How to get Foreign Qualification in Kentucky (2022)

Do you own a limited liability company (LLC) created in a state other than Kentucky, but you want to expand your business to the Bluegrass State? If so, you’ll need to qualify your foreign LLC in order to transact business in Kentucky.

What is a foreign qualification and how do foreign LLCs function within the state of Kentucky? In this guide, we’ll answer these questions and more.

What Is a Foreign Qualification?

A foreign qualification enables your limited liability company to do business in the state of Kentucky. It doesn’t matter which state you originally formed your business in ― or in other words, the state your domestic LLC is located in ― as the qualification process to register a foreign LLC in Kentucky is the same regardless of where your domestic LLC is based.

The confusion surrounding foreign qualification usually centers on what it means to “do business” in a state outside of your primary state. This gets especially problematic considering some states don’t strictly define what it means to transact business in that state. However, Kentucky state law does define exactly what does and does not qualify as “doing business in the state”.

What Qualifies as ‘Doing Business’ in Kentucky

In general, you’ll need to form a foreign LLC in Kentucky if your business pursues any of the following activities in this state:

• Having a commercial domicile in the state
• Owning or leasing property in the state
• Having one or more individuals performing services in the state
• Maintaining an interest in a pass-through entity doing business in the state
• Directing activities at Kentucky customers for the purpose of selling them goods or services
• Deriving income from, or attributable to, sources within this state

What Does NOT Qualify as ‘Doing Business’ in Kentucky

Meanwhile, the following activities are not considered to be “doing business” in Kentucky, and you do not need to qualify a foreign LLC to pursue them:

• Maintaining, defending, or settling any court proceeding
• Holding meetings
• Maintaining bank accounts
• Maintaining offices or agencies for the transfer, exchange, and registration of the entity’s own securities
• Selling through independent contractors
• Soliciting or obtaining orders, if the orders require acceptance outside the state before they become contracts
• Creating or acquiring indebtedness, mortgages, and security interests
• Securing or collecting debts, or enforcing mortgages and security interests in property securing the debts
• Owning real or personal property
• Conducting an isolated transaction that is completed within 30 days
• Transacting business in interstate commerce

It’s important to note that Kentucky actually specifically excludes some business acts that do count as transacting business in some states ― like holding meetings and maintaining bank accounts ― which makes Kentucky’s laws in this manner more lax than many other states.

How to Get Foreign Qualification in Kentucky

If you want to foreign qualify your LLC in Kentucky, you’ll need to file a Certificate of Authority for a Foreign Business Entity. This is a relatively simple one-page form that you submit to the Secretary of State. The information required in the Certificate of Authority includes:

• Your company’s name
• The state where the domestic LLC is located
• Mailing address of the domestic LLC
• Name and address of your Kentucky registered agent
• Name and address of the LLC manager
• Signatures of LLC manager and registered agent

Filing Fee: $90, with the check written to the “Kentucky State Treasurer.”

What Is the Penalty for Not Getting Foreign Qualification in Kentucky?

There are two major penalties for failing to qualify a foreign LLC in Kentucky. First, the business would be responsible for a $2 financial penalty for each day it does business in Kentucky without filing the Certificate of Authority, which is insignificant on the surface, but could add up over time. Potentially much more damaging is the second penalty, which is that your business will not be allowed to maintain a proceeding in the Kentucky court system without a Certificate of Authority. This means that individuals and businesses could fail to honor contracts with your business, and you wouldn’t be able to do anything about it legally.

Should I Hire a Business Service Provider to File My Kentucky Foreign Qualification?

If you don’t want to handle your foreign qualification on your own, you have options. Some entrepreneurs choose to hire a lawyer to prepare and file their Certificate of Authority, which can be a good option if you’re concerned about getting the job done right. However, attorney’s fees can be quite expensive.

The other option is to hire a business service provider like Incfile or ZenBusiness to register your foreign LLC with the state of Kentucky.

These companies can typically get your foreign qualification done for a fraction of the price of an attorney. This is our preferred route if you don’t want to go with the DIY option.

Conclusion

The process for getting a foreign qualification in the state of Kentucky isn’t particularly complicated compared to some other states. In addition, Kentucky’s rules and regulations regarding which LLCs need to foreign qualify are considerably looser than many states. Still, this isn’t a process that should be overlooked or taken lightly, because the penalties for not qualifying a foreign LLC in Kentucky can be severe in some cases ― especially if someone you do business with doesn’t live up to their end of a contract and you’re unable to sue them.

We hope this article managed to answer your questions about obtaining a Kentucky foreign qualification, and we wish you a prosperous business future!