LLC vs. S Corp in Kentucky 2024: A Comprehensive Comparison

by
LLC vs. S Corp in Kentucky: Understanding the Differences

Embarking on the entrepreneurial journey in Kentucky, also known as The Bluegrass State, is an exciting and transformative experience. Kentucky LLC and S Corporation are two popular options that often top the list of considerations for entrepreneurs. This article serves as your comprehensive guide, comparing LLC vs. S Corp in Kentucky and ultimately assisting you in determining the best fit for you.

Dive into business formation with confidence and clarity as LLCBase expert analysis simplifies the complexities of LLCs and S Corps, shedding light on their unique advantages and drawbacks. So, let’s explore the fascinating world of LLCs and S Corps and set your business on the path to success in Kentucky.

Compare LLC and S-Corp

What are an LLC and an S-Corp

A Limited Liability Company (LLC) is a popular legal business structure that offers a combination of benefits from both corporations and partnerships. It is specifically designed to provide personal asset protection to its owners, known as members. This protection ensures that the owner’s personal assets are separate from the business liabilities, such as debts and lawsuits.

In Kentucky, forming an LLC involves several steps, including paying an initial filing fee. Additionally, LLCs in Kentucky are required to pay an annual fee of $15 to maintain their legal status and stay compliant with the state regulations.

An LLC in Kentucky offers an attractive option for entrepreneurs seeking a flexible business structure with added liability protection and favorable tax treatment.

Recommended: If you want to start an LLC in Kentucky, an LLC Formation Service can help you be successful in this endeavor! We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

On the other hand, an S-Corporation, or S-Corp, is not a separate legal business entity like an LLC. Rather, it is a tax classification that existing corporations and LLCs can elect. A business can bypass double taxation by opting for this tax status, as the profits and losses are directly passed through to the owner’s personal tax return. Starting an S Corp in Kentucky  allows business owners to report and pay taxes on their business income as part of their individual income tax filings, eliminating the need for separate corporate taxes.

In Kentucky, it is crucial for business owners considering this tax classification to fully understand the implications and requirements of being an S-Corp in Kentucky. This includes adhering to specific rules and regulations related to ownership, shareholder limits, and tax filing deadlines. If you want to start an S-Corp, LegalZoom will help you every step of the way!

LLCs and S-Corporations Comparison

Let’s explore the comparison between LLCs and S-Corporations to help you make an informed decision.

1. Taxation Differences in Kentucky

One of the main differences between LLCs and S-Corporations in Kentucky lies in how they are taxed. LLCs are typically subject to pass-through taxation, meaning the business profits and losses are reported on the owner’s personal tax return. In contrast, S-Corporations must adhere to specific tax requirements, including distributing salaries to shareholders and adhering to the state’s income tax rate.

  • Federal Taxes: When choosing between an LLC or S-Corporation in Kentucky, it’s essential to consider several federal tax factors. These factors include differences in Pass-Through Taxes and Self-Employment Taxes.
  • Pass-Through Taxes: Both LLCs and S-Corporations in Kentucky benefit from pass-through taxation at the federal level. Due to pass-through taxation, these entities do not pay federal income taxes as separate legal entities. Instead, their owners are required to pay federal income taxes on their share of the business income. This type of taxation prevents the company from being taxed twice. In contrast, C-Corporations in Kentucky are subject to double taxation, meaning they must pay federal taxes at the entity level and their owners’ taxes.
  • Self-Employment Taxes: Many LLC owners in Kentucky opt for S-Corporation taxation to reduce their self-employment taxes. An S-Corporation owner is not considered self-employed; they can become an employee of the company and receive regular salary benefits. Conversely, an LLC member must include their guaranteed payments and a portion of the LLC’s earnings when calculating their self-employment tax. Share distributions determine the corporate income of S-Corporation shareholders. For example, suppose you are the sole owner of an LLC in Kentucky with an annual profit of $150,000 and a fair wage for someone in your location doing the same job as you is $100,000. Under the default LLC taxation, you must pay self-employment taxes on the $150,000 profit. However, if your company is taxed as an S-Corp in Kentucky, you would be responsible for paying payroll taxes only on the $100,000 standard wage. Income tax would still apply to the remaining $50,000.
  • Kentucky State Taxes: No major tax differences exist between regular LLCs and S-Corporation LLCs at the state level. For filing an annual report in Kentucky, it costs $15, which can be paid to the LA Secretary of State. Additionally, before forming the LLC, you must pay $40.

