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Starting a Small Business in Kentucky: Startup Loans & More

Reviewed by Ty Crandall

July 7, 2024


Starting a Business in Kentucky

A new business in Kentucky is in your reach. So have you been wondering: just how do I start a business in Kentucky? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Kentucky during a recession?

New Business in Kentucky: Advantages and Disadvantages

Kentucky comes out as the eighth worst state to start a new business in, per a 2016 article. And this is for the whole nation, according to Business Insider. This is despite thriving metropolitan areas such as Louisville.

One positive is that the state has a somewhat cheap cost of living. But its productivity score lags behind four fifths of the country. There also seems to be less market opportunity to start a business in Kentucky than in other states.

Recent Improvements

In 2018, Forbes lists Kentucky as its number 36. Also in 2018, Fit Small Business is in nearly perfect agreement, and clocks Kentucky in at number 35. Keep in mind, all three websites have differing criteria.

Forbes praises Kentucky for its better than average business costs and quality of life. The regulatory environment is slightly worse than the average. But the economic climate and growth prospects are somewhat worse than average.  And labor supply is an abysmal 48th for the nation.

Fit Small Business says Kentucky has a better than average cost of living and startup activity.  But everything else is worse than average. The cost of starting a business and the labor market are in the worst ten. Labor market is a measure of the desirability of an area and the number of people with bachelor’s degrees.

Conditions in Kentucky have certainly improved. Although you may have some trouble with hiring, if you choose to start a new business in Kentucky.

Start a New Business in Kentucky – New Business in Kentucky: Programs

The “Kentucky Small Business Investment Credit” is meant to encourage job creation. This is by providing a nonrefundable state income tax credit to small businesses which hire one or more people. And/or they must invest at least $5,000 in qualifying equipment or technology. Most for-profit businesses with up to 50 full time employees are eligible.

Kentucky Reinvestment Act

The “Kentucky Reinvestment Act” program can help any company engaged in manufacturing and related functions within the commonwealth. Benefits are available for up to ten years. This includes tax credits equaling up to 100% of corporate income tax liability.

Kentucky Industrial Revitalization Act

Under the “Kentucky Industrial Revitalization Act, companies can get tax credits, Kentucky Corporation License Fee credits, and job assessment fees for up to ten years. These incentives can equal up to 75% of the cost of the rehabilitation or construction of buildings, along with refurbishing or purchasing equipment.

Here is precisely how to start a new business in Kentucky.

Kentucky New Business Secretary of State Requirements

Start a New Business in Kentucky – Register a Business Name

Choose a business name and structure at the Kentucky One Stop Business Portal.

A business owner must have a unique corporate name for their business to incorporate in Kentucky. Before a business owner can file to incorporate, they should be sure that the name they want is not already in use by another corporation.

They should conduct a thorough search of online records and other databases. To check name availability in Kentucky, go to the official website of the Secretary of State.

It is not necessary for a business owner to reserve the corporate name they want, but if they would like to reserve a name until they can file to incorporate, they can submit an application to the Kentucky Secretary of State.

Download the application online at Reserve A Kentucky Corporate Name on the Kentucky Secretary of State website. It costs $15.00 to reserve a corporate name. The name will then be reserved for a period of 120 days.

Business Permits and Licenses

The One Stop Business Portal is your best bet for finding occupational licenses or permits you need.

Local Permits and Licenses

There is a list at the Kentucky State Board of Elections. There is also an Excel spreadsheet of county offices information. Also, the Kentucky League of Cities has a directory of city offices and websites.


Business Registration

Forms are available at the Kentucky Secretary of State website. But the Kentucky One Stop Business Portal tends to be the most efficient option.

Tax Registration

The Kentucky Department of Revenue keeps a useful checklist for registering for taxes. You will eventually end up back at the One Stop Business Portal.

Start a New Business in Kentucky – Virtual Offices

Alliance Virtual Offices offers Kentucky virtual office space in Lexington and Louisville.

For other areas of the state, be sure to check with Regus for Kentucky virtual business space. Or business owners might want to try local business owners. Or they can ask computer user groups for help in this area. Other options may be to seek virtual business office space in neighboring states. These are Illinois, Indiana, Missouri, Ohio, Tennessee, Virginia, and West Virginia.

Start a New Business in Kentucky – Build Business Credit

Business credit is credit in a small business’s name. It doesn’t connect to an entrepreneur’s individual credit, not even when the owner is a sole proprietor and the sole employee of the company.

Accordingly, an entrepreneur’s business and consumer credit scores can be very different.

The Advantages

Since company credit is separate from individual, it helps to secure a small business owner’s personal assets, in the event of legal action or business bankruptcy.

Also, with two separate credit scores, an entrepreneur can get two different cards from the same merchant. This effectively doubles buying power.

