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PrintIncome Taxes on Business Income in Kentucky
In Kentucky, you're generally free to choose to operate your business as a C corporation, S corporation, partnership, limited liability company (LLC), or sole proprietorship. However, the entity type you select for your business may, in some cases, decide whether you or your business pays income taxes on the business income.
Corporations. Domestic corporations (corporations organized in Kentucky) and foreign corporations (corporations organized in a state other than Kentucky) are subject to a Kentucky income tax. In addition, qualified local governments in Kentucky are authorized to levy a local income tax, so be sure to check with your local government.
For taxable years beginning on or after January 1, 2005, corporations pay tax based on the greater of the taxable net income computation, the alternative minimum calculation, or the minimum tax ($175). Tax measured by taxable net income is as follows:
| Taxable Income | Rate of Tax |
| Up to $50,000 | 4% |
| over $100,000 | 6% |
Effective January 1, 2007, Kentucky eliminated its alternative minimum tax calculation and now treats all pass-through entities the same way for state income tax purposes as they are treated for federal income tax purposes. Thus, S-corporations, LLCs, LLPs, etc. are not subject to state income tax. However, a minimum $175 LLET (limited liability entity tax) is now imposed on such entities.
