Hiring Employees in Kentucky LLC – Wages, Laws, Compliance Guide


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Any business structure or corporation stands firm on its foundation laid by the employees. An LLC is no exception to this rule. Hiring employees in your LLC comes with some rules, regulations. Before understanding the rules of hiring employees in Kentucky LLC, we must understand what an LLC means.

A Limited Liability Company is a business structure that protects the owners from any personal responsibility of the debts or liabilities arising out of the LLC. If an employee action succeeds to liabilities, the owners get the protection against it. LLCs are a combination of the characteristics of a partnership firm & a sole proprietorship. 

Hiring Employees in Kentucky

In order to hire employees in Kentucky LLC, there are many requirements that a business has to fulfill. One should keep these points in mind while hiring employees in an LLC. These requirements include:

1. Federal & State Employment Posters in Kentucky

The employers in Kentucky are required to show both Federal & State Employment posters mentioned in Equal Employment Opportunities Act, Americans with Disabilities Act, Fair Labour Standards Act (FLSA),  etc. You should seek professional help to fulfill all the norms or requirements.

2. Federal & State Required Forms

Hiring employees is a lengthier process that involves the filing of different forms & applications. Suppose you wish to hire employees in Kentucky. In that case, you must ask your employees to submit the Employment Eligibility Form, the Federal Tax withholding form, the W-4 Form, Workers Compensation Claim Form, Disability Self- Identification Form, U.S. Citizenship and Immigration Services Form, etc. These Legal forms are easy and free to download.

3. Requirements of Kentucky New Hire Reporting program

Employers of Business owners are bound by Kentucky’s New Hire Reporting Program, under which they have to submit a report consisting:

  • Company Name
  • Company Address
  • Company federal tax ID number
  • Employee’s Name
  • Employee’s Social Security Number
  • Employee’s Address
  • First Day of paid Work

In addition to the forms mentioned above, payments, taxes, tax forms, & requirements, there may be some additional compliance for hiring in Kentucky; you must adhere to those norms as well.

Can an LLC Hire Employees?

An LLC or a Limited Liability Company can be regarded as a corporation, partnership, or sole owner business. The owners of the LLC are often referred to as members. Individuals, Corporations &, in some cases, other LLCs can form an LLC as members.

The members form LLCs because of their limited or no liability provided to the owners or members. In the event of liabilities arising out of an employee’s action, the members of the LLC are not personally liable- the LLC is liable for the actionable claim.

Any LLC (even one with a single owner) can hire unlimited employees on wages or salary. (The single-member owner LLC may have different rules and regulations). In addition to the salaried employees, the LLC can appoint Independent contractors for certain tasks on a contract basis. 

Rules to Hire Employees in an LLC in Kentucky?

Just like any other business corporation, an LLC is also not immune from certain procedures & rules of hiring. An LLC files many documents & pays a number of taxes to various Government Agencies while hiring employees. Some of the essential rules or steps to hire employees in an LLC are:

