Starting a Business in Kentucky: Licenses, Permits & Requirements (2026)

Last updated: October 3, 2026

Starting a business in Kentucky involves choosing a structure, checking operating approvals and setting up the tax and employee accounts your work needs. Use the checklist to make those decisions and find official routes alongside optional services.

Kentucky Business Requirements at a Glance

An LLC is one choice within a larger business setup. Work through the requirements that apply to your activity and address, then choose whether you want paid help with a specific step.

Affiliate links may earn us a commission. Paid providers are optional; official filing routes are included.

Setup step	When it applies & what to budget	Your next step
Choose your business structureChoose first	An LLC can help separate business liabilities from personal assets, but is not required for every business. Kentucky LLC Articles of Organization have a $40 filing fee. Choose a registered agent and office and file with the Secretary of State; tax registration and local permissions remain separate. Paid filing and agent services are optional and can cost extra.	Understand Kentucky LLC costs and filing, or use the official state filing route. Optional filing help: ZenBusiness can prepare and submit the LLC formation filing. Review the package and any recurring add-ons. Form an LLC with ZenBusinessAffiliate · Optional provider
Check licenses & your locationDepends on your work	Check city or county business licensing, zoning and home-occupation rules for your operating address. Food, childcare, construction and regulated professions can require additional licenses or inspections. Forming an entity does not replace permission to carry out a regulated activity.	Find your Kentucky industry guide. Check the city or county for the location where you plan to operate.
Register a trading nameIf using an assumed name	Check the assumed-name filing route for your structure. An LLC or corporation uses Secretary of State records; an unincorporated business may need the county clerk’s process. Registering an assumed name does not create liability protection.	Check the name-registration route for your structure.
Get your federal tax IDIf an EIN is needed	An employer identification number (EIN) identifies your business for federal tax purposes. Whether you need one depends on your structure and activities. It is free from the IRS. If forming an LLC or corporation, form it before applying.	Check eligibility and get an EIN free. You do not need to buy an EIN service.
Register for sales taxIf making taxable sales	Register the applicable Kentucky sales/use and withholding accounts, and check Limited Liability Entity Tax obligations for your chosen structure. Kentucky taxes a range of services as well as goods; exemptions depend on the activity. City or county occupational licensing and tax can add separate duties.	Check tax registration and filing requirements.
Arrange business insuranceRequired coverage varies	Kentucky generally requires workers’ compensation when you have one or more employees, unless an exemption or authorized self-insurance applies. Arrange required coverage before work begins. Review liability, professional, property and vehicle coverage separately for your work, contracts and lease.	Check Kentucky workers’ compensation rules. Optional quote service: Simply Business can help you explore business insurance. Coverage and availability depend on your trade and underwriting. Get business insurance quotesAffiliate · Optional provider
Separate money & keep recordsPractical setup	Choose how you will separate business receipts and expenses, reconcile transactions and save tax records. Compare account fees, cash-deposit access and bookkeeping needs. Account-opening documents depend on the provider and business structure.	Prepare your formation or trading-name documents and tax ID, then compare business accounts. Set up a recordkeeping routine before your first payment.
Put customer agreements in writingDepends on your service	Agree on the work, price, payment dates, exclusions and cancellation terms before starting. A general service-agreement template may help with routine work; regulated or complex jobs can need specific contract terms or legal review.	Optional document service: use LawDepot to customize a service agreement, then check that it fits your work. Create a service agreementAffiliate · Optional provider
Set up invoices & paymentsChoose your payment method	Decide how customers will pay and when invoices are due. Compare transaction fees, hardware costs and payout timing. Buying a particular payment service is not a state requirement.	Optional payment service: explore Square for accepting customer payments and compare its fees with your expected sales. Explore Square paymentsAffiliate · Optional provider
Plan startup costs & cash reservesBorrowing is optional	Add filing costs, equipment, insurance and operating expenses before deciding whether to borrow. Financing options depend on revenue, time in business, credit and lender criteria. A new, pre-revenue business may not qualify.	Optional comparison service: SuperMoney Business Financing lets you explore funding options, subject to eligibility. Compare total repayment cost and payment frequency. Compare business financingAffiliate · Optional provider
Prepare for employeesIf hiring	Before hiring, arrange the applicable state employer accounts, federal payroll withholding and new-hire reporting. Check wage, leave and workplace-notice requirements for where the employee works, and confirm any industry-specific rules.	Check employer registration and reporting
Calendar reports & renewalsFor your entity and licenses	Kentucky business annual reports are generally due June 30 with a $15 filing fee; check whether a specific exemption applies. Keep the registered agent current. State tax returns, local occupational taxes and licenses are separate from the annual report.	Check the official reporting and renewal guidance. Paid filing help is optional and may cost extra.

