Advantages of Incorporating a Business in Kentucky
Ever wondered where the best selling truck in the U.S – the Ford F-Series is being manufactured? Louisville, Kentucky! A major coal producer, the bluegrass state has been ranked as one of the top states 4 years in a row for new and expanded industry activity per capita. This is the state that is considered as the headquarters for some really major league players including General Motors, Ford, Toyota, Humana, Papa John’s, and YUM! Brand.
Still wondering why you should register a new company in Kentucky?
Advantages of setting up an LLC or Corporation
There is a lot more to Kentucky than meets the eye! Over the years, the state has offered a variety of incentives, tax credits, and grants to small businesses as well as large corporations. Let’s take a look at what advantages are there for your business, if you register in this state.
Advantage#1: Salient benefits of Corporation or LLC
- Independent Life: One of the salient advantages of an S Corporation in Kentucky is that it enjoys an independent life. The death or incapacitation of a stockholder will not disturb operations of the business.
- Tax Credit: One of the advantages of a startup company in Kentucky is the Kentucky Small Business Tax Credit (KSBTC) program. Eligible businesses paying taxes imposed by program KRS 141.040 (corporation income tax) can apply for a non-refundable state income tax credit that can vary from $3,500 – $25,000.
- Pass through taxation: If you register a new company in Kentucky as an S corporation then the corporation or firm will not pay any income tax. Instead, the income or loss of the corporation will be passed on to the stockholders.
- Limited Liability: If you register a new business in Kentucky as an LLC then you will be able to enjoy limited liability protection. This means claimants can sue the LLC and not the owner or investors.
- Flexible Profit Distribution: An LLC has the benefit of being able to select different ways of distribution of profits.
- State Tax Credit: One of the advantages of a startup company in Kentucky is the Kentucky Small Business Tax Credit (KSBTC) program. Eligible businesses paying taxes imposed by program KRS 141.0401 (limited liability entity tax) can apply for a non-refundable state income tax credit that can vary from $3,500 – $25,000.
Advantage#2: Business Incentives
The number of small businesses in Kentucky grew from 341,147 in 2015 to 347,159 in 2017 and this trend is mostly due to the variety of business incentives provided through state based programs. Once you register a new business in Kentucky, you will be able to qualify for most of the programs and this can help promote financial growth and expansion for businesses in a large number of industries. Let’s look at some of the top programs in the Bluegrass State.
- Kentucky Tourism Development Act (KTDA): The KTDA targets a startup company in Kentucky that helps in promoting or supporting new or existing tourism projects. As a part of the program, businesses can benefit from sales tax credit incentives.
- Kentucky Business Investment (KBI) Program: The primary objective of the KBI program is to provide income tax credits to new as well as existing businesses in the state. The tax credits can be earned in several areas including non-retail technology or service, energy-efficient alternative fuels, manufacturing and alternative fuel among others.
- Direct Loan Program: This a pro-business program initiated by Kentucky Economic Development Finance Authority (KEDFA). The objective of this program is to provide long term financing in industries like tourism, agribusiness, service industry, and industrial ventures. If you register a new company in Kentucky, you can benefit from this loan at below-market interest rates.
- Kentucky Small Business Loan Program: The objective of this Kentucky loan program is to help a small business to acquire funding that is required for starting or growing their business. This program has been initiated by Kentucky Economic Development Finance Authority (KEDFA) and can finance up to 100% of the project cost.
Are there any Disadvantages of Incorporating in Kentucky?
When you register a new business in Kentucky, you can be rest assured that there is a wide variety of business incentives to leverage on but are there any disadvantages? There are limited numbers of disadvantages that are dependent on the type of business you register. For example, the disadvantage of an LLC is that it will get dissolved when a member dies or if it goes bankrupt. Similarly, incorporation may lead to higher overall taxes. These disadvantages far outweigh the benefits and advantages of forming a business in Kentucky.
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