Kentucky is a land of opportunity for entrepreneurs. Whether you're a Bluegrass State native or drawn to the state's rich history and welcoming spirit, starting a small business here can be an exciting chapter in your life.
We'll help you with everything from business registration and funding to understanding Kentucky's tax system and finding the right location for your venture. Discover the resources and support available to kickstart your entrepreneurial journey in Kentucky.
The state boasts an affordable cost of living, access to world-class universities and friendly cities, and it’s home to many small businesses across a wide range of industries. Wondering how to start a business in Kentucky? Our small business guide will walk you through the steps.
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So you’re ready to begin the process of starting your Kentucky-based business. Below we list all the steps, from refining your idea to setting up a solid foundation for success. With small business resources and insights tailored to Kentucky, you’ll be prepared for launch.
Choose a business type that aligns with Kentucky’s economy, such as industries like manufacturing, agriculture, or tourism. Start by focusing on your skills and expertise while considering the demand for your chosen industry in your area. Are you passionate about hospitality and dream of opening a cozy inn near Lexington? Do you have trade skills and want to launch a contracting business in Bowling Green? Or perhaps you’re planning to start a freelance business from home in Elizabethtown. Whatever your vision, the first step is determining the industry that best suits your strengths and the needs of your community.
Before starting a business, conducting thorough research is essential, as it helps you make informed decisions and avoid costly mistakes. Analyze market trends, conduct a competitive analysis, and identify gaps or opportunities in your chosen industry. Local resources like the Kentucky Small Business Development Center (KSBDC), chambers of commerce, and regional business groups can provide valuable insights and support.
Your business plan is going to be the foundational document of your eventual business. You’ll use it to outline and refine your business concept, identify areas of opportunity and competition, create a financial plan to help you secure funding, and create goals for your business. This should be a living document that changes as you get further into the business development process.
A comprehensive business plan generally includes the following key sections:
Taking the time to develop a strong business plan helps clarify your vision, attract potential investors, and lay the groundwork for success. Use a free business plan template to help you get started, and look for a Kentucky Small Business Development Center in your area for no-cost guidance and support for creating your plan.
Business entity structures play a role in determining your business's operations, liability, tax obligations, and formation process. Select the structure that best suits your needs:
A business owned and operated by one person, with no legal distinction between the owner and the business.
A business owned by two or more people who share profits, losses, and management responsibilities.
A legal entity separate from its owners, with shareholders who have limited liability for the company's debts and obligations.
A hybrid business structure combining the limited liability of a corporation with the tax flexibility of a partnership. Learn more about LLCs.
Determine how you'll fund your venture. Costs to start a business in Kentucky can vary depending on your business structure and location. For example, filing fees for forming an LLC or corporation start at $40, and additional fees may apply for amendments or local business licenses, which can range around $50 or more. However, that is only the beginning. Your overall startup needs will be influenced by factors like your industry, required equipment, supplies, inventory, rent, and specific business goals. Here’s a rundown of common funding options for Kentucky entrepreneurs.
Expanding on the above funding options are other resources such as the following:
Choose a business name that reflects what your business offers. To ensure your name is unique and not taken by anyone else, conduct a name availability search on the Kentucky Secretary of State’s website.
Once you’ve determined your business name is available, you’ll file a Reservation of Renewal of Reserved Name form with the Kentucky Secretary of State, depending on your business entity type, and remit a $15 filing fee. If you’re registering an LLC or corporation, you most likely need to use “LLC” or “Company” in your name.
Businesses that want to operate under a name separate from their legal business name may file a DBA, or “Doing Business As.” In Kentucky, it’s more commonly referred to as an “Assumed Name.”
When do you need to file an assumed name? Let’s say the name of your small corporation is Aristide Farms, but you want to expand your farm’s offerings and focus a branch of the business on catering. To do so, you’d file a DBA or assumed name, Aristide Catering, to better reflect your catering options.
To file an assumed name, you’ll file a Certificate of Assumed Name and pay a $20 filing fee.