Need the detailed instructions? Continue below for state filings, employer obligations and links to the licensing agencies.

How to Start a Business in Kentucky (Step by Step)

Step 1: Choose Your Structure and Register It

An LLC is one option, not a requirement for every business. Compare ownership, liability and ongoing obligations before choosing. If an LLC fits your plans, the filing instructions below apply; our Kentucky LLC guide explains the costs and options.

File Articles of Organization through Kentucky Business One Stop (onestop.ky.gov) or directly through the Kentucky Secretary of State. The fee is $40 regardless of online or mail filing. Online filings typically post within 1-3 business days.

LLC name: Your name must include “LLC,” “L.L.C.,” or “Limited Liability Company” and must be distinguishable from existing entities in the SOS database. The SOS provides a name availability search at sos.ky.gov.

Registered agent: Every Kentucky LLC must designate a registered agent with a physical Kentucky street address (no P.O. boxes). You can serve as your own agent if you have a Kentucky address, or hire a third-party agent service ($100-$300/year typical).

Annual report: File between January 1 and June 30 each year after formation. The fee is $15. Failure to file by June 30 puts the entity in bad standing; continued non-filing leads to administrative dissolution. The annual report fee is waived if the LLC is at least 51% owned by a military veteran or active-duty service member.

Certificate of Assumed Name (DBA): If you operate under a name different from your LLC’s legal name, file a Certificate of Assumed Name with the SOS for $20. Sole proprietors file directly with the county clerk in their home county; fees and procedures vary by county.

Get your free federal EIN immediately at IRS.gov — required before opening a business bank account, registering for state taxes, or hiring employees.

Step 2: Register for State Taxes Through Kentucky Business One Stop

Kentucky’s unified business registration portal is Kentucky Business One Stop (onestop.ky.gov). Use it to register for sales/use tax, withholding tax, unemployment insurance, and your Department of Revenue account in a single session.

Kentucky Sales Tax — 6% Statewide, No Local Add-Ons

Kentucky imposes a flat 6% state sales and use tax under KRS 139.200. There are no local sales taxes in Kentucky — no Louisville add-on, no Lexington add-on, no special transit district. The rate is exactly 6% from Paducah to Pikeville. This is one of the simpler sales-tax regimes in the country and is meaningfully different from neighboring Tennessee (combined rates up to 9.75%), Ohio (up to ~8%), and Indiana (7%).

What’s changed since 2018 is the scope of services subject to the 6%. House Bill 487 of 2018 first added landscape services and janitorial services to the tax base effective July 1, 2018. House Bill 8 of 2022 added 30+ additional service categories effective January 1, 2023, including (verify each against the Department of Revenue’s current TaxAnswers FAQ before relying):

• Photography and photofinishing
• Marketing services and lobbying
• Telemarketing
• Personal training, recreation, and fitness club memberships
• Massage services (non-medical)
• Cosmetic surgery (non-medical)
• Body modification, tattoo, piercing
• Limousine and transportation network company services (Uber/Lyft fares above $1.50 surcharge)
• Parking and valet services
• Repair, installation, and maintenance services
• Several others — full list at taxanswers.ky.gov

The de minimis exemption for service providers was raised from $6,000 to $12,000 in gross receipts effective for 2024 and later. Below the threshold, no sales tax registration or collection is required for the affected services. Above it, you must collect 6% from the first dollar of taxable receipts that calendar year.

