How to Start a Used Car Dealership in Kentucky: Motor Vehicle Commission License $200, $250,000 and $500,000 Bond or Insurance and the Place of Business Rule

If you want to sell used vehicles in Kentucky, the Kentucky Motor Vehicle Commission decides whether you can. The used car dealer license is issued under KRS 190, and it is a different kind of paperwork from the general filings most people handle first. Kentucky does not issue a general statewide business license. Forming your company is a filing with the Secretary of State, and the dealer license is a separate industry license you need before you sell a single car.

This guide walks through the process in the order most applicants find easiest: entity formation, a qualifying place of business, bond or insurance, the Commission application, tax registration, local taxes, and renewals. Three items cause the most confusion: the $200 license fee for each office or branch, the $250,000 per person and $500,000 per accident bond or insurance requirement, and the place of business rule, which is more flexible than many applicants expect.

This article is general information, not legal or tax advice. Confirm current forms, fees and deadlines with the agency named in each section, and speak with an attorney or CPA before you choose a business structure, sign a lease, or buy a building.

What the Kentucky Used Car Dealer License Covers

KRS 190 requires a Motor Vehicle Commission license for dealers (new, used, leasing, restricted and motorcycle), auction dealers, wholesalers, brokers, salespersons and recyclers. The license is issued for each location, so a used car dealer with two lots needs two licenses (KRS 190.030). Used motor vehicle dealers, wholesalers and auction dealers all pay the same $200 fee per office or branch, but wholesalers and auction dealers are different businesses with different rules, so confirm with the Commission which category fits your plan before you apply.

Every license expires December 31 and must be renewed each year. Missing a renewal means you stop operating, so treat the renewal date as a hard deadline from the first day you open.

Materials and Information You Need Before You Apply

• Your legal entity documents: Articles of Organization for an LLC or Articles of Incorporation for a corporation. Sole proprietors need an assumed name filing if they sell under a trade name.
• A Kentucky street address for each location you plan to license, and a plan showing how each site meets the place of business rule.
• A surety bond or liability insurance policy with limits of $250,000 per person, $500,000 per accident and $250,000 property damage.
• Funds for the $200 license fee for each office or branch, plus $40 for each salesperson the dealer pays for.
• A Kentucky tax account, registered with Form 10A100 through MyTaxes.ky.gov.
• The contact information for the city and county occupational license office for each location.
• A federal tax identification number, if your business uses one.

Step 1: Form Your LLC or Corporation

Most used car dealers organize as an LLC. Articles of Organization (Form KLC, Profit Limited Liability Company) carry a $40 filing fee. A corporation files Articles of Incorporation (Form PAI, Profit Corporation) for $50. Both are filed through the Kentucky One Stop Business Portal at onestop.ky.gov.

Online filings are effective on the date and time they are filed. Processing is usually the same day the filing is received, but it can take up to three business days. The Secretary of State publishes no expedited service tier or expedited fee, so online filing is the fastest route.

Your name must contain “limited liability company,” “limited company,” “LLC” or “LC.” To abbreviate “limited company,” use “LTD CO.” The name must be distinguishable from any name already on record with the Secretary of State (KRS 275.100 and KRS 14A.3-010). Search the Kentucky business entity search before you settle on a name. If you need time to finish your paperwork, you can reserve a name for 120 days for $15.

Step 2: Appoint a Registered Agent and Registered Office

Every entity must continuously maintain a registered office in Kentucky and a registered agent (KRS 14A.4-010). The agent must be either a Kentucky resident individual or an entity qualified to transact business in Kentucky, and the agent’s business address must match the registered office.

The registered office must be a Kentucky street address. A post office box is not accepted. Unless the agent signs the formation document, the appointment does not take effect until the agent delivers a written statement of acceptance to the Secretary of State. Changing the registered agent or registered office costs $10 and is filed through FastTrack Online Filings.

Many dealers use the dealership address as the registered office, but that only works if the agent’s business address is the same location. If you plan to use a third-party registered agent, confirm the service before you file.

Step 3: Secure a Qualifying Place of Business

KRS 190.035 requires an established place of business with suitable space. Many people picture a large outdoor lot, but a lot is not automatically required. The lot requirement can be waived if the location has enough indoor space to display vehicles and a sign that is visible from the street. Confirm with the Commission whether your specific space qualifies before you sign a lease or purchase a building.

Each location must meet the rule on its own, and each one needs its own license. A space that is only used for storage, or that cannot be reached and identified as a sales location by the public, creates the most risk. Check local zoning with your city or county planning office at the same time, because local zoning rules are separate from the Commission’s requirements.

Kentucky law also allows licensed dealers to sell online and deliver a vehicle to a customer who requests delivery (KRS 190.030(1)(b)). Online sales do not remove the need for a qualifying location and license. Ask the Commission how online sales fit into your location plan.

Step 4: Obtain the $250,000 and $500,000 Bond or Insurance

Dealers, auction dealers and wholesalers must file either a bond or a liability policy with the following limits: $250,000 per person, $500,000 per accident and $250,000 property damage (KRS 190.033).

The cancellation rule is strict. If the bond or policy is cancelled, your right to operate stops at once, and the license is void unless you reinstate it within 30 days. Put the policy renewal date on your calendar, enroll in automatic payment where your provider offers it, and ask your agent to notify you before any lapse. This guide does not list premium costs, because they vary by applicant and provider. Request quotes from a surety or insurance agent early in the process so the premium is built into your startup budget.

