How to set up an LLC for your rental property in Kentucky

If you’re a landlord or real estate investor in Kentucky, you’ve probably heard that forming an LLC (limited liability company) can be a smart move to help protect your rental property and your personal assets. But how exactly do you set up an LLC for a rental property in Kentucky? What does it cost? How long does it take? And what are the ongoing requirements once your LLC is up and running?

In this guide, we’ll walk you through common steps landlords may consider when forming an LLC in Kentucky, from the basics of what an LLC is and what it may protect you from, to the step-by-step process of filing with the Kentucky Secretary of State. We’ll also cover important topics like LLC filing fees, annual reports, whether you might need a lawyer to start an LLC, and how to get an EIN. Plus, we’ll touch on the differences between an LLC and an S corp for landlords and compare LLCs to umbrella insurance for rental property risk management.

If you’re ready to learn about how to protect your investment and set up your LLC, let’s dive in.

What is an LLC and what does it protect landlords from in Kentucky?

An LLC, or limited liability company, is a business structure that separates your personal assets from your rental property business. For Kentucky landlords, this means that if someone sues because of an incident at your rental property, your personal bank accounts, car, and other assets may be shielded from liability in many cases.

However, it’s important to understand what an LLC can and cannot protect you from. While it often offers a layer of protection against lawsuits and debts related to your rental property, it does not protect you from liability if you personally guarantee a loan, commit fraud, or engage in illegal activity. Also, forming an LLC does not replace the need to consider maintaining proper insurance coverage on your rental property.

For a deeper dive into the protection an LLC offers landlords, check out our article on should landlords use an LLC.

Step-by-step guide: how to set up an LLC for a rental property in Kentucky

1. Choose a name for your Kentucky LLC

Your LLC’s name must be unique and comply with Kentucky’s naming rules. It must include “Limited Liability Company,” “LLC,” or “L.L.C.” and cannot include words that could confuse it with a government agency.

To check if your desired name is available, use the Kentucky Secretary of State’s business name search tool here.

2. Designate a registered agent in Kentucky

Your LLC must have a registered agent with a physical address in Kentucky who can receive legal documents on behalf of the company. This can be yourself, another individual, or a professional registered agent service.

3. Prepare and file your articles of organization

The articles of organization are the official documents that create your LLC. They include basic info like your LLC’s name, registered agent, and purpose.

You can file your articles of organization online or by mail with the Kentucky Secretary of State’s office. The filing fee is currently $40.

Learn more about what are articles of organization and how to file them on the official Kentucky Secretary of State website.

4. Create an operating agreement (optional but recommended)

Kentucky does not require an operating agreement, but it’s often recommended to draft one. It outlines how your LLC will be managed, ownership percentages, profit distribution, and other important rules.

5. Apply for an EIN (employer identification number)

Most LLCs typically need an EIN from the IRS for tax purposes and to open a business bank account. You can get an EIN online for free at the IRS website.

See more on how to get an EIN for an LLC on the IRS' official website. Consult IRS guidance or a tax professional to determine if your LLC requires one.

6. Register for state taxes and licenses if needed

Kentucky landlords may need to register for state taxes or obtain specific permits depending on their rental type and location. The Kentucky One Stop Business Portal is a helpful resource for this.

7. Open a separate bank account for your LLC

You may want to consider keeping your rental property finances separate from your personal accounts by opening a dedicated bank account in your LLC’s name to help maintain liability protection.

How much does it cost to set up an LLC in Kentucky?

The main cost to start your LLC is the Kentucky LLC filing fee, which is $40 for the articles of organization. This is one of the more affordable filing fees compared to other states.

Other potential costs include:

• Registered agent fees (if you hire a service), which can range from $50 to $300 per year  
• Operating agreement preparation (if you pay for legal help)  
• Business licenses or permits if required by your city or county  
• Annual report fee of $15, which is due each year to keep your LLC in good standing  

Overall, the initial cost to set up an LLC for a rental property in Kentucky can be reasonable, especially considering the liability protection it may provide depending on circumstances.

How long does it take to set up an LLC in Kentucky?

If you file your articles of organization online with the Kentucky Secretary of State, your LLC can often be approved within 1 to 3 business days. Paper filings may take longer, sometimes up to 7 to 10 business days.

So, if you’re wondering how long does it take to set up an LLC in Kentucky, expect it to be a matter of days when filing online.