Kentucky Individual Income Tax — Flat 3.5% in 2026

Kentucky’s individual income tax rate is a flat 3.5% for tax years beginning on or after January 1, 2026, under HB 1 of 2024. The rate dropped from 4.0% in 2025. The phase-down was triggered by General Fund balance and Budget Reserve Trust Fund conditions specified in HB 1; the Office of State Budget Director’s September 2025 review confirmed the conditions were met. A further reduction to 3.0% may apply for tax year 2027 if the fiscal triggers are again satisfied (the General Assembly must affirmatively act on the September 2026 Office of State Budget Director report). Pass-through income from your LLC, S-corp, or partnership flows to your personal Kentucky return at the flat rate.

Kentucky Corporate Income Tax — Flat 5%

C-corporations pay a flat 5% Kentucky corporation income tax under KRS 141.040 (set in HB 366 of 2018). This is separate from and in addition to the LLET. Most small businesses choose LLC or S-corp to avoid C-corp double taxation; the 5% C-corp rate is mostly relevant if your founders/investors push for a C-corp structure for venture funding reasons.

Step 3: The LLET — Kentucky’s Surtax Most New Owners Forget

The Limited Liability Entity Tax (LLET) at KRS 141.0401 is the single Kentucky tax that catches first-time business owners off guard. Every Kentucky LLC, S-corporation, and C-corporation (with limited exceptions for sole proprietorships and certain disregarded entities) pays the LLET on top of regular income tax.

How LLET Is Calculated

The annual LLET is the lower of:

• $950 per $1 million of Kentucky gross receipts (0.095%), or
• $7,500 per $1 million of Kentucky gross profits (0.75%)

…with a $175 minimum. For most small service businesses where labor and materials eat heavily into gross receipts, the gross-receipts method (0.095%) yields the lower number and is the one you actually owe. A landscaping LLC grossing $400,000 owes $380; a cleaning LLC grossing $200,000 owes $190.

The $3 Million Tier

Entities with Kentucky gross receipts or gross profits $3 million or below pay only the $175 minimum LLET. The graduated 0.095%/0.75% calculation kicks in only above that threshold. Most small service businesses sit in the $175-minimum tier their entire life cycle.

Filing

LLET is reported on Form 720 (corporations) or as a separate computation on Form 725 (single-member LLC) due April 15 each year. Estimated payments are required if your prior-year LLET exceeded $5,000.

Step 4: Workers’ Compensation at One Employee

Kentucky requires workers’ compensation insurance for any employer with one or more employees under KRS 342.340 — full-time, part-time, or seasonal — with limited statutory exceptions (true independent contractors, certain agricultural workers, domestic servants in private homes earning below thresholds).

Situation	Kentucky Requirement
1+ full-time employees	Workers’ comp required
1+ part-time or seasonal employees	Workers’ comp required
Family members on payroll	Workers’ comp required (with rare exceptions)
Sole proprietor with no employees	Optional (owner may elect coverage)
Single-member LLC owner-only	Optional (owner may elect)
Misclassified independent contractors	Workers’ comp owed retroactively when audited

Where to get coverage: Quote both KEMI (Kentucky Employers’ Mutual Insurance) and at least two private carriers (Liberty Mutual, Travelers, AmTrust, Hartford). KEMI is Kentucky’s competitive state fund, statutorily required to consider any eligible Kentucky employer; it functions as the carrier of last resort for hard-to-place risks but is not always cheapest for clean books. The Kentucky Department of Workers’ Claims (under the Labor Cabinet) administers the system; penalties for operating without required coverage include daily fines, lost civil immunity, and personal liability for the full cost of any workplace injury claim.

