If you own a business that was created in a state other than Kentucky, you will need to qualify or register that business in Kentucky if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Kentucky) limited liability company (LLC) to do business in Kentucky.
Note: Part of Kentucky’s rules for registering foreign LLCs is contained in a relatively new set of laws—the Kentucky Business Entity Filing Act—covering registration of foreign businesses generally. The Act refers to these businesses collectively as “foreign entities.”
For Kentucky purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Kentucky. In other words, foreign doesn’t mean from another country. Instead, it means your business was organized under the laws of another state. A domestic LLC, on the other hand, is one that is formed in the state where it is doing business. This is common usage throughout the United States. For example, an LLC formed in Rhode Island is a foreign LLC in Massachusetts.
According to Kentucky’s LLC Act, you are required to register your foreign company with the state of Kentucky if you are “transacting business” in Kentucky. What does this mean? Well, like most states, Kentucky’s business entity laws do not specifically define the phrase “transacting business” in relation to foreign registrations.
However, state laws governing when foreign companies must collect state sales tax in their state provide some guidance on the issue. Under these laws, a business must have a physical presence in—or nexus with—the state in order to be required to collect state sales tax on sales to that state’s residents. Generally speaking, physical presence and nexus are synonymous, and mean having:
Certain exceptions may apply and the rules can get more complicated with things like Internet sales. Nevertheless, in general, if you have an office, a store, a warehouse, or employees in another state, you will need to qualify your LLC as a foreign company in that state. For more details, including some possible distinctions between physical presence and nexus, check Nolo’s articles on Internet Sales Tax: A 50-State Guide to State Laws.
Like most states, Kentucky’s business entities laws specify certain activities that do not constitute transacting business in the state. The items listed include:
The business entity laws also specifically state that the latter list is not exhaustive; other activities also may be exempt. For the full, legal description of each of the listed items, check Section 14A.9-010 of the Kentucky Revised Statutes.
If your LLC’s only activity in Kentucky is one or more of the listed items, you should not need to register with the state.
To register your business in Kentucky, you must file a Certificate of Authority (Foreign Business Entity) (Form FBE) with the Kentucky Secretary of State (SOS). You can download a copy of the application form from the SOS website. Unlike other states, Kentucky uses one form for all types of registered business (corporations, limited partnerships, and so on).
To complete the form, you must provide more or less the same information that you need to create an LLC in your home state. More specifically, for a Kentucky application for registration, you need to provide:
The filing fee is $90.
If your LLC transacts business in Kentucky without authority, it cannot bring a lawsuit in any of the state’s courts. In addition, the LLC is liable for a penalty of $2 for each day it transacts business in Kentucky without a certificate of authority. However, not being registered does not invalidate your LLC’s contracts or prevent it from defending a lawsuit in Kentucky.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in Kentucky are very similar. You will use the same Form FBE. See the Kentucky Secretary of Statewebsite for information and filing instructions for registering a foreign corporation in Kentucky.