Guide to Starting an LLC in Kansas
If you’re researching how to start a business, you may have come across information about creating an LLC. Here in Kansas, there are specific steps you need to take to create an LLC, and this guide will walk you through them. Keep in mind that each state has different requirements for LLC formation, so be sure to do your research before starting the process. With that said, let’s get started!
What is an LLC?
The Limited Liability Company (LLC) is a popular business structure for many businesses starting in Kansas. The LLC provides personal liability protection for the owners and has the potential to save money on taxes.
Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal entity, protecting the business owner’s personal assets.
In addition to liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
Steps to Form a Kansas LLC
While it can be intimidating to form an LLC for the first time, with a little research and patience, you can learn how to form an LLC in Kansas without an attorney. Let’s break down the steps to complete the Kansas LLC formation process.
Total Time: 10 minutes
Step 1: Choose an LLC Name
The first step in forming a Kansas Limited Liability Company is to make sure the name you want is available.
It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of Kansas. Fortunately, the Kansas Secretary of State makes it easy to search and verify if your LLC name is available. Here is more information on how to do an LLC name search in Kansas.
In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
– Limited Liability Company
– Limited Company
You can choose to use a comma or not before the designator. For example: “Acme, LLC” and “Acme LLC” are both fine to use.
Differences in grammar often do not create distinguishability. For example:
– The singular, plural, and possessive use of a word
– A, An, or The anywhere in the name
– The use of and, or, &
– A written number vs. the number itself. Example one vs. 1
The name may also contain the following words: “company,” “association,” “club,” “foundation,” “fund,” “institute,” “society,” “union,” “syndicate,” “limited,” or “trust” (or abbreviations of like import)
If there is a name you want but are not ready to register the LLC, you can reserve a name with the Kansas Secretary of State. The name reservation will hold a name for up to 120 days at the cost of $30.
Last, you may also want to see if a domain name is also available to have a matching website address.
Step 2: Appoint a Kansas Resident Agent
Kansas law requires every LLC in Kansas to have a Resident Agent (called a Registered Agent in most states). The Resident Agent serves as service of process who acts as a central point of contact and receives legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
The requirements to be a Resident Agent in Kansas include:
– The agent must be a Kansas resident at least 18 years of age or a commercial Resident Agent service
– The agent must have a physical address in the state (PO Boxes aren’t allowed)
– The agent must generally be available during normal business hours at the address provided to receive service of process
Learn more about the requirements for a Registered Agent in Kansas
Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed. Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.
Step 3: File the Kansas LLC Articles of Organization
In the last step of starting an LLC in Kansas, the Articles of Organization needs to be filed with the Kansas Secretary of State. To file, either file online with KanAccess Kansas Business Center or fill out and mail in the Kansas Articles of Organization (Form DL 51-09).
If you have questions about the LLC formation process, contact the Kansas Secretary of State:
Memorial Hall, 1st Floor
120 SW 10th Avenue
Topeka, KS 66612-1594
When filling out the Articles of Organization, there are a few sections that may bring up questions. Let’s go over a few of those sections.
Mailing Address – Enter the name and address of where you want any normal correspondence from the Secretary of State to be sent. Unlike the Resident Agent’s address, the mailing address can be a PO Box, home address, or address outside of Kansas.
Tax Closing Month – The tax closing month is the end of the LLCs fiscal year. This date is important for tax filings. Most business owners will choose December for their tax closing month as most businesses run on a calendar fiscal year, January 1st to December 31st.
Effective Date – The effective date is the day the LLC officially starts. There are two choices.
- Upon filing – Selecting this will have the LLC start on the day the Kansas Secretary of State processes the Articles of Organization.
- Future effective date – If you want the LLC to begin at some point in the future, select this option and enter the date the LLC should officially start. This date can’t be more than 90 days from the Secretary of State receiving the Articles of Organization.
You have a Kansas LLC! Now what???
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare a Kansas LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.
Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Related: Kansas operating agreement template
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file tax returns, and more.
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
Related: How to Apply for an EIN
Elect the LLC’s Form of Federal Income Taxation
One of the significant benefits of the Limited Liability Company is the tax flexibility it provides. When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:
- Sole proprietorship
While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.
Related: How can an LLC be taxed?
By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.
Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.
Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.
In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership. As a result, the owner will pay self-employment taxes on all business profits. As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes. Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.
Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C-corporation, do not benefit many people due to double taxation.
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- In some circumstances, a Kansas Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting. Some common registrations include:
- Business Licenses – The state of Kansas doesn’t have a general business license; however, many cities require a business license in order to operate.
- Business Tax Application – Businesses will need to register for a Business Tax License (Form CR-16) with the Kansas Department of Revenue. The Business Tax Application allows for the registration of several licenses, such as sales tax, withholding tax, and several others.
- Professional Licensing – Some services such as contractors, bakeries, bed & breakfasts, kennels, and businesses selling on the internet require licensing in Kansas. While this isn’t a license on the business, licensing is required to operate.
File Annual Reports
The LLC will need to file the Annual Report with the Kansas Secretary of State every year. The annual report is due on the 15th day of the fourth month following the LLC’s tax closing month (December 31st for most LLCs as they operate on a calendar year), and the filing fee is $55 when filing by mail and $50 when filed online.
Common Questions To Starting An LLC In Kansas
How much does it cost to start an LLC in Kansas?
Forming an LLC in Kansas costs between $160-$165 to file the Articles of Organization with the Kansas Secretary of State.
Is there a yearly fee for an LLC in Kansas?
Each year, an Annual Report will need to be filed, along with the Secretary of State Annual Report fee of $50-$55, depending on whether the report is filed online or sent by mail.
How long does it take to get an LLC in Kansas?
Online filings are processed immediately, and filings sent by mail normally take 3-5 business days to be processed.
Do you need a Resident Agent for your LLC in Kansas?
Anyone can act as a Resident Agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.
If I have an LLC, is a business license required?
It’s sometimes thought that the LLC and business license are the same, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.
What is a Foreign Limited Liability Company?
A foreign LLC refers to an LLC that is physically operating in states outside of the state where it was formed. Physically operating means having a presence, such as having an office or employee. The LLC will need to register as a foreign LLC in each state where it plans to operate.
What is a Professional Limited Liability Company?
Companies offering professional services can form a special type of LLC known as a Professional Association (PA), which is sometimes referred to as a professional LLC. A few types of licensed professional services include accountants, attorneys, architects, real estate brokers, and others.