Key Takeaways
- Kentucky taxes LLC pass-through income at Flat 3.5%
- Limited Liability Entity Tax (LLET): The lesser of 0.095% of Kentucky gross receipts or 0.75% of Kentucky gross profits; historically a $175 minimum, now $0 if Kentucky gross receipts are under $100,000, due Generally tracks the income tax return deadline (typically the 15th day of the 4th month after year-end, April 15 for calendar-year filers) — confirm the exact due date directly with the Kentucky Department of Revenue
- Sales Tax: 6.00%
- Annual Report due June 30 every year (filing window opens January 1), $15 fee
- Federal self-employment tax of 15.3% applies to net LLC profit regardless of state
- Kentucky automatically follows the federal S-Corp election, but S-corps still owe LLET just like any other liability-limited entity — the election does not create an exemption. With the 2026 sub-$100,000 gross-receipts exemption, very small S-corps may now escape LLET entirely.
- Same-day formation and compliance filing available through LLC Attorney at no markup on state fees
Kentucky's flat 3.5% income tax is only half the picture — nearly every Kentucky LLC also owes the Limited Liability Entity Tax (LLET), a separate entity-level filing that historically hit even the smallest LLCs with a $175 minimum. That changed for 2026: LLCs with under $100,000 in Kentucky gross receipts are now fully exempt.
This guide covers exactly what a Kentucky LLC owes in 2026 — state and federal tax obligations, how LLET works and who's now exempt, the $15 Annual Report, and why electing S-corp status doesn't get you out of LLET.
Kentucky Personal Income Tax on LLC Profit
By default, a Kentucky LLC is a pass-through entity for federal purposes — the LLC itself doesn't pay federal income tax, and profit flows through to the owners' personal returns, taxed once at Kentucky's flat 3.5% rate. But Kentucky adds a second, entity-level tax on top of this personal-level tax that most other pass-through states don't have — the Limited Liability Entity Tax, described below, which is the single most important thing to understand about Kentucky LLC taxation.
Kentucky's rate: Flat 3.5%
Kentucky's flat rate dropped to 3.5% effective January 1, 2026 (down from 4.0% in 2025), applied after a $3,360 standard deduction, under House Bill 1's automatic revenue-trigger phase-down mechanism — the rate has stepped down nearly every year since 2023 and may continue dropping in future years as triggers are met.
Kentucky's Limited Liability Entity Tax (LLET)
Every Kentucky LLC with Kentucky gross receipts of $100,000 or more owes LLET — the lesser of 0.095% of gross receipts or 0.75% of gross profits, with a $175 minimum for most filers under $3 million in gross receipts/profits. Entities under the new $100,000 gross-receipts threshold are fully exempt starting with tax years beginning on or after January 1, 2026 — genuinely good news for the smallest LLCs, who previously owed the flat $175 regardless of how little they earned. Single-member LLCs owned by an individual typically file LLET on Form 725, while multi-member entities file it alongside their pass-through return.
LLET applies to essentially every entity with liability protection — LLCs, S-corps, C-corps, LPs, and LLPs alike — and it's a second, separate tax return most first-time Kentucky LLC owners don't expect. For tax years beginning on or after January 1, 2026, this changed meaningfully: entities with Kentucky gross receipts under $100,000 are now fully exempt from LLET, so the old $175 floor no longer applies to the smallest LLCs. Electing S-corp status doesn't avoid LLET — it's an additional layer on top of whatever federal self-employment-tax savings the S-corp election produces.
Kentucky Sales Tax
Kentucky has a flat 6.00% state rate with zero local sales tax add-ons anywhere — like Indiana, one of the simplest sales tax states to operate in. Most retailers of tangible personal property and specifically enumerated services need to register and collect.
- State rate: 6.00%
- Registration: Kentucky One Stop Business Portal registration (commonly referenced as Form 10A100), No fee fee with the Kentucky Department of Revenue
- Confirm your specific filing frequency and exact registration form number directly at onestop.ky.gov, since the Department of Revenue assigns frequency based on your estimated liability.
Kentucky Annual Report Requirement
Kentucky requires every LLC to file Annual Report with the Kentucky Secretary of State, due June 30 every year (filing window opens January 1). Filing fee: $15.
Missing the June 30 deadline moves the LLC to 'bad standing,' triggering a delinquency notice with a 60-day cure period before administrative dissolution.
Reinstatement costs $100 plus all missed Annual Report fees through the Kentucky Secretary of State.
Federal Self-Employment Tax and How Your Kentucky LLC Is Classified
Regardless of which state you're in, LLC owners who materially participate in the business owe federal self-employment tax — 15.3% on net profit, covering Social Security (up to the $184,500 (2026) wage base) and Medicare (no cap).
Single-Member LLCs
A single-member Kentucky LLC defaults to a disregarded entity — you report income and expenses on Schedule C of your personal Form 1040 and compute self-employment tax on Schedule SE. If owned by an individual, LLET is typically filed on Form 725.