  • Federal Employer Identification Number – Every LLC must obtain an Employer Identification Number (EIN) from the Internal Revenue Service. EIN helps report taxes & a few other documents to the IRS.
  • Employee Eligibility Form – It is mandatory for an LLC owner to check if the employee is eligible for employment in the U.S. An LLC has to ask the employees to submit the I-9, Employment Eligibility Verification Form to verify the identity of the employee & to authorize the employment. the I-9 form is a mandatory requirement while hiring an employee.
  • Employee’s Social Security Number – The employee has to have a valid Social Security Number (SSN) to work. LLCs have to ask the new employees to submit their SSN before employment. The SSN is helpful in payment & tax purposes.
  • Setting up a process for collection & payment of the appropriate taxes – There has to be a due process for the employees’ future collection & payment of taxes. This process needs to be set up by the employer (in this case, the LLC)
  • Employee handbook – In the hiring process, one of the crucial elements of hiring paperwork is an Employee Handbook. Although it is not essential in Kentucky, it is usually needed as one of the legal documents in many other states. An Employee Handbook consists of a complete list of all the basic rules & policies of the company.
  • Kentucky payroll Taxes – An LLC that is running a business with employees or businesses with employees has to pay many federal taxes & state Taxes. Following the rules on payroll taxes is also an essential requirement.  After hiring employees, an LLC is subject to the State Unemployment Compensation Act. Under the said Act, an LLC will have to pay Unemployment tax to the state & to do that; the LLC must register itself with the Kentucky Workforce Commission. The process involves simple steps & can be completed in 20 minutes. 
    Payroll taxes also include Federal Income Tax withholding, an employer can withhold money from the employee’s account for the income tax.
  • Workers’ Compensation Insurance An LLC operating in the state of Kentucky has to carry workers’ compensation insurance & has to display relevant posters.
  • New Hire Report or Report of the New Employee – An LLC has to
    • Report about hiring the new employees in the form of “Report of New Employee(s)” to the Kentucky Workforce Commission within 20 days from the date of hire.
    • Deposit and report federal employment taxes as per the IRS procedures for payroll reporting & payment.

Laws Relating To Wages of Employees

The State of Kentucky is largely reliant on federal legislation to regulate the employer-employee relationship in the State. The State offers protection and rights to the employees against harassment, leave, overtime pay, etc. the employers are expected to act in compliance with the state and federal laws against any form of harassment and discrimination, or other forms of reprisal against employees or other types of retaliation against employees.

  • The minimum wage in the State is fixed at $7.25 per hour. The State’s minimum wage is determined in proportion to the standard wage determined by the federal provisions.
  • The employers also need to fulfill the obligations upon the termination of the employees, such as the final settlement of final pay and leave.
  • Employers in the State of Kentucky should also ensure a safe workplace environment for their employees.

Structure of Wages of Employees

The federal legislation, i.e., the Fair Labor Standards Act (FLSA) has established a uniform labor regulation in the United States with respect to labor regulation such as wage and hour laws that should be enforced by all the States as the minimum standards in business practices. We have mentioned below some of the important aspects of the wage structure in the State of Kentucky.

Minimum Wage

Kentucky’s minimum wage is $7.25 per hour. The employers in the State should not compensate their employees below this rate. However, there exist certain exemptions such as the Tipped employees, trainees, and learners.

  • Tipped Employee: The employees who also receive tips under their employment, the minimum wage for such employees in the State is $2.13 per hour. Nevertheless, the total wage per hour of the employee should be at minimum be equal to the State determined minimum wage, lest the employer should pay for the difference amount.
  • Student Minimum Wage: For up to 20 hours of labour per week, full-time high school or college students who work part-time may be paid 85 percent of the Kentucky minimum wage (as little as $6.16 per hour) for specified companies.
  • Trainees and Learners: In the State of Kentucky, the minimum wage for trainees and learners should not be less than the minimum wage determined by the State.

Overtime Wage

The State of Kentucky regulates overtime compensation based on two aspects, namely,

  • The basic compensation structure is that the employee who exceeds the threshold of 40 working hours in a week should be paid at the rate of 1.5 times the regular pay rate for the extra hours worked by the employee.
  • Secondly, if the employee works for more than 7 days in a row for more than 40 hours, they are again eligible for overtime compensation at the rate of 1.5 times the original pay rate. However, the senior leaders of the management such as supervisors and superintendents are exempted from such requirements.

Youth Labor

Minor employees can work in non-dangerous jobs such as restaurants and retails. Also, minors are allowed to take a half-hour break between a five-hour work shift.

Rights of The Employees in Kentucky

Kentucky state has set employees’ rights to protect them. Employers across the state have to follow the rules while employing people. Here are the rights of employees in Kentucky,

Anti-discriminatory Practices

The Kentucky Civil Rights Act (KCRA) enforces strict regulation against discrimination based on protected characteristics, such as nationality, sex, race, etc. Any form of retribution, retaliation, and harassment is also prohibited under the Act.

