there is no specific requirement as to the number or qualifications of directors.
Can a Kentucky corporation have just one shareholder who is also the only officer?
Yes, a Kentucky corporation can have just one shareholder who is also the only officer and director of the company.
How often do Kentucky corporations need to hold shareholder meetings?
Kentucky corporations are required to hold annual shareholder meetings, but special meetings may be called as necessary.
How many shares of stock can a Kentucky corporation issue?
There is typically no limit to the number of shares a Kentucky corporation can issue, but the Articles of Incorporation may specify a certain number or range.
Can a Kentucky corporation issue both common and preferred stock?
Yes, a Kentucky corporation can issue both common and preferred stock, as well as other types of securities, subject to certain regulations.
Are Kentucky corporations required to have corporate bylaws?
Kentucky corporations are not required to have corporate bylaws, but they are often recommended in order to establish guidelines for key aspects of the corporation’s governance and operations.
Does Kentucky law permit the formation of nonprofit corporations?
Yes, Kentucky law recognizes the formation of nonprofit corporations, which can, among other things, seek tax-exempt status from the IRS.
What is the difference between an LLC and a corporation in Kentucky?
Both LLCs and corporations offer limited liability protection to their owners, but LLCs are generally more flexible in terms of how they are operated and taxed.
Can a Kentucky corporation amend its Articles of Incorporation after its formation?
Yes, a Kentucky corporation can amend its Articles of Incorporation by filing a Certificate of Amendment with the Secretary of State’s office and paying the necessary fee.
Can a Kentucky corporation be owned by another corporation?
Yes, a corporation can own the stock of another corporation, subject to certain regulations and restrictions.
Are Kentucky corporations required to carry insurance?
Kentucky does not have a general requirement for corporations to carry insurance, but certain types of businesses may be subject to specific regulations or insurance requirements.

Also Read

How to Save Money While Forming Your Kentucky Corporation

First and foremost, it’s crucial to acquaint oneself with the legal requirements and regulations concerning the formation of a corporation in Kentucky. While seeking the assistance of a lawyer or an experienced business professional may initially seem like an added expense, enlisting their expertise early on can prove invaluable. They can provide guidance on understanding the legal implications, minimizing potential legal pitfalls, appropriately structuring the corporation, preparing the necessary documents, and adhering to relevant tax obligations. By investing in professional advice from the outset, entrepreneurs can prevent costly mistakes and complications later.

Taking advantage of technology is another effective strategy to save money during the formation process. Nowadays, various online platforms and services offer affordable solutions specifically designed to assist in forming new corporations. These platforms typically provide step-by-step guidance, customizable templates for legal documents such as articles of incorporation, and access to a range of helpful tools and resources. Embracing these digital solutions not only streamlines the formation process but also significantly reduces costs associated with traditional methods such as engaging expensive legal services or purchasing numerous books and materials.

In addition, minimizing unnecessary expenses is essential, especially during the early stages of formation. Entrepreneurs should evaluate their needs diligently and only invest in essential equipment, infrastructure, and supplies required to kickstart their business. Similarly, smart financial planning involves exploring cost-effective office space options such as shared workspaces or renting a virtual office. These alternatives offer affordable solutions with access to all the necessary facilities, allowing entrepreneurs to focus their resources on core operations rather than unnecessary overheads.

Networking is another invaluable tool that can aid in multiple aspects of Kentucky corporation formation. Interacting with fellow entrepreneurs, industry experts, and established professionals during industry-specific events or conferences offers an opportunity to gather valuable advice, learn from their experiences, and build meaningful relationships. This networking process can often lead to finding mentors or potential partners who can contribute guidance, support, and even access to resources or services at discounted rates, helping entrepreneurs cut costs while ensuring growth.

As entrepreneurs form a Kentucky corporation, they should also keep a watchful eye on tax incentives or grants offered by the government or local organizations to foster new businesses. Various federal, state, and local programs aim to encourage economic growth by providing financial incentives or tax credits for small businesses. By thoroughly researching and utilizing these opportunities, entrepreneurs can significantly offset operational costs and gain a much-needed financial advantage during the early stages of their Kentucky corporation.

In conclusion, starting a Kentucky corporation requires careful planning and cost-conscious decision-making. Entrepreneurs can save money during the formation process by investing in reliable legal advice, leveraging practical technological solutions, minimizing unnecessary expenses, and taking advantage of networking opportunities. By being proactive and strategic, aspiring business owners can navigate the often expensive road of corporation formation, setting their venture up for long-term success.

Conclusion

Starting a corporation in Kentucky involves several critical steps, from choosing a corporate name to fulfilling ongoing compliance requirements. Following the steps outlined in this guide and seeking professional advice when needed, you can successfully establish your Kentucky corporation and enjoy the benefits of limited liability, potential tax savings, and a professional business image.

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