What is a Kentucky motor vehicle dealer license?
Types of Kentucky Motor Vehicle Dealer Licenses
Step 1: Pay $7 to the Kentucky Motor Vehicle Commission
Step 2: Establish a permanent business location
Step 3: Choose an appropriate business name
Step 4: Choose your business type
Step 5: Register your business
Step 6: Obtain a franchise agreement (new motor vehicle dealers only)
Step 7: Complete and submit your license application
Step 8: Purchase insurance and submit your certificate of insurance
Step 9: Obtain a motor vehicle dealer bond/auto dealer bond
Step 10: Wait and receive your license
Renewing your Kentucky Motor Vehicle Dealer License
The Kentucky motor vehicle dealer license is a legal authorization issued by the Kentucky Motor Vehicle Commission (KMVC) that allows individuals or businesses to engage in the sale, display, offering for sale, or dealing of motor vehicles within the state of Kentucky. This license is required for various types of motor vehicle dealerships, including new motor vehicle dealers, used motor vehicle dealers, motorcycle dealers, and more. If you wish to sell or operate more than 5 vehicle within a year, you must obtain this license.
IMPORTANT: The Kentucky Motor Vehicle Comission meets every second Friday of each month. The Commission must receive your license application at least ten working days before their meeting.
This type of dealer holds a valid sales and service agreement, franchise, or contract granted by the manufacturer, distributor, or wholesaler, allowing them to sell the manufacturer's new motor vehicles.
This category includes individuals engaged in the retail sale, display, offering for sale, or dealing of used motor vehicles. However, it does not cover those involved in dismantling, salvaging, or rebuilding motor vehicles using parts.
These dealers are in the business of regularly providing, offering, or arranging for the use of motor vehicles under a lease or contractual arrangement, where a charge is made for its periodic use, typically on a monthly basis. The title of the vehicle remains in the name of someone other than the user. This does not include manufacturers or their affiliates leasing to their employees or dealers.
This type of dealer exclusively sells to other licensed dealers and is prohibited from conducting retail sales to the general public.
These individuals primarily engage in the business of offering, negotiating, or attempting to negotiate sales, purchases, or exchanges of motor vehicles through auctions.
This dealer is involved in the retail sale, display, offering for sale, or other dealings of new or used motor vehicles specially designed or permanently modified for use by aging or disabled persons.
This type of motor vehicle dealer exclusively sells, offers to sell, solicits, or advertises specialized motor vehicles, such as funeral coaches and emergency vehicles.
These dealers engage in the business of dismantling, salvaging, or recycling salvage vehicles to harvest used parts, components, assemblies, and recyclable materials for resale, reuse, or reclamation.
This dealer exclusively sells, offers to sell, solicits, or advertises motorcycles.
These dealers are engaged in the business of selling, offering for sale, or otherwise dealing in "recreational vehicles," which include travel trailers, fifth-wheel trailers, pop-up campers, and on-road-drivable RVs.
To obtain your license application, mail a check or money order of $7 to the Kentucky Motor Vehicle Commission. Make the payment to the following address:
Motor Vehicle Commission
105 Sea Hero Road, Suite 1
Frankfort, Kentucky 40601
Make the check payable to the “Kentucky State Treasurer.”
To send a money order, follow the instructions below:
Kentucky Motor Vehicle Commission requires you to have an established place of business when you apply for your dealer license. Your location must adhere to the following requirements:
The next step is to pick a business name for your dealership. You will need your business name to both register your business as well as obtain your license. The Motor Vehicle Commissions requires your business name to following the criteria below:
Once you’ve picked a business name, you must choose your business type. Auto dealerships commonly fall under four main types of business entities: sole proprietors, partnerships, LLCs (Limited Liability Companies), or corporations.
A sole proprietorship, which can also be referred to as an "individual," is the simplest option for solo dealers as it involves minimal paperwork during registration. However, operating as an individual/sole proprietor leaves you personally exposed to your business's liabilities and taxes.
There are two types of partnerships your business could be in Kentucky: a general partnership or a limited partnership.
A general partnership is a type of business arrangement where two or more individuals or entities join together to run a business for profit. In this form of partnership, all partners share equal rights and responsibilities in managing the business, including decision-making and sharing profits and losses. One notable aspect is that the partners are personally liable for the business's debts and obligations, which means their personal assets are at risk in case of any financial or legal liabilities.
A limited partnership is a business structure that involves at least one general partner and one or more limited partners. The general partner(s) assume full management control and personal liability for the business's debts, while the limited partner(s) contribute capital but have limited involvement in management and liability, typically only risking their investment. This arrangement offers limited partners the opportunity to invest in the business without being exposed to the same level of risk as the general partner(s).
LLCs, on the other hand, are well-suited for those who want to separate their personal liabilities from the business's obligations. Choosing this structure allows you to protect your personal assets in case of any financial or legal issues related to the dealership.
Kentucky also allows your business to be professional or non-profit LLC, but neither are business structures that apply to a motor vehicle dealership.
Alternatively, business (or for-profit) corporations are the preferred choice for dealers seeking to attract outside capital to expand their dealership. This corporate structure enables you to raise funds from investors or shareholders, helping you to grow your business more effectively.