Step 5: Unemployment Insurance and New Hire Reporting

The Kentucky Office of Unemployment Insurance assigns each new employer to Rate Schedule A (active for 2026 — rate schedule activation depends on the trust fund balance). For 2026:

• Taxable wage base: $12,000 (up from $11,700 in 2025)
• New non-construction employer rate: 2.7%
• New construction employer rate: 9.0% (the highest tier)
• Experienced employer rate range under Schedule A: 0.3%-2.4% positive-rated, 6.5%-9.0% negative-rated

Register for UI through Kentucky Business One Stop. Quarterly filings via the Kentucky Employer Web Enabled Self-Service portal (kewes.ky.gov).

New Hire Reporting: Report every new hire and rehire to the Kentucky New Hire Reporting Center within 20 days of hire under KRS 405.435 (and federal PRWORA at 42 U.S.C. § 653a). Reporting within 7 days is recommended for child-support enforcement effectiveness. Failure to report can result in penalties of up to $25 per unreported employee, or $500 if a conspiracy to avoid the requirement is shown.

Step 6: Local Occupational License Tax — Most Cities Charge One

Unlike most states, Kentucky cities and counties impose local occupational license taxes on either net profits, payroll, or both. There’s no statewide cap, and rates vary significantly. Verify the rate for every city and county you operate in.

Louisville Metro (Jefferson County)

2.2% on residents’ compensation and net profit; 1.45% on non-residents’ compensation and net profit — administered by the Louisville Metro Revenue Commission. The combined occupational tax is functionally Louisville’s “city income tax.” Form OL-3 is the annual net profits return; Form W-1 is the employer withholding return for employee compensation. The Louisville Metro Revenue Commission also collects school district occupational tax (additional 0.75% in most parts of Jefferson County for the JCPS district).

Lexington-Fayette (LFUCG)

2.25% on compensation and net profits earned within Fayette County, administered by the LFUCG Division of Revenue. The same 2.25% rate applies to both employee gross wages (employer withholds and remits) and to business net profits. As of March 2026, businesses can submit all net profit forms through LFUCG’s new digital filing system.

Northern Kentucky (Boone, Kenton, Campbell)

Boone County, Kenton County, Campbell County, and most Northern Kentucky cities (Florence, Covington, Newport, Erlanger, Independence, Fort Mitchell, Edgewood) each impose their own occupational license — typically 1.0%-2.5% of net profit or gross receipts. Boone County is generally the lowest in the region. Northern Kentucky businesses serving Cincinnati customers also encounter Cincinnati’s separate 1.8% earnings tax for work performed in Cincinnati.

Other Major Cities

Bowling Green (1.85%), Owensboro (1.39%), Frankfort (1.95%), Henderson (1%), Paducah (2%), Richmond (2%) — each city sets its own rate. The Kentucky League of Cities maintains a directory at klc.org. Many small cities outside metro areas impose 1%-1.5% occupational taxes; verify before assuming you owe nothing locally.

Local Restaurant Tax

Under KRS 91A.400, cities classified as fourth or fifth class as of January 1, 2014 may levy a local restaurant tax of up to 3% on prepared food sales. The list is frozen — no new cities can adopt the tax. Cities with active restaurant taxes include Bardstown, Bowling Green’s tourism district, Bellevue, Berea, Covington, Danville, Elizabethtown, and others — full registry available through the Kentucky Department for Local Government. Funds must be turned over to the local tourism and convention commission. The Kentucky Court of Appeals affirmed KRS 91A.400’s constitutionality on October 3, 2025.

Step 7: Industry-Specific State Licenses

Kentucky has no general statewide business license. Industry-specific state licenses are administered by separate agencies: See how Kentucky compares in our 51-state business license requirements table.

• Cosmetology, Esthetics, Nail Tech, Barbering: Kentucky Board of Cosmetology under the Department of Professional Licensing
• Private Investigators: Kentucky Board of Licensure for Private Investigators under DPL
• HVAC, Electrical, Plumbing: Kentucky Department of Housing, Buildings and Construction (DHBC) under KRS 198B
• Landscape Pesticide Application: Kentucky Department of Agriculture Pesticide Section under 302 KAR 26:020
• Daycare: CHFS Division of Regulated Child Care under 922 KAR Chapter 2
• Food Establishments and Mobile Food Units: CHFS Department for Public Health, with permits issued through local health departments
• Real Estate: Kentucky Real Estate Commission
• Insurance Producers: Kentucky Department of Insurance
• Health professions: separate boards for medicine, dentistry, nursing, pharmacy, etc.

