Forming your business entity in Delaware—specifically, a corporation—gives you a lot of flexibility, but you may still need to follow local laws depending on what state you operate in.
Specifically, if you do business in Kentucky, you need to register with the state. We’ll walk through the process and simplify it. But first, how can you tell whether you’re legally doing business in Kentucky?
When to register as doing business in Kentucky
Delaware C corps—and all other corporations formed outside of Kentucky—are referred to as “foreign” corporations by the State.
Kentucky statutes do not specifically define what is considered doing business in the state. However, Kentucky statutes provide that the following activities would not require you to register with the State:
Defending or settling a lawsuit
Having a bank account in the state
Selling through independent contractors
When to register to collect sales tax in Kentucky
Every state has rules about when a company is required to pay sales tax. These are called sales tax nexus rules.
You can think of the nexus as a special version of that state’s border; if you perform certain business activities within that border, you fall into the state’s sales tax nexus, and you’re required to register for and collect state sales tax.
Typically, these actions take the form of buying and selling goods and services.
In Kentucky, the sales tax nexus rules only apply to sellers who sell physical goods or services to Kentucky residents.
Until 2018, selling or buying non-physical goods—like subscriptions to streaming services, SaaS memberships, etc.—did not, generally speaking, qualify you for sales tax nexus. After an important court ruling in 2018, that changed. Now, if you buy or sell non-physical goods or services in a state, you may fall within its sales tax nexus.
Kentucky sales tax nexus (physical goods and property)
Since the 2018 Supreme Court ruling, the physical nexus test in Kentucky has been in flux. Traditionally, selling, leasing, or delivering tangible personal property or taxable services creates a physical nexus with the state that would subject you to collecting sales and use tax.
You can learn more about physical nexus/presence for sales tax purposes through the State’s website.
Kentucky sales tax nexus (non-physical goods and property)
The new state sales tax laws applying to non-physical (ie. internet) sales allow you to qualify for sales tax nexus even without physical presence or goods. In Kentucky, you need to cross a certain threshold to qualify.
You will need to remit sales if you have:
- $100,000 or more in sales to Kentucky in the previous calendar year; or
- 200 or more separate transactions of sales into Kentucky in the previous calendar year
If you would like to take a deep dive, you can check out the State’s website.
As usual, this isn’t legal advice—just a guide. If you’re not 100% clear on whether you fall within Kentucky’s sales tax nexus, it’s best to confer with your legal counsel and/or an accountant that has expertise in Kentucky’s legal code and tax regulations.
How to register to do business in Kentucky
- Select a name under which to do business. This doesn’t have to be the name you registered when incorporating in Delaware, but it can be.
- Fill out an application. You’ll need to file an Application for Certificate of Authority for a Foreign Business Entity with the Kentucky Secretary of State through the state’s online portal.
- Pay the fee. Now you pay the Kentucky Secretary of State a $90 filing fee.
- Submit your Application for Certificate of Authority for a Foreign Business Entity.
- Wait. Processing typically takes two to four weeks.
Compliance as a qualified foreign business in Kentucky
To stay in compliance and continue legally doing business in Kentucky, you need to meet two requirements: maintaining a registered agent and filing your annual report. On top of that, you will also need to pay a corporate income tax.
Registered agent in Kentucky
Your registered agent in Kentucky is your point of contact with local authorities. If you don’t have a physical address for your company in Kentucky, it may be advantageous to find a registered agent to receive state notices on your behalf.
Foreign corporations are required to have a registered office in Kentucky. The office cannot be a P.O. box, rather it must be a physical address of your registered agent or a licensed registered agent service.
Your registered agent will forward any important information, such as business mail, to you. There are a number of firms that contract out registered agents. They typically cost $50 – $100 per year.
Annual reporting in Kentucky
Every year, you must file a statement with the State, updating any changes to the company address or the composition of the Board and officers. You’ll include info like:
- The legal name of your business
- The name and address of your registered agent
- The names and addresses of board members, managers, and officers
There is a $15 fee for filing your annual report.
Paying Kentucky’s corporate income tax
Lastly, Kentucky has a corporate income tax. A corporate income tax is a tax imposed directly on the income of your corporation. For more information on filing and paying your annual taxes, please see the following guidance from Kentucky’s Department of Revenue.
How to register to collect sales tax in Kentucky
If you fall within Kentucky’s sales tax nexus, your company will need to register for a sales and use tax collection. Kentucky provides two ways for you to register to collect sales and use tax depending on what is best for your company:
- Kentucky One Stop allows you to register for only Kentucky sales and use tax collection. Please note that you must first create an account on One Stop before registering for sales and use tax collection.
- Streamlined Sales Tax Registration System lets you register for sales tax for multiple states. Kentucky is part of this system so you can register to collect Kentucky sales and use tax through the Streamlined Sales Tax Registration System.
Hiring and paying employees in Kentucky
When you hire a new employee in Kentucky, federal and state laws require that you report new hires within 20 days of the date of hire. You can report your new hires using the Kentucky employer website portal.
Your payroll provider should be able to take care of paycheck withholdings, but it’s up to you to register as an employer with the State and set up an online employer account.
For a comprehensive guide of your responsibilities, Kentucky provides the following information.
The easiest way to register your business in Kentucky
To register your business in Kentucky, you’ve got to keep track of a lot of moving parts. Failing to file the right forms, provide the right information, or stay on top of compliance laws can lead to serious headaches.
Capbase makes it easy. When you incorporate your Delaware corporation on Capbase, we will generate the required information needed to register to do business in Kentucky and keep you up to date on any required filings.
The compliance calendar inside your Capbase account will notify you of upcoming fees, reporting, or other requirements, so you can keep your startup in good standing with Kentucky state officials. Try Capbase now.
Written by Capbase Staff
Capbase is a team of designers, engineers, and business professionals spread across 6 time zones on 3 continents united by our passion for dogs, coffee, and great software.
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