You’ve got a name—now it’s time to decide where to locate your business in Kentucky. Whether it’s a co-working space in Bowling Green or a retail store in downtown Paducah, your location will impact operating costs, tax considerations, and customer accessibility. Always check with your city or municipality for zoning regulations, required permits, and potential incentives. If you’re considering a metropolitan area, take into account local business regulations as well as resources that may benefit your operations. Depending on your business type, running it from home could also be a cost-effective option.
Here are a few considerations if you’re locating a business in a bigger city:
A registered agent is a person or professional service that accepts legal and government documents on your business’s behalf.
Anyone can be a registered agent, including yourself or an employee, provided that person is over the age of 18, has a physical address in the state that’s not a P.O. Box, and is authorized to do business in Kentucky. That person should also keep regular business hours to ensure they can receive legal documents if needed. You can search for professional registered agents on the Kentucky Secretary of State website or perform a Google search to find a professional service.
An EIN (Employer Identification Number) is a nine-digit number the IRS uses to identify your business for tax purposes. Although Alaska doesn't require a state EIN, you'll need one to file payroll taxes and federal tax returns, open a business bank account, and apply for loans. You can apply for a free EIN through the IRS website.
Registering your Kentucky business may be a necessary step, depending on your business entity. Here’s what you need to know:
Licenses and permits can greatly vary, depending on industry and location. If you’re opening a bar, for example, you’ll need an ABC license from the Alcoholic Beverage Control (ABC) Board. If you’re selling tourist gifts near Mammoth Caves in Edmonson County, you’ll need a seller’s permit to collect and remit sales tax. Restaurants need health department permits, and contractors likely need a professional license through the state’s contractor association.
There is no general business license that’s mandated statewide. If, however, you operate a certain profession, from a hairdresser or accountant to a real estate broker or occupational therapist, you’ll likely need a professional license. If you’re unsure, check with Kentucky Business OneStop or contact your local county clerk.
A customer slips and falls in your retail space. An air conditioning unit’s pan overflows into a home office, ruining all your equipment, or an employee gets into a car accident in a business vehicle. These scenarios are all too common. That’s why business insurance is imperative to protecting your organization, as well as yourself and your employees.
The types of insurance your Kentucky small business needs will depend on your unique circumstances. Consult a qualified insurance agent to help you determine the most suitable coverage for your business.
As a small business owner, you need to understand the ins and outs of your tax obligations. When you set up your business, read up on tax laws in your state and any municipal taxes you may incur. Your tax situation can make or break your business in many cases.
Here are the most common taxes — and a few tax breaks — you’ll want to take into consideration, depending on your industry, location, and business size.
Since 2018, the corporate income tax in Kentucky is a flat 5% rate.
Every business protected from liability in the state of Kentucky—LLCs, corporations, LPs—incurs the LLET. To determine how much you owe, you’ll calculate the following:
While there are no local sales and use tax rates in the state, Kentucky does have a flat 6% tax rate on gross receipts or purchase price.
While there are no local sales and use taxes, some local governments may impose franchise taxes or other local taxes. However, the Bank Franchise Tax is in lieu of most city, county, and local taxes, except for real estate transfer taxes and taxes on utility services
Pass-through entities (such as LLCs, partnerships, and S corporations) must withhold income tax on the distributive share income of nonresident individual partners, members, or shareholders. The withholding rate is 5%.
In addition to state and local taxes, all businesses must pay applicable federal taxes, including:
To ensure you understand your federal tax obligations, check out these IRS resources: Publication 334, Tax Guide for Small Business and Publication 583, Taxpayers Starting a Business and Keeping Records.
Tax credits and incentives can help reduce your tax liability and free up funds to invest in your business growth and development. Explore what financial assistance you could potentially qualify for.
Now that you're up and running, it's crucial to establish a dedicated small business bank account. This separates your personal finances from your business transactions, simplifies bookkeeping, builds credit for your business, and potentially offers perks unavailable with personal accounts.
There are several state and federal resources that can support your business with guidance, training, potential funding and more.
Disclaimer:
This content is for information purposes only and information provided should not be considered legal, accounting or tax advice or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.
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