A limited liability company (LLC for short) is a way to legally structure a business. It combines the limited liability of a corporation with the flexibility and lack of formalities provided by a partnership or sole proprietorship. Any business owner who seeks to limit his or her personal liability for business debts and lawsuits should consider forming an LLC.

Here are the steps you need to take to form an LLC in Kentucky. For more information on how to form an LLC in any state, see Nolo's article on How to Form an LLC.

1. Choose a Name for Your LLC

Under Kentucky law, an LLC name must contain the words "limited liability company" or "limited company" or the abbreviation "LLC" or "LC." If you wish to abbreviate "limited company," you must use the abbreviation "LTD CO."

Your LLC's name must be distinguishable from the names of other business entities already on file with the Kentucky Secretary of State. Names may be checked for availability by searching the Kentucky Secretary of State's business name database. You may reserve a name for up to 120 days by filing a Reservation or Renewal of Reserved Name (Form RES) with the Secretary of State. The reservation may be filed online or by mail. The filing fee is $15.

2. Appoint a Registered Agent

Every Kentucky LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC's behalf if it is sued. A registered agent may be an individual who resides in Kentucky, or a domestic or foreign business entity authorized to do business in Kentucky. The registered agent must have a physical street address in Kentucky.

3. File Articles of Organization

A Kentucky LLC is created by filing Articles of Organization for a Limited Liability Company (Form KLC) with the Kentucky Secretary of State. The articles must include:

• the LLC's name
• the LLC's street address
• the name and address of the LLC's registered agent
• the mailing address of the LLC's initial principal office
• whether the LLC is managed by members or a manager
• the effective date of the articles
• checked boxes showing the LLC's size and general nature of business, and
• signatures of the LLC's organizer and registered agent.

The articles may be filed online or by mail. The filing fee is $40.

4. Prepare an Operating Agreement

An LLC operating agreement is not required in Kentucky, but is highly advisable. This is an internal document that establishes how your LLC will be run. It sets out the rights and responsibilities of the members and managers, including how the LLC will be managed. It can also help preserve your limited liability by showing that your LLC is truly a separate business entity. In the absence of an operating agreement, state LLC law will govern how your LLC operates.

For help creating an LLC operating agreement, see Form Your Own Limited Liability Company, by Anthony Mancuso (Nolo) or use Nolo's Online LLC. If an operating agreement is created, it need not be filed with the Articles of Organization.

5. Obtain an EIN

If you form a one-member LLC, you must obtain an EIN for it only if it will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online application on the IRS website. There is no filing fee.

6. File Annual Reports

All LLCs doing business in Kentucky must file an annual report with the Secretary of State by June 30 every year. When filing your first annual report you must submit the names and addresses of your LLC's members and managers, confirm the principal and registered office/agent, and sign and date the report. Subsequent annual reports must confirm the same information.The initial annual report is due between January 1 and June 30 of the year following the calendar year in which the LLC was formed. Subsequent annual reports must be filed with the Secretary of State between January 1 and June 30 of the following calendar years. The report may be filed online, by returning the annual report postcard your LLC will receive in January, or by printing out and mailing the annual report. The filing fee is $15. For more information on Kentucky LLC annual report requirements, see Nolo's article, Kentucky LLC Annual Filing Requirements.