On the other hand, if you form an S-Corporation in Kentucky, you will also need to pay taxes. This includes the S-Corp filing fee and an annual report fee after establishing your S-Corp for one year. You must also go to the LA Secretary of State to make these payments.

2. Liability Protection

LLCs and S-Corporations in Kentucky provide liability protection for their owners. This means that the owner’s personal assets are protected from business debts and lawsuits. However, S-Corporation status does not offer the same level of protection as an LLC, as it is primarily a tax designation.

The following factors exclude certain individuals and entities from becoming shareholders in an S-Corporation in Kentucky:

  • Insurance businesses
  • Domestic international sales corporations
  • Partnerships
  • Corporations
  • Unauthorized immigrants
  • Specific financial institutions

While understanding the ownership requirements of LLCs and S-Corporations in Kentucky is essential, seeking legal counsel when establishing your business is still advisable. For assistance with your Kentucky LLC or Kentucky S-Corp, consider consulting with professionals.

3. Ownership Requirements and Restrictions

LLCs and S-Corporations in Kentucky have specific ownership requirements and restrictions. For instance, an LLC can have unlimited members, while an S-Corporation is limited to 100 shareholders. Additionally, S-Corporations can only have one class of stock and must follow strict rules regarding shareholder eligibility.

Easier to File in Kentucky: LLCs or S-Corporations

While filing an LLC or S-Corporation in Kentucky requires time and preparation, proper planning can make the process manageable. Both LLCs and S-Corporations can be filed through the Kentucky Registered Agent.

To start an LLC in Kentucky, you must submit the Articles of Organization to the Kentucky Secretary of State. This document should contain all the necessary information for your LLC, along with the payment of the associated filing fee.

On the other hand, if you want to elect S-Corporation status for your Kentucky LLC, you will need to submit additional paperwork. First, file Form 8832 with the Internal Revenue Service (IRS) to indicate your preference to tax your LLC as a corporation rather than a partnership. Next, submit Form 2553 to choose S-Corporation status.

Remember, maintaining legal compliance is crucial for your LLC. This means submitting annual tax returns and reports after establishing your business entity.

With that, we’ve carefully curated a list of the best LLC services in Kentucky to support and guide you through filing an LLC and S-Corp. Check them out!

LLC Services

Rating & Pricing

Top Features

Learn More

#1 Editor's Choice
Legalzoom

$0 + State Filing Fee

  • Free LLC Formation

  • Various Legal Services

  • Attorney Advice

Learn More

$299 + State Filing Fee

  • Single Package

  • Flat Pricing

  • Legal Services

Learn More

Filing Process for LLCs vs. S-Corporations in Kentucky

Forming an LLC in Kentucky involves several crucial steps. To start, you must file Articles of Organization with the Kentucky Secretary of State and pay the associated filing fee of $40. Once your LLC is established, you must comply with annual reporting and tax requirements.

On the other hand, if you want to elect an S-Corporation status for your existing LLC or corporation, the process is slightly different. Firstly, you must file Form 8832 with the Internal Revenue Service (IRS) to classify your LLC as a corporation for tax purposes. Then, you must submit Form 2553 to the IRS to choose S-Corporation status. In Kentucky, the S-Corporation filing fee is $40 for filing online and by mail.

Recommended: Maximize your business success in Kentucky – hire a reliable LLC Formation Service for effortless LLC and S-Corp filings. Transform your entrepreneurial aspirations today!