Equal Remuneration and Pay

In continuation with the anti-discriminatory policies, employers should also not discriminate between the employees based on their sex and genders, thereby favoring one over another. All the employees who work in similar conditions and deliver similar results should be compensated at similar rates. Any distinction that is made should be based on the seniority, merit, skills, and responsibilities of the workers.  

Right to Leave and Absence

Kentucky offers mandated time off from employment under certain circumstances, such as elections, jury duty, military leave, emergency responders, etc.

Exit Pay

The terminated employees must be paid in final settlement by the end of their regular pay routine or within 14 days from the date of termination of their employment.

How to Hire Employees Fast in Your Kentucky LLC

To hire employees for your Kentucky LLC you need to verify if the person is eligible to work in the US and then report him/her as ‘new hires’ to the state.

Whether you’re planning to open a new storefront or simply want to hire employees, you will need to follow certain steps to make sure your Kentucky LLC is in business and running smoothly. If you haven’t already set up an LLC, you can find out more about starting a business in Kentucky by visiting the Kentucky Secretary of State’s OneStop Business Portal.

You’ll need to designate a registered agent. This is a person or business that receives legal mail on behalf of the LLC. The name and address of the agent must be listed on the LLC’s Articles of Organization. A registered agent can be an individual Kentucky resident, a business that is licensed to do business in the state, or a registered agent service. You will also need to register your business with the state’s tax office.

You will also need to hire employees, which requires filling out an employment eligibility form. In order to do so, you’ll need to determine how many employees you need and determine the tasks that each employee will be responsible for. You’ll also need to get an Employee Identification Number, or EIN. This number is like a social security number for a business. EINs are issued by the Internal Revenue Service to businesses. It helps identify your business to both state and federal tax authorities.

The Kentucky OneStop Business Portal has a lookup tool for business licenses and permits. You can also visit the Small Business Administration to see which licenses and permits you need to operate your business. There is no statewide business license, but many Kentucky cities have local licensing requirements. Depending on the nature of your business, you may also need to obtain commercial auto insurance, workers’ compensation insurance, and unemployment insurance. You may also need to rent a storefront or warehouse.

The Kentucky state also requires you to produce an annual report. This is a document that provides a brief overview of your business. A report must be submitted to the state by a specific deadline. If you fail to submit an annual report, you may be subject to penalties.

The Kentucky state also requires you to carry workers’ compensation insurance. You may also be required to obtain an Employer Identification Number, or EIN. EINs are used to identify your business to both state and federal taxing authorities. You will need an EIN in order to pay federal employment taxes. You can obtain an EIN by filing an online application form SS-4.

The Kentucky state also requires you to display a state employment poster and a federal employment poster. If you have employees, you will need to report your hiring activities to the Kentucky Workforce Commission within 20 days of hire. You will also have to pay your employees within 14 days of termination. You will also need to pay an annual LLC entity tax of at least $175.

The Kentucky state also requires you to hire a registered agent. A registered agent is a person or business that receives important legal documents on behalf of the LLC. The name and physical address of the agent must be listed on the Articles of Organization. It’s a good idea to choose a registered agent who is a Kentucky resident, since the state will send official mail to them.

FAQs

What Is an LLC?

An LLC is a business entity that can be treated as either a corporation, a partnership, or a sole owner business.

Is the LLC liable for damages caused by employees?

The owners of the company are not personally liable for the actions of the employees, the LLC is liable for any such actions.

What is the IRS Form I-9?

Before hiring an employee, under federal law, the business has to verify an employee’s eligibility to work in the United States with the (IRS Form I-9). The business owner also has to make sure the employee has a valid SSN or Social Security Number.

What is LLC self-employment?

LLC members, or LLC owners, are self-employed according to the IRS because they pay themselves through the earnings of LLC.

In Conclusion

All the LLCs with employees are bound by many rules and regulations with reference to wages. It is always advisable to register a registered agent service to understand the laws better. Feel free to share your feedback with us in the comment section below.

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