Starting a business can be the beginning of the career path of a lifetime. Entrepreneurs have unlimited income potential, get to choose their own schedules and clients, and get to create something they’re passionate about from scratch. However, before you can build momentum, you need to make sure you have your business structured properly.
Kentucky’s got many signs of strengthening economic conditions, including a gradually lowering unemployment rate. Many industries are represented in the state, including agriculture, healthcare and social assistance, and construction, where the overwhelming majority of businesses are small businesses. The diversity of rural landscapes, urban areas, and mid-sized cities make it so it’s possible to find an ideal environment for almost any business in the state. Set up your business the right way the first time, and obtain your state and federal tax IDs before you need to provide it to banks, the IRS, local offices, etc.
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Steps to getting a Tax ID (EIN) Number and Forming a Business in Kentucky
- Forming a Business in Kentucky
- Federal Tax ID (EIN) Number Obtainment
- Kentucky State Tax ID Number
- Localized Licenses and Permits in Kentucky
There are many motivations to consider when deciding what business structure to apply. There are some business structures that have inherent perks or advantages, like corporations, which can publicly issue shares to raise funds. If you’re trying to establish a national or international business, corporations are usually the way to go.
However, you might be trying to start a small business and keep things as simple as possible. Corporations aren’t ideal here, because they’re complicated to start, and must adhere to many rules and regulations throughout their lifespan. Sole proprietorships and partnerships are much simpler, and are straightforward to manage on an ongoing basis. Limited liability companies (LLCs) occupy a middle ground.
You may also want to consider the tax advantages of each business type. In a sole proprietorship or partnership, you and/or your partner will simply pay taxes as individuals on any business income you make. LLCs are considered pass-through entities; they won’t owe taxes on income they generate, but you’ll pay taxes on any money you take as profits or salary. Corporations are required to pay taxes on eligible income in addition to taxes you’ll pay as an individual on salary and profits, resulting in a kind of double taxation. Kentucky has a marginal corporate income tax rate, across three tax brackets. The rate is 4 percent on eligible income up to $50,000, 5 percent on income between $50,000 and $100,000, and 6 percent thereafter. LLCs in Kentucky must also file an annual report, with a $15 fee.
Another factor to consider is liability. In a sole proprietorship or partnership, you and/or your partner will be vulnerable to liability issues; you can be held liable for any business actions you take, and any debts will be your own. LLCs and corporations are both considered separate legal entities; they can take on debts of their own and be held accountable for certain business decisions. Generally, corporations offer the most liability protection.
One of the first steps you’ll take for your business, once you’ve decided on a structure, is getting a federal tax ID number. This is a 9-digit number you’ll get when you register your business with the federal government, and it’s used to uniquely identify your business. It’s sometimes called an employer identification number, or EIN.
There are many reasons you’ll need an EIN for your Kentucky business, so most businesses will need one. All businesses with multiple members, or those that plan on hiring employees, will need to get one. You’ll also need one to apply for a loan, a business license or permit, or a business bank account. You may also want to have one so you don’t have to use a personal social security number for certain applications. Use our federal tax ID number obtainment service to get your tax ID as quickly as possible. All you’ll have to do is answer a few questions about your business, and you’ll receive your tax ID in less than an hour.Apply for a Kentucky Tax ID Number
Many Kentucky businesses will also need to get a Kentucky state tax ID number. This serves as a unique identifier, like a federal tax ID number, but are applied at the state level. You’ll need one of these numbers if your business is going to sell taxable goods and services in the state of Kentucky, if you’re hiring Kentucky employees, or if you’re going to owe excise taxes, which apply to some regulated goods.
You’ll need a federal tax ID number if you’re going to apply for a Kentucky state tax ID number. Make use of our Kentucky state tax ID number obtainment services to get your state tax ID as quickly as possible. Just answer a few questions about your business, and you’ll receive your Kentucky state tax ID in 4 to 6 weeks.
Like with most states, mostbusinesses will need to get a license, permit, or other form of certification to operate legally in certain areas. Some businesses will need multiple types of documentation. These licenses and permits apply at the local level, and vary based on your industry and business structure, so the best approach is to check with your local Chamber of Commerce to see which licenses and permits you’ll need.
Hundreds of thousands of entrepreneurs are proud to call Kentucky their home. There are more than 347,000 Kentucky small businesses, employing a total of 696,183 employees, or more than 44 percent of the working population in the state. All in all, they represent 99.3 percent of all businesses in the state, and are responsible for a great deal of Kentucky economic activity, including 17,194 net new jobs in 2018.
The sooner you get your tax ID numbers, the sooner you can start generating revenue. Use our federal tax ID number and Kentucky state tax ID number obtainment services to handle your business needs and start your business faster.