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

The LLC formation and S-Corporation election processes can be completed through two ways, online and by mail. Online incorporation is available at Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything., while offline incorporation can be done at Send the form by mail to Michael G. Adams, Office of the Secretary of State, P.O. Box 718, Frankfort, KY 40602. It is essential to stay up-to-date with any ongoing reporting and tax requirements for your chosen business structure.

The filing process for LLCs and S-Corporations in Kentucky varies slightly, with each requiring specific forms and fees. It’s essential to consider the unique requirements of each business structure before making a decision. Consulting with a legal or financial advisor can provide valuable guidance on which structure best suits your business in Kentucky.

FAQs

What is the difference between an LLC and an S Corp in Kentucky?
LLC and S Corp are both business entity types, but they have different structures and tax implications in Kentucky.
What is an LLC in Kentucky?
LLC stands for Limited Liability Company. In Kentucky, LLCs provide limited liability protection for their owners (also called members) and have flexible management options.
What is an S Corp in Kentucky?
S Corporations, or Subchapter S Corporations, are corporations that meet specific internal revenue service (IRS) requirements, giving them certain tax benefits in Kentucky.
How do LLCs and S Corps differ in their taxes in Kentucky?
In Kentucky, LLCs are usually taxed as pass-through entities, while S Corps must file for special status with the IRS to receive the benefit of pass-through taxation.
What is pass-through taxation in Kentucky?
In Kentucky, pass-through taxation means that the income earned by the business is only taxed once, at the individual level of the business owners.
Do LLCs have fewer tax obligations than S Corps?
It depends on the circumstances and structure of the business in Kentucky. In general, both LLCs and S Corps have tax advantages and disadvantages that should be considered when making a decision.
Are there any residency requirements for starting an LLC or S Corp in Kentucky?
No, there are no residency requirements for starting an LLC or S Corp in Kentucky. Anyone can own an LLC or S Corp in the state.
How are management structures different between an LLC and an S Corp in Kentucky?
In Kentucky, LLCs have more flexibility in how they manage the business and make decisions. S Corps are required to have a board of directors and annual shareholder meetings.
Can an LLC or S Corp limit liability in Kentucky?
Yes, in Kentucky both an LLC and an S Corp offer limited liability protection for their owners or shareholders.
Can an LLC or S Corp own property in Kentucky?
Yes, both LLCs and S Corps in Kentucky can own property and enter into contracts in their own names.
Are there any limits to how many owners an LLC or S Corp can have in Kentucky?
In Kentucky, an LLC can have an unlimited number of members, whereas an S Corp is limited to 100 shareholders.
Can a single-member LLC in Kentucky elect to be taxed as an S Corp?
Yes, single-member LLCs in Kentucky can elect to be taxed as an S Corp for federal tax purposes by filing Form 2553 with the IRS.
Is the process of forming an LLC or an S Corp the same in Kentucky?
No, the process to form each entity is different in Kentucky and has its own specific requirements.
What is the filing fee for forming an LLC or S Corp in Kentucky?
The filing fee for forming an LLC in Kentucky is $40. The filing fee for forming an S Corp in Kentucky is $50.
Which entity type in Kentucky requires more paperwork, an LLC or an S Corp?
An S Corp in Kentucky requires more paperwork because it must hold annual shareholder meetings and submit corporate minutes.
Are there any age restrictions for forming an LLC or S Corp in Kentucky?
No, there are no age restrictions for forming an LLC or an S Corp in Kentucky. Anyone who is 18 years or older can form either entity type.
As a business owner in Kentucky, am I required to pay Kentucky state taxes for both LLCs and S Corps?
Yes, both LLCs and S Corps in Kentucky are required to pay state taxes and file state tax returns as they are considered separate legal entities.
Can an LLC or S Corp in Kentucky be taxed as a C Corporation?
Yes, either an LLC or S Corp in Kentucky can elect to be taxed as a C Corporation if they meet specific IRS requirements and file the necessary paperwork.