Another advantage is that even startups can do this. Going to a bank for a business loan can be a formula for frustration. But building company credit, when done the right way, is a plan for success.

Personal credit scores depend upon payments but also other considerations like credit use percentages.

But for company credit, the scores truly only depend on if a small business pays its debts on a timely basis.

Information on how you can Discover 7 Easy Vendors to Start Building Business Credit Immediately - without a Personal Credit Check or Guarantee via Credit Suite

Company Fundability™

A company has to be Fundable to lenders and vendors.

Hence, a small business will need a professional-looking website and e-mail address. And it needs to have website hosting bought from a hosting company.

Also, business telephone numbers need to have a listing on ListYourself.net.

Likewise, the company phone number should be toll-free (800 exchange or the equivalent).

A business will also need a bank account dedicated purely to it, and it must have all of the licenses necessary for operation.

Working with the Internal Revenue Service

Visit the IRS web site and get an EIN for the small business. They’re free. Select a business entity such as corporation, LLC, etc.

A business can get started as a sole proprietor. But they should change to a form of corporation or an LLC.

This is in order to limit risk. And it will make the most of tax benefits.

A business entity will matter when it comes to taxes and liability in the event of litigation. A sole proprietorship means the owner is it when it comes to liability and taxes. Nobody else is responsible.

Information on how you can Discover 7 Easy Vendors to Start Building Business Credit Immediately - without a Personal Credit Check or Guarantee via Credit Suite

Kicking Off the Business Credit Reporting Process

Start at the D&B web site and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a small business in their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s web sites for the small business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process.

In this manner, Experian and Equifax will have activity to report on.

Vendor Credit

First you should establish trade lines that report. This is also called vendor credit. Then you’ll have an established credit profile, and you’ll get a business credit score.

Start a New Business in Kentucky Credit Suite

And with an established business credit profile and score you can start to get more credit.

These sorts of accounts have the tendency to be for the things bought all the time, like outdoor work wear, ink and toner, and office furniture.

But first of all, what is trade credit? These trade lines are credit issuers who will give you initial credit when you have none now. Terms are frequently Net 30, rather than revolving.

Hence, if you get approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term. Such as within 30 days on a Net 30 account.

You want 3 of these to move onto more credit.

Start a New Business in Kentucky – Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and fix any inaccuracies ASAP. Get in the practice of taking a look at credit reports. And dig into the specifics, not just the scores.

We can help you monitor business credit at Experian, Equifax, and D&B for only 92% less.

Update Your Data

Update the relevant information if there are inaccuracies or the relevant information is incomplete.

Start a New Business in Kentucky – Fix Your Business Credit

So, what’s all this monitoring for? It’s to challenge any errors in your records. Mistakes in your credit report(s) can be corrected. Disputing credit report errors usually means you precisely itemize any charges you challenge.

Information on how you can Discover 7 Easy Vendors to Start Building Business Credit Immediately - without a Personal Credit Check or Guarantee via Credit Suite

Start a New Business in Kentucky – A Word about Building Business Credit

Always use credit sensibly! Never borrow more than what you can pay back. Track balances and deadlines for repayments. Paying off punctually and in full will do more to raise business credit scores than just about anything else.

Growing small business credit pays off. Excellent business credit scores help a business get loans. Your lender knows the small business can pay its financial obligations. They understand the small business is bona fide.

The small business’s EIN links to high scores. And loan providers won’t feel the need to ask for a personal guarantee.

Business credit is an asset which can help your small business for many years to come.

Learn more here and get started toward opening a new business in Kentucky.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

Kentucky’s Response to COVID-19

This is what Kentucky is doing about COVID-19. On March 6, Governor Andy Beshear declared a state of emergency. Public-facing facilities can only stay open if six-foot minimum social distancing is possible. The Commonwealth also provided guidelines for correctional facilities.

On March 16, Kentucky filed an application for an economic injury disaster loan declaration to get access to small business disaster assistance loans from the SBA. These loans will be for up to $2 million to small businesses affected by COVID-19.

Kentucky will be receiving at least $1.25 billion in relief. This includes funding to help Kentucky colleges and universities.

About the author 

Janet Gershen-Siegel

Janet Gershen-Siegel is the seasoned Finance Writer and a former content manager at Credit Suite. She has been admitted to practice law for over 30 years, with a focus on litigation and product liability, and is a published author, with writing credits at Entrepreneur, FedSmith.com and BusinessingMag.com.

She has a BA in Philosophy from Boston University, a JD from the Delaware Law School of Widener University, and a MS in Interactive Media (Social Media) from Quinnipiac University.

She regularly writes for Credit Suite, which helps businesses improve Fundability™, build credit, and get approved for loans and credit lines.

Her specialties: business credit, business credit cards, business funding, crowdfunding, and law

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