Step 5: File the Motor Vehicle Commission Application and Pay the Fees

Under 605 KAR 1:215 (effective November 15, 2021), the fees are:

• $200 for each office or branch for a used motor vehicle dealer, wholesaler or auction dealer.
• $40 for each salesperson, paid by the dealer.

As an example, a single-location dealer with four salespeople would budget $200 for the license plus four $40 salesperson fees, for a total of $360 in state license fees. That figure does not include the bond or insurance premium, the LLC filing fee, the tax registration, or any local license or zoning costs.

Confirm the Commission’s application form, supporting documents and processing time directly with the Kentucky Motor Vehicle Commission before you submit, and ask whether you can apply before your bond or insurance is final. Keep copies of everything you file.

Step 6: Register for Kentucky Tax Accounts

Register your tax account with the Kentucky Department of Revenue using Form 10A100 through MyTaxes.ky.gov. Kentucky has a flat 6% state sales tax with no local sales taxes, but the tax reaches about 50 services. Ask the Department how vehicle sales and related charges are taxed and reported for your business model, because the answer affects your point-of-sale setup and bookkeeping. The Department’s business registration page is at revenue.ky.gov.

Your entity type determines which income taxes apply:

• LLC: Income passes through to the members and is taxed at the 3.5% flat individual rate for 2026. The LLC also owes the Limited Liability Entity Tax (LLET), with a $175 minimum if Kentucky gross receipts or gross profits are $3 million or less.
• Corporation: A 5% flat corporate income tax applies, plus the LLET with the same $175 minimum.

Kentucky has no franchise tax. The LLET uses a sliding scale between $3 million and $6 million, and above $6 million it is the lesser of 0.095% of Kentucky gross receipts or 0.75% of Kentucky gross profits. Your CPA should model which figure applies to your sales volume.

Step 7: Check Local Occupational License Taxes and Your Assumed Name

Kentucky has no statewide general business license, but cities, counties and school districts can levy occupational license taxes on payroll, net profits or gross receipts. The state has 120 counties and about 420 cities, and each jurisdiction runs its own forms and revenue office. Check the occupational license rules for the city and county where each lot sits, and do not assume that one location’s rules apply to another.

If you sell under a name other than your legal name, file a Certificate of Assumed Name (Form ASN) with the Secretary of State for $20. Registration is effective for five years and can be renewed. Sole proprietors file with the county clerk of the county where they reside under KRS 365.015(3). Entity filings are also recorded with the county clerk of the registered office county, and county recording fees are set locally. Fee details are on the Secretary of State fees page.

Step 8: Calendar Your Recurring Deadlines

Set these dates in your calendar as soon as your entity is formed:

• Motor Vehicle Commission license: expires December 31 each year and must be renewed.
• Bond or liability policy: must stay in force without interruption.
• Annual report: $15, due June 30 each year. The filing window opens January 1. Domestic entities that miss June 30 can be administratively dissolved after notice and 60 days to cure (KRS 14A.7-020).
• Registered agent: must be maintained continuously.
• Assumed name: renew before the five-year registration period ends.

Common Mistakes to Avoid

• Looking for a general business license. Kentucky does not issue one. Your entity filing and your Motor Vehicle Commission license are different requirements, and you need both.
• Licensing only one location. Each office or branch needs its own license and its own $200 fee.
• Assuming a lot is always required. KRS 190.035 allows the lot requirement to be waived when there is enough indoor display space and a street-visible sign. Confirm that your space qualifies with the Commission.
• Using a post office box as the registered office. Kentucky requires a street address.
• Letting the bond or insurance lapse. A cancellation stops your right to operate immediately, and the license is void unless it is reinstated within 30 days.
• Forgetting salesperson fees. Each salesperson carries a $40 fee paid by the dealer, which adds up quickly as you hire.
• Missing the June 30 annual report. The $15 report is due every year, and a missed filing can lead to administrative dissolution.
• Skipping local checks. Cities and counties can levy occupational license taxes and zoning rules that the state does not cover.

What Results to Expect

If you complete the steps in order, you may find the state filings the fastest part of the process. Online formation through the One Stop portal is typically processed the same day, though it can take up to three business days. The Commission’s review timeline is the variable most likely to shape your opening date, so it is worth asking for an estimate before you sign a lease or order inventory.

A dealer who has a qualifying location, a bond or policy in force, and the tax and local registrations in place could reasonably expect to be positioned to operate once the Commission issues the license. Results depend on the Commission’s decision, your location, and how completely your application is prepared, so treat any timeline as an estimate rather than a guarantee.

Tips for a Smoother Application

• Run the name search and reserve your name before you pay for any other service.
• Request bond or insurance quotes early, because the premium is a real cost that affects your budget.
• Contact the Commission early and describe your exact space before you sign a lease.
• Build a single calendar that includes December 31, June 30, and every local renewal.
• Ask the Kentucky Small Business Development Center for help reviewing your plan. Its website is kentuckysbdc.com, and the SBA’s Kentucky district page is at sba.gov.

When to Get Professional Help

Talk with a licensed attorney before you choose between an LLC and a corporation, before you sign a long-term lease for a dealership site, and before you rely on any registered agent or insurance arrangement. Ask a CPA to model the LLET, the income tax treatment, and the sales tax setup for your expected volume. An insurance agent can explain how a surety bond compares with a liability policy for your situation.

This article is for general information only and is not legal or tax advice. Kentucky fees, forms, and deadlines can change, so confirm each one with the Secretary of State, the Department of Revenue, the Motor Vehicle Commission, and your local government before you file or pay.