Kentucky’s Distinctive Tax and Payroll Environment

Three aspects of Kentucky’s tax and payroll structure require specific planning compared to most other states.

1. The LLET surtax. Most states tax business income once — at the entity level (C-corp) or pass-through to the owner (LLC, S-corp). Kentucky taxes pass-throughs twice: once at 3.5% on the owner’s individual return and again through the LLET on the entity itself. The LLET is small in absolute dollars at the $175 minimum but is a real bookkeeping line item every Kentucky LLC must file Form 720 for. Most small LLCs remain in the $175-minimum tier (≤$3M receipts/profits); confirm computation and any exemptions with current DOR guidance.

2. Sales tax on services without local complexity. Kentucky’s flat 6% with no local add-ons is one of the simpler tax regimes in the U.S. — a major plus over Tennessee or Ohio. But the post-2018 service-tax expansion (HB 487) and post-2023 second wave (HB 8) means service businesses that were tax-free in 2017 are now collecting 6% from customers. Reprice or absorb. Pass-through to customers is standard but requires invoice and POS reconfiguration. The $12,000 small-seller threshold is a meaningful out for true side-hustle operators.

3. Local occupational tax overlay. Louisville Metro 2.2%, Lexington 2.25%, and 1%-2% in most other cities make Kentucky’s effective tax burden for an in-city business closer to 5.5%-5.75% (3.5% state + 2-2.25% local) before federal income tax. This is comparable to flat-rate states like Indiana (3.0% state + ~1-2% county) and lower than Ohio’s heavily local burden, but higher than no-local-tax states like Tennessee. When comparing Kentucky to neighboring states for a relocation decision, factor the local occupational tax in.

Kentucky Market Context: Where the Demand Is

Kentucky has roughly 4.5 million residents distributed unevenly across three economic regions:

• Louisville Metro (Jefferson + 7 surrounding counties): Approximately 1.4 million in the Louisville metro area, 770,000+ in Louisville Metro proper. UPS Worldport hub, Ford Heavy Truck, GE Appliances, Brown-Forman, Humana, Yum Brands HQ all call Louisville home. The Bourbon Trail tourism economy adds steady hospitality demand. The Kentuckiana metro spans the Indiana border (Clark, Floyd, Harrison counties IN), creating dual-state operating considerations.
• Lexington-Fayette and Bluegrass Region: ~325,000 in the city plus surrounding horse country. University of Kentucky, Toyota Manufacturing Kentucky’s flagship Camry/Lexus plant in Georgetown, Keeneland, and a thoroughbred industry generate diverse demand. Distinct seasonal patterns around Keeneland’s spring and fall race meets.
• Northern Kentucky (Boone/Kenton/Campbell): ~430,000 across the three counties — economically Cincinnati-suburban. CVG airport (Amazon Air’s second-largest hub plus DHL Americas hub), Procter & Gamble’s research and engineering across the Ohio River, and Newport on the Levee tourism create strong service-business demand. Operating here often means navigating Ohio rules too.
• Bowling Green (Warren County): ~73,000 in the city, anchored by Western Kentucky University and the GM Corvette Assembly Plant. Strong manufacturing supply-chain economy.
• Eastern and Southern Kentucky: Smaller markets — Owensboro (Daviess), Paducah (McCracken), the Bourbon Trail towns of Bardstown and Lebanon, and the Lake Cumberland tourism corridor. Less competition but lower volumes.

Kentucky Business Guides by Industry

Kentucky plumbing business guide — master plumber licensing, $250,000 insurance rule and startup steps for plumbing companies.

