Can Kentucky hold an LLC manager personally liable for the company's taxes?

The limited liability company was supposed to be the thing that stopped this. That is what it was sold as, that is what it does for almost every other kind of debt, and it is a reasonable thing to have believed. Two Kentucky tax statutes carve straight through it, and they do it by naming the shield provision and setting it aside. If you are reading this because a letter has arrived with your own name on it rather than the company's, that is why.

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Yes. KRS 141.340 makes managers of an LLC personally and individually liable, jointly and severally, for income tax that should have been withheld from wages; KRS 139.185 does the same for sales and use tax. Both override the LLC liability shield by name. Neither requires wilfulness. The escape is narrow: having had no relevant authority when the tax came due.

Neither statute is unlimited, and the limit is worth reading carefully because it is not the same limit in both places.

In KRS 141.340, for withholding, and in KRS 139.185(2) for LLC managers on sales tax, the exculpation is: no person is liable "who had no authority to collect, truthfully account for, or pay over any tax" at the time it became due.

In KRS 139.185(1), for corporate officers on sales tax, it is different: no person is liable "who had no authority in the management of the business or financial affairs of the corporation" at the relevant time.

Those are two different tests inside the same subject, and I flag it because copy that flattens them into one is copy you cannot rely on. The first is about authority over the tax. The second is about authority over the business. A person could plausibly satisfy one and not the other.

What both have in common is the shape: the statute assumes you are liable because of the office you held, and the escape is proving you had no relevant authority. That is the opposite of how people expect it to work.

The federal trust fund recovery penalty is 26 U.S.C. § 6672, and the difference matters in both directions.

Kentucky is broader in three ways. There is no wilfulness element — the word does not appear in KRS 139.185, KRS 141.340, or the three sibling provisions covering financial institutions, controlled-substance and health-care provider taxes. Federal law requires that the responsible person "willfully fails to collect … or truthfully account for and pay over" the tax, and that word does a great deal of defensive work. Second, Kentucky's liability survives dissolution and leaving office, expressly. Third, on sales tax it reaches the whole chapter's tax rather than only what was collected.

Kentucky is narrower in one way, and it is a significant one. The federal definition of "person" reaches "an officer or employee of a corporation, or a member or employee of a partnership" under a duty to act. Kentucky's statutes name a closed list of offices: corporate officers, LLC managers, LLP partners, LLLP general partners. There is no employee catch-all.

I am not going to tell you that means an employee is safe. What I can tell you is that no Kentucky statute I have found reaches a non-officer employee, and that the phrase "any other person holding any equivalent office" has an edge to it that I have not seen tested. A member of a member-managed LLC sits close to that edge. Anyone telling you confidently which side of it they fall on is telling you something the text does not settle.

Kentucky has no single general responsible-person provision. What it has is a set of tax-specific ones, and the two that reach ordinary businesses are the two above: KRS 141.340 for withheld income tax and KRS 139.185 for sales and use tax. Parallel provisions exist for financial institutions, controlled-substance and health-care provider taxes, and local occupational withholding has its own at KRS 67.785(2) — which reaches corporate officers only and has no LLC-manager subsection at all.

I am not going to tell you that list is closed. I have not read every tax statute in Kentucky and I would not claim to have.

The pattern is the useful part. The taxes that follow an individual personally are largely the ones the business was holding on someone else's behalf — money withheld from an employee's wages, or collected from a customer at the till. A company's own income tax liability does not work this way. If your exposure is to one of the trust-fund taxes, that is the harder category; if it is not, that is worth establishing early.

Whether the exculpation clause covers you is a question about your own business, and it cannot be answered down a phone line. It turns on the authority you actually held when the tax came due — not your job title, not the operating agreement, and not whether you signed checks on a particular Tuesday. A firm that answers it in a first call has not looked.

Where the statute's edges are is a question for a lawyer, and I will say so rather than guess. The text carries no knowledge requirement; whether Kentucky courts have read one into it is case law I have not checked. If your position depends on that rather than on the facts of who did what, you need someone whose job that is.

And I am not going to tell you that dissolving the company solves it. Both statutes say the opposite in terms — dissolution, withdrawal from the state and leaving office are each named and each disclaimed. It is the most intuitive thing to reach for and it is the one that does not work.

And if the honest answer is that you did have the authority and you made the call — you signed the checks, you decided which bills got paid in a bad month — then the exculpation clause is not your route and pretending otherwise wastes the time you have. What is left is the arithmetic: which periods, how much, what can be paid over what timeframe, and whether penalty relief is available on any of it. That is a worse position than a defense and it is a completely workable one — and there is no shame attached to it that a bad quarter does not already explain.

Download: the Kentucky License Risk Checklist, by profession

Which state board issues your license, what a tax clearance requires, and the two triggers to check yourself — because for a lot of business owners the personal exposure and the license exposure arrive together.

First name and email is the whole form. It is how the checklist reaches you, and how an updated one reaches you if a board changes what it requires. One click to unsubscribe, and downloading it does not put you in a call queue.

I am a CPA and a Certified Tax Resolution Specialist, and I practice from an office in Georgetown, Kentucky.

Bring the assessment and whatever you have about the periods — who was an officer or manager when, and who had signing authority. Most of the useful work on this kind of case is documentary, and it goes faster when the documents come with you.

If the honest answer is that the exculpation clause fits you cleanly and this is a letter rather than a case, I will tell you that.

Related Kentucky guides

Continue through the Kentucky section — each page cites the statute it relies on, with the date it was last checked.