Kentucky LLC Tax Filing Requirements (2026)

Fact-checked by the LegalGlass editorial team against primary sources · Published Aug 6, 2026 · Last updated Aug 6, 2026

A Kentucky LLC is taxed federally by default as a disregarded entity or partnership, and it owes the Kentucky Limited Liability Entity Tax (LLET) with a $175 minimum. LLCs file Form 725 or Form 765, members pay Kentucky income tax on their distributive shares, and the state sales and use tax rate is 6%.

Federal Default Taxation of a Kentucky LLC

An LLC is a state-law entity, not a federal tax category, so the first question in any tax analysis is how the IRS classifies it. By default, a single-member Kentucky LLC is a disregarded entity: the IRS ignores it, and the owner reports business income and expenses on Schedule C with their Form 1040, paying income tax and 15.3% self-employment tax on the profit. A multi-member LLC is a partnership by default, filing federal Form 1065 and issuing Schedule K-1s to members, who report their shares on their own returns.

This default treatment is set by the federal "check-the-box" rules and applies before any Kentucky-specific tax. Kentucky generally follows the federal classification for income-tax purposes, so a disregarded LLC or a partnership LLC passes income through to its owners at the state level too. The important Kentucky wrinkle is that the state adds an entity-level tax — the LLET — on top of that pass-through treatment, which we cover below. For the overall framework, see S-Corp vs LLC.

Choosing S-Corp or C-Corp Taxation

An LLC can change its federal tax treatment by election. Filing IRS Form 8832 lets an LLC be taxed as a C corporation; filing IRS Form 2553 lets an eligible LLC be taxed as an S corporation. An S-corporation election is popular with profitable owner-operated businesses because it lets an owner-employee split pay between a reasonable salary (subject to payroll tax) and distributions (not subject to self-employment tax). Kentucky recognizes these federal elections for income-tax purposes.

Changing federal tax status does not remove the LLET. Whether your LLC is taxed as a partnership, a disregarded entity, or a corporation, it remains a limited-liability entity doing business in Kentucky and is subject to the LLET. The election changes how income is reported and taxed, not whether the entity-level LLET applies. Model the trade-offs with our self-employment tax calculator before electing, and confirm your EIN is in place via how to get an EIN.

The Kentucky Limited Liability Entity Tax (LLET)

The Limited Liability Entity Tax is Kentucky's entity-level tax on LLCs and other limited-liability businesses. It is computed as the greater of two measures: $0.095 per $100 of the entity's Kentucky gross receipts, or $0.75 per $100 of the entity's Kentucky gross profits. Regardless of the calculation, there is a minimum LLET of $175, so even a small or unprofitable Kentucky LLC generally owes at least $175 for the year. Smaller businesses below statutory receipt thresholds pay only the minimum.

The LLET is reported on the LLC's Kentucky return and is separate from the income tax paid by the members. Kentucky provides a mechanism so that the LLET is not fully duplicated at the individual level, but the entity must still file and pay the tax. Because the exact thresholds and any small-business reductions can change, confirm the current figures with the Kentucky Department of Revenue when you file. For related recurring obligations, see Kentucky annual report.

Kentucky Income Tax and the Pass-Through Election

Because a default LLC is a pass-through, its profit is taxed to the members rather than to the entity for income-tax purposes. Members report their distributive shares on their Kentucky individual income tax returns and pay Kentucky's flat individual income tax on that income. Kentucky has been reducing its flat rate over time, so confirm the current rate with the Department of Revenue rather than relying on a prior year's figure. Nonresident members may have Kentucky filing or withholding obligations on their Kentucky-source income.

Kentucky also offers a pass-through entity (PTE) tax election, which lets an LLC elect to pay Kentucky income tax at the entity level on the members' behalf. This election is designed to work around the federal cap on state-and-local-tax deductions by shifting the state tax to the entity, where it may be deductible. Whether the election helps depends on each member's situation, so it is worth a conversation with a tax professional. See the broader business tax hub for how these pieces fit together.

