Kentucky Form 765 is the partnership return that general partnerships, limited partnerships, and LLCs taxed as partnerships use to report income and pay the Limited Liability Entity Tax (LLET) to the Kentucky Department of Revenue. It is due by the 15th day of the fourth month after the close of the taxable year, which is April 15 for calendar-year filers, and it builds on the federal Form 1065 with Kentucky-specific adjustments, apportionment, and credits. A complete filing means the Kentucky schedules, the federal attachments, an LLET calculation, and a Kentucky Schedule K-1 for every partner.
Who Has to File
The filing net is broad. A partnership must file Form 765 if it is organized under Kentucky law, has its commercial domicile in Kentucky, owns or leases property in the state (including computer software used by a third party there), has anyone performing services in the state, holds an interest in another pass-through entity doing business in Kentucky, earns Kentucky-source income (including indirectly through a trust or a disregarded single-member LLC), or actively directs sales at Kentucky customers.
That covers general partnerships, limited partnerships, syndicates, joint ventures, and LLCs that elect partnership treatment federally. Single-member LLCs disregarded for federal purposes don’t file their own 765; their activity flows up to the owner.
What to Attach
Missing attachments are the fastest route to a Department of Revenue notice. The Kentucky schedules to include are:
- Schedule K-1 (Form 765) for each partner.
- Schedule A for apportionment and allocation, if the partnership operates in more than one state.
- Schedule LLET for the Limited Liability Entity Tax calculation.
- Schedule O-PTE for additions to and subtractions from federal ordinary income.
- Schedule TCS, the Tax Credit Summary, if you’re claiming any Kentucky credits.
On the federal side, attach all pages of Form 1065 plus Form 1125-A (Cost of Goods Sold), Form 4797 (Sales of Business Property), Schedule D (Capital Gains and Losses), Form 4562 (Depreciation and Amortization), Form 8825 (Rental Real Estate Income and Expenses), Form 5884 (Work Opportunity Credit), and any schedules referenced by Form 1065’s Schedule L.
Filling Out the Return
Start with the identifying block: entity name and address, Federal Employer Identification Number, six-digit NAICS code for the primary business activity, and the Kentucky Corporation/LLET account number. Mark whether the return is original, amended, or final, and note the accounting method.
Income and Kentucky Adjustments
The income section begins with ordinary income or loss from federal Form 1065, Line 22. From there, you work through Kentucky additions and subtractions. The common ones are depreciation differences between federal and Kentucky law and state or local bond interest that Kentucky treats differently than the federal government does. Schedule O-PTE walks through the full list.
Apportionment for Multi-State Partnerships
Partnerships doing business both inside and outside Kentucky apportion income on Schedule A, using a fraction built from sales, property, and payroll factors. Enter the Kentucky figure and the total for each factor, and the resulting fraction sets what share of income Kentucky taxes. If the partnership holds an interest in another pass-through entity, include its proportionate share of that entity’s sales, property, and payroll in the calculation.
An alternative allocation and apportionment formula requires written approval from the Department of Revenue in advance. If you have it, attach a copy of the department’s letter.
Calculating the LLET
Kentucky imposes the LLET on every business entity that enjoys liability protection under state law, which captures limited partnerships, LLCs, and S-corporations. General partnerships are not subject to the LLET because their partners don’t have limited liability.
Schedule LLET calculates the tax using Kentucky gross receipts or Kentucky gross profits, whichever produces the smaller tax:
- If total gross receipts or total gross profits are $3 million or less, the entity owes only the $175 minimum LLET.
- Between $3 million and $6 million, a sliding-scale formula phases in the full rate.
- Above $6 million, calculate Kentucky gross receipts times 0.095% and Kentucky gross profits times 0.75%, and pay the smaller.
If the entity also owes Kentucky income tax, that liability can be reduced by the LLET amount above the $175 minimum. The practical effect: the LLET is a floor, and income tax only adds to the bill above that floor.
Kentucky Schedule K-1 for Each Partner
Every Form 765 filing produces a Kentucky Schedule K-1 for each partner. It reports the partner’s distributive share of ordinary income or loss, rental income, portfolio income (interest, dividends, royalties, capital gains), guaranteed payments, charitable contributions, Section 179 deductions, and any Kentucky credits passed through.
The K-1 also carries LLET pass-through items: the partner’s share of Kentucky and total sales, property, payroll, gross profits, and the nonrefundable LLET credit. Partners use these on their own Kentucky individual or corporate returns. A calendar-year partner receiving a K-1 from a fiscal-year partnership reports the items on the return for the calendar year in which the partnership’s fiscal year ends.
Nonresident Partner Withholding
If any individual partner is a Kentucky nonresident, the partnership must withhold Kentucky income tax on that partner’s distributive share of Kentucky income, whether or not it was actually distributed. The withholding rate is the maximum individual rate under KRS 141.020, dropping to 3.5% for taxable years beginning on or after January 1, 2026.
Report the withholding on Form 740NP-WH and file a Form PTE-WH for each affected partner. Form 740NP-WH is due the same day as Form 765, and partnerships with a withholding obligation also have to make estimated tax payments during the year.
Two situations skip the withholding: the partner filed a Kentucky return for the prior year, or the partner’s net distributive share isn’t subject to Kentucky income tax. Nonresident C-corporation partners are not subject to the partnership-level withholding, but they still have their own Kentucky filing obligation.
Deadline, Extensions, and How to File
Form 765 is due the 15th day of the fourth month after the taxable year closes. April 15 for calendar-year filers; fiscal-year partnerships adjust from their own year-end. If the due date lands on a weekend or legal holiday, it rolls to the next business day.
For more time, file Kentucky Form 41A720SL before the original due date for a six-month extension. If you already have a federal extension on Form 7004, Kentucky honors it, as long as you attach a copy of the 7004 when you eventually file the Kentucky return. A federal extension granted after the Kentucky return has been filed does not count, and late-filing penalties will follow.
An extension buys time to file, not time to pay. Any LLET or withholding owed is still due on the original date. Use Form 720EXT to send a payment with the extension request.
Kentucky accepts Form 765 electronically through the Modernized e-File (MeF) system or by mail. To file electronically, the partnership needs a valid six-digit Kentucky Corporation/LLET account number and must be registered for electronic filing with the department. Paper returns with payment go to the Kentucky Department of Revenue, Frankfort, KY 40620, with the check made payable to the Kentucky State Treasurer. Electronic filing gets faster confirmation and processing.
Penalties and Interest
A late return draws a penalty of 2% of the total LLET due for each 30-day period (or fraction) the return is late, capped at 20%. If the department determines a return should have been filed and wasn’t, the failure-to-file penalty rises to 5% of estimated tax due per 30-day period, up to 50%.
Unpaid tax also accrues interest. For 2026, the rate on tax owed to the Commonwealth is 9%.
Amending a Return
To correct a previously filed Form 765, file a new Form 765 and check the Amended Return box on page 1, Item F. If the amendment changes any partner’s income, deductions, or credits, file an amended Schedule K-1 for each affected partner and check the Amended K-1 box on each one.
A separate rule applies after an IRS audit: copies of the federal final determinations must reach the Kentucky Department of Revenue within 30 days of the audit’s conclusion. Use Form 765, check the Amended Return box, and attach the complete Revenue Agent’s Report.