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How to Start a Business in Kentucky

With more than 355,000 small businesses, the Commonwealth of Kentucky has expanded well beyond its agricultural roots. If you’re an entrepreneur seeking to start a business in Kentucky, we’re here to guide you.

Follow these simple steps to launch your new business in Kentucky the right way and start making money.

Step 1: Create a business plan for your Kentucky company

Writing a business plan is a vital step for many startups and brand new businesses. Not only does it help attract investors or secure a loan, but it helps keep you on track with your vision, goals, and finances. When you’re writing a business plan, consider the following steps:

  • Clarify your “SMART” goals.
  • Understand your service or product line and pricing.
  • Run a market analysis: If there’s no market need, your own business is probably going to run into trouble. Also, if you understand your ideal customer, you can better serve them.
  • Run a competitive analysis: What are your competitors doing and how are you going to do it differently and/or better?
  • Create a financial outline: What’s your main revenue source, what are your operating costs, and when do you expect to be profitable?
  • Look for tax breaks, grants, and other government resources, and document this in your business plan.

Need help creating a business plan for your Kentucky startup? We put together a comprehensive library of articles and guides on business planning.

Step 2: Choose a business structure

All businesses have to choose a business structure, whether they opt to operate as a corporation, general partnership, limited liability company (LLC), or sole proprietorship. Let’s take a quick look at the pros and cons of each of the most popular types of business structure.

Kentucky Corporation

Incorporations are one business structure option. They can shield their shareholders’ personal assets from liability, so if the business gets into trouble, their home, car, and personal bank accounts can stay safe. However, income for Kentucky C corps (the default form of corporation) is taxed twice — once at the level of the corporation, and again on the personal tax returns of its shareholders.

Kentucky Limited Liability Company

LLCs, general partnerships, and sole proprietorships are among the most popular business structures partly because they’re considered “pass-through” entities, meaning their profits are reported only on the owners’ personal income tax returns without first being taxed at the business level.

Though the tax benefits make them similar, they’re definitely not equal. Kentucky LLC owners enjoy liability protection on their owners’ personal assets, which is important in the event of a lawsuit or bankruptcy involving the company. LLCs must file Articles of Organization with the state, while sole proprietorships and general partnerships do not.

Sole Proprietorship and General Partnership

Sole proprietorships and general partnerships are the cheapest types of entities with the least amount of paperwork. They don’t have to craft an LLC operating agreement or create corporate bylaws. They also avoid having to file formation documents with the commonwealth. Unfortunately, these structures don’t offer any liability protection on personal assets. That means if your company gets into financial trouble, you do, too.

For all these reasons, the LLC is a very popular form of business entity. With liability protection and tax benefits, it’s an attractive choice for many who want to start a business in Kentucky.

Still unsure what business structure in Kentucky is best for you? Feel 100% certain by reading this guide that compares formation types.

Step 3: Determine startup costs for your Kentucky business

From startup costs to ongoing fixed and variable expenses, your organization will need to cover its costs. As part of your planning, the better you can estimate those costs, the better positioned you can be to get the right financing, set up your budget, and stay on track with managing cash flow.

Business Expenses and Filing Fees

Every startup’s costs are different, but some of the most common ones include:

  • Entity filing fees and Kentucky annual reports
  • Licenses and permits
  • Leasing or purchasing office space
  • Designing and printing business cards, postcards, brochures, or other print marketing materials
  • Office supplies and furniture
  • Technical equipment: smartphones, tablets, point-of-sale devices, and/or computers
  • Bookkeeping and accounting
  • Travel and transportation
  • Developing, designing, hosting, and updating a company website

Business Insurance

Business insurance is another important consideration. From commercial general liability to workers’ compensation insurance, remember that different companies need different kinds of coverage. 

Step 4: Name your Kentucky business

Whether you’re working in your own first and last name, location, services, or branding message, there’s no one way to name your company.

Find a unique business name

Your startup can’t adopt a name already in use, and there can be legal repercussions if you do. To ensure your choice of the business name isn’t already in use by another organization in the state, do a name search on the Kentucky Secretary of State website. We walk you through the search process on our Kentucky business entity search page. This will help prevent legal issues, confusion among customers, and ultimately wasted time and money.