As a SOLE individual, should I choose LLC or S Corp?
There is no one-size-fits-all answer. Both entity types have their unique advantages and ongoing requirements. We recommend speaking with a qualified tax professional and attorney to determine which entity type would fit your needs in Kentucky.
Can a Kentucky LLC or S Corp be owned by another business entity rather than individuals?
Yes, Kentucky LLCs and S Corp may be either fully or partly-owned by trusts, other businesses, or even other LLCs, depending on state laws and the IRS tax implications.
Is the annual filing fee for a Kentucky LLC and S Corp similar?
No, the annual reports for an LLC in Kentucky range in cost from $10-$200, depending on the total value of the company’s assets; whereas, for an s-corp in Kentucky, the annual report fee applied is $15.
Do LLCs and S Corps in Kentucky need to file a DBA in order to operate under a different name?
In Kentucky, an LLC that uses a name other than its legal name must register a Trade Name with the state. However, S Corporations in Kentucky are not required to file a DBA.
What specific business functions might benefit from setting up an S Corp structure as opposed to an LLC in Kentucky?
Businesses in Kentucky that want to incentivize shareholder ownership or who anticipate going public might favor or benefit from an S-corp structure as opposed to LLC.
Is it more challenging to transfer ownership in an S Corp in Kentucky than an LLC?
The transfer of ownership ownership in either entity in Kentucky may require extra paperwork. The actual steps that registered agent needs to follow will depend on specific circumstances and the rules laid out in the governing documents of the entity.
Do LLCs and S Corps in Kentucky have differing regulations with regards to foreign owner or foreign investors?
In Kentucky, both entities types ideally have different set of regulations for foreign ownership or investment in their business. For detailed advice, make sure to discuss foreign investment information requirements with a local, experienced business lawyer, attorney, or tax professional.
How are member operations in LLCs in Kentucky any different than directors or shareholders of an S Corp?
LLC owners are typically called members and typically affected major decision making via an Operating Agreement which provides operational and governance documents. On the other side, S-Corp has an elected board of directors, who in turn generally delegate responsibility of day-to-day operations to executive officers operating under these governing policies.
What Kentucky laws differ between LLCs and s-corporations?
LLCs function under Kentucky Statute chapter 14a. Similarly, aKentucky-based S Corps are managed under the Kentucky statutes chapter 271B.
When could converting from LLC to S Corp make sense for Kentucky-based small businesses?
When members of the entity structure want a more structured voting framework that escalates easily; or It may be feasible to make the change once members begin to anticipate go very publi or if members feel that the benefits of qualified RO has side and long term tax ramifications in comparison to the entity taxed under default LLC status.
Can both LLCs and S Corps be formed in Kentucky?
Yes, Kentucky allows the formation of both LLCs and S Corps.
How do I choose between an LLC and an S Corp for my business in Kentucky?
The decision between an LLC and S Corp depends on multiple factors such as taxation, management, ownership, legal structure, and business goals.
What are the tax implications of forming an LLC in Kentucky?
In Kentucky, LLCs benefit from pass-through taxation, meaning that business profits and losses are reported on the personal income tax returns of each owner.
How are S Corporations taxed in Kentucky?
S Corps in Kentucky also have pass-through taxation, but there are additional requirements to maintain S Corp status and avoid double taxation at the federal level.
Can foreign nationals form an LLC or S Corp in Kentucky?
Yes, non-US citizens can establish an LLC or S Corp in Kentucky if they meet specific incorporation requirements.
Can an LLC in Kentucky convert to an S Corp?
Yes, it is possible to convert an LLC to an S Corp in Kentucky, but it would require filing additional paperwork and meeting eligibility requirements.
What is the cost of setting up an LLC in Kentucky?
The cost of forming an LLC in Kentucky is $40 for filing articles of organization.
What is the fee for registering an S Corp in Kentucky?
