What Kentucky expects from a new trade business

Electric, plumbing and HVAC need the state. Check locally for the rest.

Kentucky's Department of Housing, Buildings and Construction handles the trades that can hurt somebody:

• Plumbing: nobody works the trade without a master or journeyman license. You need at least $250,000 in general liability, plus proof of comp and unemployment insurance.
• HVAC: master contractor and journeyman licenses, with years of documented experience to qualify. You need $500,000 in general liability and $300,000 in property damage coverage.
• Electrical: electricians and electrical contractors have their own licensing law. Unlicensed work is allowed only under direct on-site supervision of a licensed electrician. Electrical contractors carry $1,000,000 in general liability, plus proof of comp and unemployment insurance.
• Fire protection sprinklers: you need a license or certificate to design, install or repair them.
• Boilers and fire alarms: the department licenses or certifies these contractors too, so call before you bid.

Those laws don't reach general contracting, remodeling or handyman work, so ask your local building department what applies before you bid. If a job touches a licensed trade, sub it out to someone who holds the license. A construction attorney can tell you where the line falls for your work.

Source: KRS 318.030, plumbing license and insurance · KRS 198B.658, HVAC qualifications · KRS 227A.030, electrician law scope · Kentucky DHBC, licensed trades · KRS 198B.668, HVAC insurance · KRS 227A.020, unlicensed work and supervision · KRS 227A.060, electrical contractor insurance · KRS 198B.560, fire protection sprinklers

Who to call: an attorney near you

One employee and you're in

Kentucky makes comp mandatory for anyone with one or more employees in the state, outside of agriculture. Executive officers of a corporation count as employees too.

Owners are different. A business owner, or a qualified partner or LLC member, is covered only if you elect in, by an endorsement to the policy. You still owe coverage for your employees.

You pay for uninsured subs. A contractor who subs out work, along with his carrier, is liable for comp to the sub's employees unless the sub has secured coverage. You can try to get the money back from him, but the claim comes to you first. Get a certificate before they start.

Going without is a fine of $100 to $1,000 per offense, and each employee and each day counts as a separate offense. That adds up fast. An insurance agent who writes contractors can tell you how your own coverage works and what your class codes cost.

Source: KRS 342.630, coverage of employers · KRS 342.640, coverage of employees · KRS 342.610, contractor liability · KRS 342.990, penalties · KRS 342.012, owners and LLC members electing coverage

Who to call: an insurance agent near you

Getting paid: notice, six months, twelve months

Kentucky's lien clock runs like this:

• If you contracted directly with the owner, you have no notice to send. Go straight to filing your statement.
• Sub or supplier on an owner-occupied single or double family home: notify the owner in writing within 75 days of your last labor or materials, no matter the amount. The lien doesn't reach what the owner already paid before getting your notice.
• Sub or supplier on anything else: notify the owner within 75 days on claims under $1,000, or 120 days on claims over $1,000.
• File your statement with the county clerk within 6 months after you stop working or furnishing.
• Mail a copy to the owner by regular mail within 7 days of filing. Miss that and the lien is dissolved.
• Sue within 12 months of filing or the lien is dissolved.

A construction attorney can set up your notice form so a sub's clock never catches you short.

Source: KRS 376.010, liens and notice to owner · KRS 376.080, statement filing · KRS 376.090, limitation on action

Who to call: an attorney near you

You pay at the counter, whatever the contract says

Kentucky doesn't care how you write the job. Materials and fixtures you put into a structure are taxable when you buy them, whether it's lump sum, cost plus or anything else. That goes for erecting, remodeling, replacing or repairing.

It's strict the other way too. You can't buy tax-free because the job is for a government, a church, a school or a charity. A contractor who only does construction doesn't get a sales tax permit at all.

The one exception is the contractor-retailer, someone who also sells appliances or over-the-counter materials. That business gets a retail permit and can use resale certificates for what it sells. A CPA who works with contractors can help you keep the two straight.

Source: 103 KAR 26:070, Contractors

Who to call: a CPA or tax pro near you

LLC, sole proprietor, or S-corp?

You form an LLC and file its annual report with the Kentucky Secretary of State. Get the current fees and the due date from that office before you budget.

Here's the part people miss. Kentucky has a Limited Liability Entity Tax, filed on Form 725, with a $175 minimum every year. Businesses with $3 million or less in gross receipts pay the $175, and it applies even to a one-owner LLC.

Pass-through profit also lands on your personal return at a flat 3.5% for 2026. The statute allows further cuts starting in 2027, so check the rate each year.

When an S-corp pays off is a numbers question. Bring what the business clears after your floor rate to a CPA and have them run it.

Source: KRS 141.0401, limited liability entity tax · KRS 141.020, individual income tax

Who to call: a CPA or tax pro near you