Business Name Reservation

Kentucky business owners have the ability to reserve a name for 120 days before filing the paperwork to start an entity like an LLC or corporation. This isn’t required, but it can keep another business from snatching your desired name before you can get your paperwork together.

DBA Name

As part of your branding, you may also consider a trade name, known as a “doing business as” (DBA) name in Kentucky. That can help you do business under a more marketable name while using a different one for your overall company.

Corporations and LLCs might use DBA names for different lines of business, such as clothing vs. footwear sales. Sole proprietorships and general partnerships often use DBAs because otherwise, they must do business under the owner’s first and last name, such as Joan Smith or Bob Buck.

Domain Name

Once you’ve identified an available name that represents your brand, check for available domain names that you can use for your email and website. This is also a good time to reserve accounts or handles on social networks that may be part of your marketing outreach and engagement.

Step 5: Register your business in Kentucky

Once you’ve chosen your business structure and (if required for your entity type) filed the formation paperwork with the Kentucky Secretary of State, you can apply for a federal employer identification number (EIN) with the Internal Revenue Service (IRS). This is necessary if you have multiple owners or plan to hire employees.

Open a Business Bank Account

Having an EIN will allow you to open a business bank account. You can do this yourself or have a partner do it by creating a special document called a banking resolution.

A dedicated business bank account will keep personal and business accounts separate. This not only helps you at tax time, but it can help protect your limited liability status if you have an entity like an LLC or corporation.

Apply for Permits and Licenses

Next, apply for any permits or licenses required to do business in Kentucky. Permits and business licenses vary by industry, and they can be needed at the federal, state, and local levels. There’s no central authority to tell you every license and permit your business requires, so you’ll have to do some research or have someone like us do the research for you with a business license report.

Need more information about licenses and permits in Kentucky? Read all about licenses for different industries and how to apply for them in our Kentucky business licenses guide.

Step 6: Market your business

By marketing your business, you make customers aware of your services and products. It’s your way to make the case for why someone should choose you over the competition. Start by making a solid marketing plan.

A business website is essential, with pages that showcase your offerings, tell customers your business’s story, and offer a way for them to get in touch.

List Your Business Location Online

Online directories, such as Yelp or Google My Business, are another way you can put your business out there. Optimize those listings and your website, too, so potential customers are more likely to find your business in online searches.

Don’t forget about advertising, either. Print media and regional radio and TV broadcasters can be powerful ways to spread the word about your company. Business cards, brochures, and postcards can also help.

Benefits of opening a business in Kentucky

To foster business creation and economic growth, the Kentucky Economic Development Finance Authority (KEDFA) provides tax credit and financial programs. Generally speaking, the commonwealth strives to be friendly to business. In fact, CNBC ranked Kentucky as first in the nation for the cost of doing business in 2019.

In addition to the direct benefits to business, living in Kentucky has its own benefits. Housing costs are approximately 30% lower than the national average, and the cost of living is more than 10% lower. Kentucky also has some of the finest state parks in the nation, and its bluegrass music and fine arts are internationally recognized.

Examples of good businesses to start in Kentucky

Deciding on the right business venture will depend on many variables, such as your own interest and expertise, your location within Kentucky, and the existing competition in that area. However, here are some examples of businesses that have done well:

  • Daycare
  • Fitness training
  • Pet care
  • Event planning
  • Dry cleaning

Looking for more ideas? Check out our list of the best businesses to start in Kentucky.

Bottom Line

Kentucky’s natural beauty, low cost of doing business, and pro-business programs make it an attractive place to start a new company. If you think you want to start a business, Kentucky may be the place. If you need help getting your dream business off the ground, we have a host of services to help you succeed. Contact us today for more information.

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

Kentucky Business FAQs

  • Kentucky’s Cabinet for Economic Development can help you fund your new business in a variety of ways, including small business loans, tax credits, and access to investors.

  • According to the U.S. Census Bureau, per capita income from 2015 to 2019 was approximately $28,178.

  • Kentucky’s business diversity is always growing, but some of its most important industries are agritech, automotive, aerospace, logistics/distribution, manufacturing, chemicals, plastics and rubber, and health care.

“This is your life.
You want to get it right.”

– Mark Cuban on Starting a Business

Entrepreneur and Shark Tank host lays out
3 steps to follow when starting a business

  • Form an LLC to protect your liability
  • Set up your banking and accounting
  • Grow sales by marketing your website

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