Kentucky electrical business guide — contractor and master roles, current insurance minimums and startup costs.

Every industry has different licensing, permit, and insurance requirements in Kentucky. Select your business type:

• How to Start a Cleaning Service in Kentucky — 6% sales tax on janitorial services since 2018, $12,000 small-seller threshold, KEMI workers comp at 1 employee
• How to Start a Food Truck in Kentucky — CHFS Department for Public Health, local health department permits, Louisville and Lexington mobile food rules, KRS 91A.400 restaurant tax in tourism cities
• How to Start a Daycare in Kentucky — CHFS Division of Regulated Child Care, STARS for KIDS NOW quality rating, ratios under 922 KAR 2:120, Child Care Assistance Program (CCAP)
• How to Start an HVAC Business in Kentucky — DHBC Master HVAC Contractor license, EPA 608, A2L refrigerant transition, Kentucky Building Code
• How to Start a Hair Salon in Kentucky — Kentucky Board of Cosmetology, 1,500-hour cosmetology, salon establishment registration
• How to Start a Landscaping Business in Kentucky — KDA Commercial Applicator + Operator licenses (302 KAR 26:020), 6% sales tax on landscape services, Kentucky 811
• How to Start a Private Investigator Business in Kentucky — Kentucky Board of Licensure for PIs, KRS 526.020 one-party consent recording, surety bond and insurance
• Do You Need an Arborist License in Kentucky? – No arborist license – treating trees splits into two credentials: the owner licensed as an operator, each employee as an applicator
• Kentucky Massage License: Cost & Requirements (2026)
• How to Get a Dealer License in Kentucky: Cost & Requirements
• How to Get a Liquor License in Kentucky: Cost & Requirements

Key Kentucky Business Resources

Resource	What It Covers
Kentucky Business One Stop	Unified registration: SOS filings, sales tax, withholding, UI, LLET
Kentucky Secretary of State	LLC formation, annual report, name searches, assumed names
Kentucky Department of Revenue	Sales tax, income tax, LLET, withholding, corporation tax
Kentucky TaxAnswers	HB 8 service-tax FAQs, landscape and janitorial guidance
Kentucky Office of Unemployment Insurance (KEWES)	UI registration, quarterly filings, rate schedules
KEMI	Workers’ compensation (Kentucky competitive state fund)
Kentucky Labor Cabinet	Wage and hour, OSH, Department of Workers’ Claims
Kentucky New Hire Reporting Center	Report new hires within 20 days (KRS 405.435)
Cabinet for Health and Family Services (CHFS)	Daycare licensing, food establishment permits, public health
Department of Housing, Buildings and Construction	HVAC, electrical, plumbing contractor licensing
Kentucky Department of Agriculture	Pesticide applicator licenses, agricultural regulation
Kentucky League of Cities	Local occupational tax directories, restaurant tax registry

How Long Do New Businesses Last in Kentucky?

The Bureau of Labor Statistics follows every private-sector establishment in Kentucky from the year it opens. Of the businesses opened in March 2024, 78.7% were still operating one year later. Among those opened in March 2020, 54.1% reached the five-year mark — 2.7 points above the national 51.4% — and 36.4% of the March 2015 cohort made it to ten years.

Two things keep those numbers from reading as grimly as they look. A closed establishment is not always a failed one: the BLS count includes owners who sold, merged, moved, or retired. And the businesses that last, grow — nationally, establishments reaching age ten average 11.7 employees, up from 4.4 when they opened. Rates for every state and 19 industries: business survival rates by state.

Frequently Asked Questions

How much does it cost to start an LLC in Kentucky?

Kentucky LLC Articles of Organization cost $40, identical online or by mail, filed with the Secretary of State through Kentucky Business One Stop. After formation, the annual report costs $15, due between January 1 and June 30 each year (waived for veteran-owned LLCs). Optional costs: Certificate of Assumed Name $20, registered agent service $100-$300/year if you hire one. Add the LLET minimum of $175 when Kentucky gross receipts or gross profits are $3 million or less (confirm exemptions and computation with DOR).

