The first step in forming a Kentucky startup is determining which type of business
to form. This page gives an overview of some of the main business startups you can
form in Kentucky: assumed name, S corporation, C corporation, LLC, nonprofit corporation,
or foreign corporation.
Kentucky Assumed Name
Individuals, corporations, LLCs, and other types of businesses must file a Certificate
of Assumed Name in Kentucky if they are doing business under a name other than their
legal corporate or individual name. (An Assumed Name is known in other jurisdictions
as a DBA or Fictitious
Incorporate in Kentucky
in Kentucky, a business must file Articles of Incorporation. These documents
must include the following information:
Amount of authorized shares
Registered office address
Mailing address, which may or may not be the same address
Incorporator's name and address
Forms are provided by the Business Services Division.
There are two types of tax classifications that a for-profit corporation can select:
C corporation and S corporation. Both are for-profit corporations; the distinction
is in the way each is taxed by the IRS.
C corporation is the default tax classification; a for-profit Kentucky corporation
will become a C corporation when its Articles of Incorporation have been filed,
which means that there is a corporate tax on company income before that income is
distributed to shareholders and owners—at which point it is taxed again on
the individual level. This is known as double-taxation.
Why would anyone want to be taxed twice on purpose? A C corporation is the least
restrictive of the two types as far as ownership: the shareholders and owners of
a C corporation are not required to be US citizens, nor is there a limit on the
number of people who may own stock in the corporation.
Additionally, a C corporation might own stock in another corporation; it may also
have shareholders that are themselves other corporations.
After incorporation, a corporation may send in IRS Form 2553 and elect to be taxed
S corporation; this eliminates the corporate tax on income, and the shareholders
and owners will pay an individual income tax only.
But an S corporation has a few restrictions that a C corporation does not: there
can be no more than 100 shareholders, and those shareholders must be US citizens
or residents. Corporations cannot act as shareholders of an S corporation, nor can
an S corp own stock itself.
Kentucky Foreign Corporation
corporation in Kentucky is one that has already registered as a corporation
in another state (its domestic state) but has registered to do business in Kentucky
as well. Registration as a foreign corporation is required; a business may not conduct
its business in the state without first obtaining permission from the Secretary
of State to do so.
A Kentucky LLC
is a different type of business that, like a corporation, provides limited liability
to its owners. An LLC is not recognized as a federal tax classification; it will
elect to be taxed by the IRS as a partnership, corporation, or individual.
To form an LLC, a business must file Articles of Organization (the LLC version of
Articles of Incorporation) with the Business Filings division.
Kentucky Nonprofit Corporation
A nonprofit corporation is one that does not sell stock and operate for the benefit
of its stockholders. Certain nonprofits that are organized for specific purposes,
such as literary or educational purposes, can elect to be recognized as a
501c3 by applying to the IRS.