Multi-Member LLCs
A multi-member Kentucky LLC defaults to partnership taxation, filing Form 1065 and issuing each member a Schedule K-1. LLET is filed alongside the pass-through return regardless of member count — the tax itself applies the same way whether the LLC is single- or multi-member.
Should Your Kentucky LLC Elect S-Corp Taxation?
An S-Corp election lets you split LLC profit into a reasonable salary (payroll-taxed) and distributions (not subject to self-employment tax), once the business is consistently profitable enough to justify the added payroll complexity.
Kentucky's treatment: Kentucky automatically follows the federal S-Corp election, but S-corps still owe LLET just like any other liability-limited entity — the election does not create an exemption. With the 2026 sub-$100,000 gross-receipts exemption, very small S-corps may now escape LLET entirely.
Because LLET applies at the entity level regardless of federal tax classification, the S-Corp calculus in Kentucky has to weigh federal self-employment-tax savings against LLET as an unavoidable add-on — though for LLCs under the new $100,000 gross-receipts threshold, that add-on may now be $0 rather than the historical $175 floor.
Kentucky LLC Tax Costs at a Glance
How to Handle Your Kentucky LLC's Taxes
If You Do It Yourself
Step 1 — Get your federal EIN before anything else.
Apply for your EIN for free directly at irs.gov — a purely federal application with no Kentucky-specific step.
Step 2 — Confirm your default federal tax classification.
A single-member LLC defaults to a disregarded entity (Schedule C); a multi-member LLC defaults to partnership taxation (Form 1065 plus Schedule K-1 for each member). Neither requires a separate election — this is automatic unless you file Form 8832 or Form 2553 to change it.
Step 3 — Register with the Kentucky Department of Revenue if required for state income tax withholding or estimated payments.
Kentucky's flat rate dropped to 3.5% effective January 1, 2026 (down from 4.0% in 2025), applied after a $3,360 standard deduction, under House Bill 1's automatic revenue-trigger phase-down mechanism — the rate has stepped down nearly every year since 2023 and may continue dropping in future years as triggers are met.
Step 4 — Register for sales tax if you sell taxable goods or services.
File Kentucky One Stop Business Portal registration (commonly referenced as Form 10A100) with the Kentucky Department of Revenue at onestop.ky.gov, No fee fee. Confirm your specific filing frequency and exact registration form number directly at onestop.ky.gov, since the Department of Revenue assigns frequency based on your estimated liability.
Step 5 — Register for payroll/reemployment tax the moment you hire your first employee.
The moment you hire your first employee, register with the Kentucky Office of Unemployment Insurance. The 2026 new-employer rate is 2.7% (9.0% for construction), applied to a taxable wage base of $12,000.
Step 6 — Set up quarterly estimated tax payments.
If you expect to owe $1,000 or more in combined federal and Kentucky tax for the year, both the IRS and Kentucky DOR expect quarterly estimated payments covering income tax, LLET, and federal self-employment tax on your LLC profit.
Step 7 — Calendar your Limited Liability Entity Tax (LLET) due date.
Limited Liability Entity Tax (LLET) (Form 725 (single-member LLCs owned by an individual) or as part of the pass-through/corporate return (Form PTE with LLET schedules) for multi-member entities) is due Generally tracks the income tax return deadline (typically the 15th day of the 4th month after year-end, April 15 for calendar-year filers) — confirm the exact due date directly with the Kentucky Department of Revenue, The lesser of 0.095% of Kentucky gross receipts or 0.75% of Kentucky gross profits; historically a $175 minimum, now $0 if Kentucky gross receipts are under $100,000. Missing it puts your LLC in bad standing with the Kentucky Department of Revenue.
Step 8 — File your Annual Report every Kentucky deadline.
Annual Report is due June 30 every year (filing window opens January 1) with the Kentucky Secretary of State, $15 fee.
Step 8 — Decide whether an S-Corp election makes sense once your LLC is consistently profitable.
Because LLET applies at the entity level regardless of federal tax classification, the S-Corp calculus in Kentucky has to weigh federal self-employment-tax savings against LLET as an unavoidable add-on — though for LLCs under the new $100,000 gross-receipts threshold, that add-on may now be $0 rather than the historical $175 floor.
Step 9 — Watch for Kentucky-specific tax traps.
LLET is the standout trap — many first-time Kentucky LLC owners don't realize there's a second tax return and liability beyond income tax, historically a flat $175 no matter how small the business. The 2026 sub-$100,000 exemption is genuinely good news worth highlighting for very small businesses, but confirm the exact Form 725 due date and current sales tax registration form number directly with the Kentucky Department of Revenue before relying on precise figures.
Step 10 — Keep business and personal finances completely separate.