What is the Kentucky LLET and who pays it?

The Limited Liability Entity Tax at KRS 141.0401 is a Kentucky-specific gross-receipts/gross-profits surtax that applies to every Kentucky LLC, S-corporation, and C-corporation on top of regular income tax. The annual amount is the lower of 0.095% of Kentucky gross receipts or 0.75% of Kentucky gross profits, with a $175 minimum when Kentucky gross receipts or gross profits are $3 million or less. Entities at or below that $3 million tier pay only the $175 minimum; the graduated 0.095%/0.75% calculation applies above it. Filed on Form 720 due April 15.

Are services taxable in Kentucky?

Many are. Landscape and janitorial services have been subject to Kentucky’s 6% sales tax since July 1, 2018 (HB 487 of 2018). House Bill 8 of 2022 added 30+ additional services effective January 1, 2023 — including photography, marketing, telemarketing, fitness club memberships, massage, body modification, parking/valet, repair and installation services, and several others (full list at taxanswers.ky.gov). The de minimis exemption was raised from $6,000 to $12,000 in gross receipts effective for 2024 and later. Kentucky has no local sales tax — the rate is a flat 6% statewide.

What is Kentucky’s individual income tax rate in 2026?

Kentucky’s individual income tax rate is a flat 3.5% for tax years beginning on or after January 1, 2026, under HB 1 of 2024. The rate dropped from 4.0% in 2025 after revenue triggers (General Fund balance and Budget Reserve Trust Fund conditions) were met per the Office of State Budget Director’s September 2025 review. A further reduction to 3.0% may apply for tax year 2027 if the September 2026 review confirms the conditions and the General Assembly affirmatively acts.

Does Kentucky have a state minimum wage above the federal $7.25?

No. Kentucky’s minimum wage is $7.25/hour, the federal floor, under KRS 337.275. The state has not raised its minimum wage since 2009. Cities and counties cannot enact higher local rates: in October 2016, the Kentucky Supreme Court struck down both Louisville Metro’s $9.00 ordinance and Lexington-Fayette’s $10.10 ordinance, ruling that municipalities lack the authority. Tipped workers can be paid $2.13/hour as a cash wage if tips bring them up to $7.25 total. Kentucky is one of 21 states still at the federal minimum.

When is workers’ compensation required in Kentucky?

At one employee — full-time, part-time, or seasonal — under KRS 342.340. There is no minimum-employee exemption like Tennessee’s 5-employee or South Carolina’s 4-employee thresholds. Coverage is purchased from KEMI (Kentucky Employers’ Mutual Insurance — the competitive state fund) or any licensed private carrier. Penalties for non-coverage include daily fines, lost civil immunity, and personal liability for the full cost of any workplace injury claim.

What local taxes do I owe in Louisville and Lexington?

Louisville Metro (Jefferson County): 2.2% Occupational License Tax on residents’ compensation and net profit; 1.45% on non-residents — administered by the Louisville Metro Revenue Commission via Form OL-3 (annual net profits) and Form W-1 (employer withholding). Most parts of Jefferson County add a 0.75% Jefferson County Public Schools occupational tax on top.

Lexington-Fayette (LFUCG): 2.25% on compensation and net profits earned within Fayette County, administered by the LFUCG Division of Revenue.

These are functionally local “income taxes” that stack on top of state income tax and LLET, and should be planned for in your business model.

Does Kentucky have paid family leave or paid sick leave?

No. Kentucky has no statewide paid family leave program (unlike Colorado FAMLI, Washington PFML, Massachusetts PFML, etc.) and no statewide paid sick leave law. Federal FMLA still applies to employers with 50+ employees for unpaid job-protected leave. Some Kentucky employers voluntarily offer paid leave as a benefit; some industries (federal contractors) are subject to executive-order paid sick leave rules. The absence of a state mandate is a meaningful difference from neighboring states; verify county or city-level requirements (Louisville Metro and Lexington have explored but not enacted local paid leave).