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Doing business in

Kentucky

Navigate Kentucky’s business landscape with ease—whether you’re incorporating, expanding, or managing tax compliance. Commenda helps you stay ahead with automated solutions for incorporation, compliance, and tax filings.
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kentucky

Business Overview

Kentucky has established strengths in manufacturing, automotive, logistics, and bourbon production. The state offers competitive business costs, central location, and specialized workforce development. Its extensive transportation network makes it ideal for distribution operations.

Key Facts & Figures

Category Details
Capital Frankfort
Major Cities Louisville, Lexington, Bowling Green, Owensboro, Covington
State Sales Tax Rate 6%
Local Sales Tax Rate No local sales tax
Corporate Income Tax 4% plus 3% surtax on income over $50,000
Physical Nexus Threshold Physical presence through property, employees, or representatives
Economic Nexus Threshold $100,000 in annual sales or 200 transactions

Did you know?

Kentucky is home to the global headquarters of Humana and is a major hub for healthcare and logistics industries.

Setup & Compliance

Kentucky business formation involves several state agencies with specific registration requirements.

Starting a Business in Kentucky:

  1. Select Your Business Structure: Consider tax advantages and liability protection needs.
  2. Register Your Business: File formation documents with the Kentucky Secretary of State.
  3. Register for Tax Accounts: Register with the Department of Revenue for sales tax and withholding.
  4. Obtain Required Licenses: Research and secure necessary state and local business licenses.
  5. Register as an Employer: Register with the Office of Employment and Training if hiring employees.

Key Compliance Considerations:

  • Annual Reports: Kentucky entities must file annual reports with the Secretary of State.
  • Limited Liability Entity Tax: LLCs, LLPs, and corporations pay annual LLET based on gross receipts or gross profits.
  • Sales Tax Collection: Collect and remit 6% state sales tax on taxable transactions.
  • Corporate Income Tax: Corporations pay 5% flat corporate income tax.
  • Local Occupational Taxes: Many Kentucky localities impose occupational license taxes or fees.

Hiring & Payroll

Kentucky provides straightforward employment requirements with limited state-specific regulations.

Kentucky Payroll Requirements:

  • Unemployment Insurance: Rates from 0.3% to 9.75% on first $11,100 of wages.
  • State Income Tax Withholding: Flat 4.5% of taxable wages.
  • Workers’ Compensation: Required for all employers with limited exceptions.

Kentucky Employment Laws:

  • Minimum Wage: Follows federal minimum wage ($7.25/hour).
  • Overtime: Follows federal regulations for most industries, with some exceptions for specific sectors.
  • Break Requirements: 10-minute rest period for each 4-hour work period and reasonable meal period after 5 hours.
  • Final Paycheck: Due on next regular payday or 14 days after termination, whichever is later.
  • Kentucky is an at-will employment state with right-to-work laws.

State Incentives

Kentucky offers comprehensive economic incentives to attract and retain businesses.

Key Business Incentives:

  • Kentucky Business Investment Program: Tax incentives for job creation.
  • Research and Development Tax Credit: Supports innovative company development.
  • Kentucky Enterprise Initiative Act (KEIA): Tax incentives for technology businesses.

Small Business & Startup Support:

  • Kentucky Small Business Development Center: Comprehensive business consulting.
  • Opportunity Zones: Tax benefits for investments in designated areas.
  • Agricultural Development Grants: Support for farming and agricultural businesses.

Regulatory Considerations

Kentucky provides a balanced regulatory environment for businesses.

Key Business Regulations:

  • Data Privacy: Laws protecting business and consumer information.
  • Environmental Compliance: Regulations for manufacturing and natural resource industries.
  • Professional Licensing: Mandatory for various service professions.

Additional Regulatory Areas:

  • Manufacturing Sector Compliance.
  • Healthcare Industry Regulations.

Explore Tax & Compliance Topics

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