Kentucky Sales and Use Tax

If your LLC sells taxable goods or certain services in Kentucky, you must register for and collect sales and use tax. Kentucky's state sales and use tax rate is 6%, and unlike many states Kentucky does not add local sales taxes on top. You register for a sales tax account through the Kentucky Business One Stop portal, then collect the tax on taxable sales and remit it to the Department of Revenue on the filing schedule the state assigns based on your volume.

Kentucky has expanded sales tax to cover a range of services in recent years, so do not assume a service-based business is automatically exempt — check the current list of taxable services. Registration for sales tax is typically handled at the same time you register the business for its other tax accounts. For the formation side of setting up your entity, see how to form an LLC in Kentucky and Kentucky Articles of Organization.

Forms, Due Dates, and Registration

The core LLC returns are Form 725 for a single-member LLC and Form 765 for a multi-member LLC; a corporation-taxed LLC files the corporate return instead. These returns report the LLET and pass income through to the owners. Kentucky income tax returns generally follow the federal calendar, with the annual return due in the spring for calendar-year filers, and estimated payments required when liability is large enough. Confirm the exact current-year due dates and any extensions with the Department of Revenue.

Before your first filing, register the business for its Kentucky tax accounts — income tax withholding if you have employees, sales tax if you make taxable sales, and the LLET — through the Kentucky Business One Stop. Keep your registered agent and state filings current so the entity stays in good standing. When it is time to wind down, review how to dissolve a Kentucky LLC, and compare Kentucky's approach with a neighboring state such as a single-member LLC setup.

Frequently Asked Questions

How is a Kentucky LLC taxed by default?

By federal default, a single-member Kentucky LLC is a disregarded entity reported on the owner's Schedule C, and a multi-member LLC is a partnership filing Form 1065. Either can elect C-corp or S-corp taxation.

What is the Kentucky LLET?

The Limited Liability Entity Tax is Kentucky's tax on LLCs. It is the greater of $0.095 per $100 of Kentucky gross receipts or $0.75 per $100 of Kentucky gross profits, with a minimum of $175.

What forms does a Kentucky LLC file?

A single-member LLC generally files Kentucky Form 725, and a multi-member LLC files Form 765. These report the LLET and pass income through to members, who report it on their own Kentucky returns.

Does a Kentucky LLC pay sales tax?

If it sells taxable goods or services, yes. Kentucky's sales and use tax rate is 6%. You register through the Kentucky Business One Stop and remit the tax to the Department of Revenue.

Do Kentucky LLC members pay state income tax?

Yes. Because the LLC is a pass-through, members report their shares on their Kentucky individual income tax returns and pay the state's flat income tax, in addition to the entity's LLET.

Related

• Business tax (cluster hub)
• How to form an LLC in Kentucky
• S-Corp vs LLC
• How to get an EIN
• Kentucky annual report
• Kentucky registered agent
• Kentucky operating agreement

Sources

1. Kentucky Department of Revenue — Business Taxes.
2. Kentucky Department of Revenue — Corporation Income and Limited Liability Entity Tax ($175 minimum LLET).
3. Kentucky Department of Revenue — Business Tax Forms (725, 765).
4. Kentucky Department of Revenue — Individual Income Tax.
5. Kentucky Department of Revenue — Sales and Use Tax (6%).
6. Kentucky Department of Revenue — Pass-Through Entities.
7. Kentucky Business One Stop — Register or Manage a Business.
8. IRS — Limited Liability Company (LLC).
9. IRS — About Schedule C (Form 1040).
10. IRS — About Form 1065 (partnership return).
11. IRS — About Form 2553 (S-corp election).
12. IRS — About Form 8832 (entity classification election).
13. Kentucky Revised Statutes — Chapter 141, Income Taxes (LLET) (via Justia).
14. Kentucky Revised Statutes — Chapter 139, Sales and Use Taxes (via Justia).
15. Cornell LII — 26 CFR § 301.7701-3 (entity classification).

LegalGlass provides general information for educational purposes and is not a law firm or a substitute for advice from a licensed attorney or tax professional. Tax laws, rates, and thresholds change; verify current requirements with the Kentucky Department of Revenue and the IRS before acting.