Once you’ve picked a business name and type, you must register your business. Kentucky requires your business to be a legally recognized entity in order to become a licensed dealership. Follow the below instructions to register your type of business:
For sole proprietorships or general partnerships: Register your business name, if you are not using its “real name.” “Real name” means that the business name is the same as the legal name of the owner of the business. To register, contact your County Clerk and submit the Assumed Name Certificate. The county you contact is where your business is located. The submission process is different for different counties, but generally, you would asked to mail your completed form to the County Clerk. For example, in Jefferson County, you would mail your form to:
Jefferson County Clerk
527 West Jefferson St., Room 204
Louisville KY 40202
For limited partnerships, LLCs, and corporations: Register with the Secretary of State and Department of Revenue. Use the Kentucky Business One Step Portal to begin the process.
When you open the portal, click “Create a New Account.” You will be taken to a webpage where you answer a series of basic questions, like your name, address, and password verification. Once you have completed these questions, you will be asked to verify your email address. After your email verification, you will be able to sign into your account. Go to the homepage, and scroll down to find Kentucky Business One Stop. You will be prompted to sign into your account again. Once you’ve signed in again, click the option “Register a new business.” Once you’ve completed the registration process, make sure you have a copy of your Certificate of Limited Partnership/Articles of Organization/Articles of Incorporation to submit along with your dealer license application.
The next step is to obtain your Federal Employer Identification Number (FEIN) from the IRS. The FEIN is also known as a Federal Tax ID Number. You use this ID number to identify your business on tax and payroll forms. To obtain this number, apply via the IRS website. On this webpage, click “Apply Online Now.” This link will take you to your FEIN application. If you do not want to apply online, download Form SS-4 as well as the accompanying instructions. Once you’ve completed the form, fax the form to 855-641-6935 or file the form to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Along with your FEIN, you must also obtain the Commonwealth Business Identifier (CBI). CBI is a ten-digit number unique to your business that allows state agencies to identify your business. Completing your online business registration would have given you your CBI number.
Registering your business also automatically enrolls you in the most common business taxes:
You will receive ID/permit numbers for all of these taxes. You will need them when applying for certain licenses and permits. For example, the Kentucky motor vehicle dealer application asks you for your Revenue Cabinet Sales Tax Permit Number which is your Sales and Use Tax permit number.
The next step is to obtain a franchise agreement with the manufacturer your business gets its vehicles from. This step is only required for new motor vehicle dealers.
Verification of franchise agreements from each manufacturer is mandatory for new vehicle dealers. The manufacturers they collaborate with should hold a valid license issued by the Kentucky Motor Vehicle Commission. Franchise agreements entail the permission granted by a brand owner to a dealer, allowing them to enjoy the benefits of selling the brand's products. For instance, if a dealership intends to sell Toyota vehicles, it must establish a franchise agreement with Toyota.
After you’ve collected all the necessary materials stated in previous steps, you must complete the Kentucky Motor Vehicle Dealer License Application. The application asks for the following information:
Submit your completed application to the following address:
Motor Vehicle Commission
105 Sea Hero Road, Suite 1
Frankfort, Kentucky 40601
The license fees should be included in your materials submitted to the above address. The following fees are required:
Make the checks payable to the “Kentucky State Treasurer.”
Once you’ve submitted your application, you will be notified via mail to submit your certificate of insurance.
Liability insurance is a type of insurance coverage that provides financial protection to an individual or business in the event they are found legally responsible for causing harm or damage to someone else or their property. The purpose of liability insurance is to cover the costs associated with legal claims, judgments, or settlements resulting from such incidents.
The state of Kentucky requires the following garage liability coverage: minimum of $250,000 per person, $500,000 per occurrence, and $250,000 for property damage.
Automotive recycling dealers are required to have a commercial general liability policy of the same amounts.
Garage liability coverage and commercial general liability (CGL) coverage are both types of liability insurance, but they are designed to address different sets of risks and are often tailored to specific industries or business types. While both garage liability coverage and commercial general liability coverage offer liability protection, they have distinct areas of focus. Garage liability coverage caters specifically to businesses in the automotive industry, addressing risks related to garage operations and auto liability. On the other hand, commercial general liability coverage provides broader protection applicable to various businesses, covering common risks like bodily injury, property damage, product liability, and advertising injury.
You will be notified by the Kentucky Motor Vehicle Commission when you must show proof of your auto dealer bond. You can also alternatively show assets or other reliable financial arrangements in any amount up to $100,000, instead of purchasing the bond. If you choose this alternative path, there is no extra work required. All you have to do is fully fill out the “Financial Statement” of the licence application. If your assets add up to $100,000 you will not be required to purchase a bond.
To obtain your dealer license in Kentucky, you must adhere to the requirement of securing a $100,000 motor vehicle dealer bond. The Kentucky Motor Vehicle Dealer Bond, also known as an auto dealer bond, serves as a crucial assurance that auto dealers fulfill their legal obligations to the state and uphold their responsibilities to their customers. These bonds act as a financial safeguard for individuals engaging with motor vehicle dealers, ensuring that they have recourse in case of any misconduct or violations.
For example, if a dealer were to sell a car without a valid title, a consumer would have the right to file a claim against the dealer's auto dealer bond to seek compensation for their losses.
Obtaining the Kentucky Motor Vehicle Dealer Bond is a straightforward process, and SuretyNow offers a convenient solution for obtaining this bond. The steps are simple:
By following these steps, you can fulfill the bond requirement and proceed with your motor vehicle dealer license application in Kentucky.
After submitting all required materials, it typically takes 30 days for your license to be approved and sent to you. Once you acquire your license, you must display your license at your business location.
The dealer license expires every year on December 31st.
To renew your license, you must submit your request online. The renewal process begins on October 17, 2023. The first sttep is to log in or sign up for a Kentucky.gov account. After you access your account, click the blue box that says “Renew Dealer License.”
Renewing your license requires the following information: