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Kentucky LLC
Advantages and Disadvantages



Kentucky LLC and Asset Protectioin



Kentucky LLC:



An Kentucky LLC offers business entrepreneurs the form of corporate organization that provides perhaps the most flexibility to you. An LLC formation, like the alternative corporate forms of organization like a limited partnership or a Subchapter S Corporation, are generally prime candidates for a business juststarting. The state of Kentucky gives public support to an Kentucky LLC.

The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership.

Should I Incorporate in Kentucky LLC?



An Kentucky LLC satisfies a necessary condition of your business planning developement in that it meets the requirement that you establish a legal form of organization in order to gain the statutory benefits and protection available in Kentucky to your LLC. Your Kentucky LLC establishes a legal presence within the state, which you can use either as a platform for in-state operations or by registering your Kentucky LLC via your agent's physical address in order to meet the purely statutory requirement for tax and filing purposes absent an in state operation.

Advantages and Disadvantages of a Kentucky LLC

Advantages of Limited Liability Company
  • Limited Liability: Owners of a LLC have the limited liability protection of a corporation.


  • Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.


  • No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.


  • Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.


Disadvantages of Limited Liability Company


  • Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.


  • Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.


  • Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.


By Kentucky and other state law in order to proceed with forming a llc, you need to prepare a written abstract detailing your llc purpose, the names of your initial Kentucky LLC members, the name and address of your Kentucky registered agent, the details of which will be introduced into the body of your LLC operating agreement and related Kentucky LLC formation documents assembled for application to the state of Kentucky.

Kentucky’s Business Tax Climate Ranks 44th

Kentucky ranks 44th in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: Illinois (23rd), Indiana (12th), Ohio (29th), West Virginia (47th), Virginia (12th), Tennessee (15th), and Missouri (11th).

Kentucky’s State/Local Tax Burden at the National Average

Estimated now at 10.0% of income, Kentucky’s state/local tax burden percentage is ranked 17th nationally and equal to the national average of 10.0%.

Kentucky’s Individual Income Tax System

Kentucky’s personal income tax system consists of five brackets with a top rate of 6% kicking in at $8,000. The top rate is 22nd highest nationally among states levying personal income taxes. Kentucky’s 2002 individual income tax collections were $655 per person (ranked 24th highest nationally).

Kentucky’s Corporate Income Tax Structure

Kentucky’s corporate tax structure consists of five brackets with a top rate of 8.25% kicking in at $250,000. Among states levying corporate income taxes, Kentucky’s top rate is 16th highest. In 2001, corporate tax collections reached $89 per capita (ranked 25th nationally).

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