Commingling funds is the single biggest reason courts pierce the LLC liability shield, and it also makes tax preparation far more error-prone. Run all business income and expenses through a dedicated business bank account and keep receipts.
If LLC Attorney Does It for You
- Submit your information at llcattorney.com — entity classification, expected revenue, and whether you'll be hiring employees or collecting sales tax.
- LLC Attorney obtains your EIN, registers you with the Kentucky Department of Revenue and Kentucky Department of Revenue as needed, and sets up your compliance calendar for Annual Report and Limited Liability Entity Tax (LLET).
- Receive reminders before every deadline through your client portal, plus access to flat-fee attorney consultations (no retainer) when an S-Corp election or multi-state question needs a licensed professional's judgment call.
When Should You Talk to a Tax Professional About Your Kentucky LLC?
A CPA is worth consulting in Kentucky specifically to confirm whether your LLC now qualifies for the new sub-$100,000 gross-receipts LLET exemption, to sort out Form 725 filing mechanics for a single-member LLC, or to run the numbers on an S-Corp election given that LLET applies regardless of the election.
Is Kentucky a State Where Tax Complexity Matters More?
Kentucky's LLET is a real, separate compliance obligation on top of ordinary income tax — one that applies regardless of entity type or S-corp election, and that many owners forming their first Kentucky LLC simply don't expect.
What You Actually Get With LLC Attorney's Kentucky Compliance Service
LLET is the tax most first-time Kentucky LLC owners don't see coming — a separate return, separate liability, and historically a flat cost no matter how small the business. LLC Attorney's Kentucky service makes sure it's never a surprise.
- EIN obtained for you at no extra charge.
- State tax and sales tax registration handled as part of formation, starting at $49.
- An ongoing compliance subscription (available through an ongoing compliance subscription — contact LLC Attorney for current pricing) tracks every Kentucky deadline — Annual Report, Limited Liability Entity Tax (LLET), and registered agent renewal.
- Access to professionally trained Business Success Advisors at no charge, plus flat-fee attorney consultations (no retainer) for S-Corp election analysis and multi-state nexus questions.
Kentucky's LLET catches owners who assume income tax is the only state-level obligation — LLC Attorney keeps your entity-level filings current so the $175 minimum, or the new exemption below it, is never a surprise.
Get Your Kentucky LLC's Taxes Set Up Correctly
Getting your EIN, tax registrations, and compliance calendar right from day one prevents expensive corrections later. LLC Attorney's Kentucky formation service starts at $49, and an ongoing compliance subscription (available through an ongoing compliance subscription — contact LLC Attorney for current pricing) keeps you ahead of every deadline after that. See our full pricing for all service tiers.
Frequently Asked Questions
Yes, in effect — Kentucky calls it the Limited Liability Entity Tax (LLET), and it applies to virtually every LLC, S-corp, and corporation in the state. It's historically been a $175 minimum, but starting with tax years beginning on or after January 1, 2026, entities with Kentucky gross receipts under $100,000 are fully exempt.
Only if you sell taxable tangible personal property or enumerated services. Register through the Kentucky One Stop Business Portal at no cost, then collect the flat 6.00% rate — Kentucky has no local sales tax add-ons anywhere in the state.
Every Kentucky LLC files an Annual Report with the Secretary of State, due June 30 each year (the filing window opens January 1), for a $15 fee — separate from and much simpler than the LLET filing.
Missing the June 30 Annual Report deadline triggers a delinquency notice with a 60-day cure period before administrative dissolution. Reinstatement afterward costs $100 plus all missed Annual Report fees.
It depends on your profit level, but Kentucky adds a real wrinkle: LLET applies to essentially every liability-limited entity, S-corps included, so electing S-corp status doesn't avoid it. The 2026 sub-$100,000 gross-receipts exemption may eliminate LLET entirely for very small S-corps.
A single-member Kentucky LLC defaults to a disregarded entity for federal tax purposes — you report income on Schedule C and pay self-employment tax via Schedule SE. If owned by an individual, LLET is typically filed on Form 725, separate from your personal income tax return.
If your LLC does business in a state other than the one it's formed in — an office, employees, inventory, or significant sales there — you may have created nexus requiring registration and tax obligations in that state too. This is fact-specific and worth a conversation with a tax professional if you operate in multiple states.
For a typical Kentucky LLC with in-state owners and no employees: a flat 3.5% state income tax on your share of profit, plus LLET (historically a $175 minimum, now $0 if Kentucky gross receipts are under $100,000), the $15 Annual Report, and federal income tax and 15.3% federal self-employment tax (up to the $184,500 Social Security wage base for 2026). Add 6.00% sales tax only if you sell taxable goods or services.
Yes. LLC Attorney's ongoing compliance subscription tracks your Kentucky filing deadlines, handles your Annual Report, and connects you with flat-fee attorney consultations (no retainer) when a tax question needs a licensed professional's judgment call.