The fee for registering an S Corp in Kentucky is $40 for filing articles of incorporation.
What are the filing requirements for an LLC in Kentucky?
The annual report for Kentucky LLCs must be filed by June 30th and the fee for filing is $15.
Do S Corps have any specific filing requirements in Kentucky?
Yes, S Corps in Kentucky must file an annual report each year with a fee of $15.
Can an LLC have a single member in Kentucky?
Yes, Kentucky LLCs can have one or more members, and a single-member LLC is treated as a disregarded entity for tax purposes.
Can an S Corp have multiple classes of stock in Kentucky?
No, an S Corp in Kentucky can only have one class of stock.
Can an LLC issue stock in Kentucky?
No, LLCs in Kentucky cannot issue stocks since they are a pass-through entity that does not issue stock.
What are the liability protection benefits of an LLC in Kentucky?
LLCs in Kentucky offer limited liability protection to their members, meaning that they are protected from personal liability for business debts or lawsuits.
Are there any restrictions on who can own an S Corp in Kentucky?
S Corps in Kentucky have restrictions on owning shares, limited to US citizens or lawful permanent residents.
Who manages an LLC in Kentucky?
Kentucky LLCs can be managed by members or designated managers, as determined in the operating agreement.
Who manages an S Corp in Kentucky?
An S Corp in Kentucky is managed by a board of directors, appointed and elected by shareholders.
Can an LLC be dissolved in Kentucky?
Yes, an LLC in Kentucky can be dissolved if all members agree or according to the terms specified in the operating agreement.
Can an S Corp be dissolved in Kentucky?
Yes, an S Corp in Kentucky can be dissolved via shareholder or board of director’s resolution or after bankruptcy.
Are there any specific capitalization requirements for LLCs in Kentucky?
No, there are no specific capitalization requirements for an LLC in Kentucky.
What are the minimum and maximum number of shareholders for an S Corp in Kentucky?
An S Corp in Kentucky must have a minimum of one and a maximum of 100 shareholders.
Do LLCs have to hold annual meetings in Kentucky?
LLCs in Kentucky are not required to hold annual meetings.
Are S Corps required to hold annual meetings in Kentucky?
Yes, S Corps in Kentucky are required to hold annual meetings of directors and shareholders.
What happens if my LLC or S Corp fails to file an annual report in Kentucky?
LLCs and S Corps in Kentucky have a late filing fee of $15 for each month the report remains unfiled, and the business could be administratively dissolved or terminated.
Can an LLC or S Corp in Kentucky change its business name?
Yes, LLCs and S Corps in Kentucky can change their business name by filing an Amendment of Articles with the Secretary of State and paying a $40 filing fee.
Can a Kentucky LLC or S Corp change its registered agent?
Yes, Kentucky LLCs and S Corps can change their registered agent by filing a Statement of Change with the Secretary of State and paying a $10 fee.
What are the reporting requirements for changes in ownership of an LLC in Kentucky?
LLCs in Kentucky must report changes to member ownership and interests when effectively transferred by filing a Statement of Change with the Secretary of State and paying a $10 fee.
How do I know if an LLC or S Corp is still in good standing in Kentucky?
To verify the current standing of an LLC or S Corp in Kentucky, you can search the entity name in the Secretary of State’s database or request a Certificate of Existence.

Also Read

Conclusion

Navigating the world of business structures and filings may seem daunting, but with the right information and guidance, you can confidently make the best decision for your unique entrepreneurial journey. Remember, the path to success is paved with well-informed choices and a clear understanding of your business goals. So, take the time to research, consult with professionals, and weigh the pros and cons of LLCs and S-Corporations in Kentucky.

As you embark on this exciting adventure, remember that a strong foundation built on sound legal and financial principles will be the backbone of your thriving enterprise. Embrace the challenge, stay curious, and always remember your passion and vision. Visit LLCBase today to access valuable resources, expert guidance, and personalized support tailored to your needs. Don’t wait any longer – let us help you realize your entrepreneurial dreams. 

Leave a Comment