What are articles of organization and how to file them in Kentucky

Articles of organization are the official documents that create your LLC. They provide details such as:

• The name of your LLC  
• The address of the registered office  
• The name and address of the registered agent  
• The purpose of the LLC (often a general purpose is sufficient)  

To file your articles of organization in Kentucky, you can do so online through the Kentucky Secretary of State's business portal. You’ll pay the $40 filing fee when you submit. Alternatively, you can mail the form with payment to the Secretary of State’s office.

Once accepted, your LLC officially exists in Kentucky.

Do I need a lawyer to start an LLC in Kentucky?

You don’t necessarily need a lawyer to form an LLC in Kentucky. The process is designed so that many landlords and investors can handle it themselves online or via mail. The Secretary of State’s website provides clear instructions and forms.

That said, consulting a lawyer can be beneficial if your rental property business is complex, you want help drafting an operating agreement, or you have specific legal questions. For many landlords, forming an LLC can be a straightforward DIY process.

How to get an EIN for an LLC that owns rental property

An EIN (employer identification number) is like a Social Security number for your LLC. It’s typically required for tax filings, opening bank accounts, and hiring employees (if applicable).

Getting an EIN is free and easy. You can apply online through the IRS EIN application portal and receive your EIN immediately.

You may want to consider applying for an EIN once your LLC is officially formed.

Do LLCs need annual reports and other ongoing compliance in Kentucky?

Yes. In Kentucky, LLCs generally must file an annual report each year with the Secretary of State. This report updates your LLC’s contact information and confirms it remains active. The annual report fee is $15.

The report is due by June 30 every year, starting the year after your LLC is formed.

You should be aware that failing to file the annual report may result in penalties or administrative dissolution of your LLC. Consult official sources for details.

Besides the annual report, Kentucky LLCs should keep up with any local business licenses or permits required for rental properties.

S corp vs LLC for landlords in Kentucky: what’s the difference?

Many landlords wonder about the difference between an LLC and an S corporation. Here’s a quick overview for Kentucky rental property owners:

• An LLC is a flexible business structure that separates personal and business liabilities. It’s simple to maintain and doesn’t require corporate formalities. You can choose how your LLC is taxed (sole proprietorship, partnership, or corporation).
• An S corp is a tax status that an LLC or corporation can elect with the IRS. It allows profits and losses to pass through to owners, potentially reducing self-employment taxes. However, S corps require more formalities like holding meetings and maintaining minutes.

For many Kentucky landlords, starting with an LLC may be a common and straightforward choice. You can always consult a tax professional to discuss whether electing S corp status makes sense for your situation.

LLC vs umbrella insurance for rental property risk management

While an LLC offers legal protection by separating your personal assets from your rental property business, it’s not a substitute for insurance. Many landlords ask, what’s better: LLC vs umbrella insurance?

An umbrella insurance policy provides extra liability coverage beyond your standard landlord insurance. It can cover large claims or lawsuits that might exceed your primary policy limits.

The best approach is often to use both: form an LLC for legal protection and carry adequate landlord insurance along with umbrella coverage for added peace of mind.

Learn more about the differences and how they work together in our guide to LLC vs umbrella insurance.

When does it make sense for landlords in Kentucky to use an LLC?

An LLC can be a good choice for Kentucky landlords who want to:

• Protect personal assets from rental property liabilities  
• Separate finances and simplify bookkeeping  
• Establish a professional business presence  
• Potentially save on self-employment taxes (with proper tax elections)  

However, if you own only one small property and your risk is minimal, the cost and administrative work of an LLC may not be justified. Also, some lenders have stricter rules about financing properties owned by LLCs.

Ultimately, deciding whether to form an LLC depends on your unique situation. You can read more on whether should landlords use an LLC to help make your decision.

Next steps: review your insurance and consider forming your LLC

If you’re a Kentucky landlord, setting up an LLC for your rental property can be one way to help protect your personal assets and organize your business. The process is generally straightforward, affordable, and quick when filing online with the Kentucky Secretary of State.

Don’t forget that forming an LLC is just one piece of the puzzle. Make sure your rental properties have the right coverage by exploring landlord insurance in Kentucky and consider adding umbrella insurance for extra protection.

For more detailed info on forming an LLC and protecting your rental property, start with our main guide on should landlords use an LLC and learn how LLCs fit into your overall risk management strategy.

Remember, this article is for informational purposes only and is not legal or tax advice. For personalized guidance on LLC formation and tax implications, be sure to consult a qualified attorney or tax professional familiar with Kentucky law.