Choosing the right business idea is a critical first step on your entrepreneurial journey, and I’m here to offer some tips and encouragement as you make this important decision.

First and foremost, when selecting a business idea for your new venture, think about your passions and strengths. By aligning your business with what truly excites and motivates you, you’ll be more likely to stay committed and focused, even when the going gets tough. Remember, while money can be a great motivator, you’ll be pouring a significant amount of time and energy into your business, so make sure it’s something you’re genuinely passionate about.

Next, consider the local market and identify gaps or unmet needs in your area. Research the industries and niches that are thriving in the state, and look for opportunities where your unique skills, experience, and vision can make a difference. Be prepared to adapt your idea to the specific needs and preferences of Kansans, as understanding your target market is essential for success.

To learn more about over 300 industries, check out our library of business ideas.

Finally, don’t be afraid to seek out advice and support from fellow entrepreneurs, mentors, and industry experts. Kansas has a vibrant business community with guidance and technical assistance from resources such as local chambers of commerce, Small Business Development Centers, and networking events. By connecting with others who have walked the path before you, you’ll gain valuable insights and guidance that can help you refine your business idea and set the stage for success.

A business plan is an essential tool for any entrepreneur looking to start a business in Kansas—or anywhere else for that matter. This roadmap not only helps you outline your vision, goals, and strategies but also serves as a communication tool for potential investors, partners, and employees. I’ll explain why a solid business plan is so important.

First, a business plan helps you clarify your thoughts and ideas, forcing you to think critically about your business’s viability and long-term success. It allows you to identify potential challenges and devise strategies to overcome them.

Second, a business plan is crucial for securing funding. Whether you’re approaching banks or investors, a thorough and convincing plan demonstrates that you’ve done your homework and have a clear path to profitability.

Third, a business plan serves as a guide for decision-making and setting milestones. It helps you measure your progress and make adjustments along the way.

If you aren’t sure how to get started, check out our resource on how to write a business plan.

When starting a business in Kansas, one of the first and most important decisions you’ll need to make is choosing the right business entity. A business entity refers to how a company is organized to operate, and it can significantly impact your personal liability, taxation, and overall management.

Let’s dive into the differences and pros and cons of four common business structures in Kansas: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

Sole Proprietorship: This is the simplest and most common form of business entity. It’s owned and operated by a single individual, with no legal separation between the owner and the business.

Pros:
– Easy and inexpensive to establish.
– Minimal paperwork and regulatory requirements.
– Complete control over business decisions.
– Business profits are taxed only once as personal income.

Cons:
– Unlimited personal liability for business debts and liabilities.
– Difficulty in raising capital.
– Limited growth potential, as the business is tied to the owner.

General Partnership: A general partnership consists of two or more individuals who share the management, profits, and liabilities of a business.

Pros:
– Simple and affordable to set up.
– Shared decision-making and management responsibilities.
– Business profits are taxed only once as personal income for each partner.

Cons:
– Unlimited personal liability for all partners, even for debts or liabilities incurred by a single partner.
– Potential for conflicts between partners.
– Difficulty raising capital compared to corporations or LLCs.

Corporation: A corporation is a separate legal entity owned by shareholders, providing limited liability protection and the ability to raise capital by selling shares.

Pros:
– Limited liability for shareholders, protecting personal assets from business debts.
– Easier to raise capital through the sale of shares.
– Longevity, as the corporation continues to exist even if the founder or shareholders leave.

Cons:
– More complex and expensive to establish and maintain.
– Increased regulations and reporting requirements.
– Double taxation: corporate income is taxed, and shareholders also pay taxes on dividends.

Related: How to form a Kansas Corporation

Limited Liability Company (LLC): An LLC combines the limited liability protection of a corporation with the tax advantages and flexibility of a partnership or sole proprietorship.

Pros:
– Limited liability for members, protecting personal assets from business debts.
– Pass-through taxation: business profits are taxed only once as personal income for each member.
– Flexibility in management and decision-making structure.

Cons:
– More complex and costly to set up compared to sole proprietorships or general partnerships (but easier than a corporation).
– Potential for self-employment taxes on members’ share of business profits.
– Varying state regulations can complicate interstate operations.

Related: How to form a Kansas LLC

When starting a business in Kansas, it’s essential to make sure you comply with all federal, state, and local regulations, which include obtaining the necessary licenses and registrations. While the specific requirements can vary depending on your business type and location, I’ll outline some common licenses and registration steps you’ll need to follow when setting up shop in Kansas.

Business Licenses – The state of Kansas doesn’t have a general business license; however, many cities require a business license in order to operate.

Employer Identification Number (EIN): Most businesses will need to get an EIN from the Internal Revenue Service (IRS). This is a unique nine-digit number that is used to identify a busienss for tax purposes.

Business Tax Application – Businesses will need to register for a Business Tax License 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.

Related: What business licenses and permits are needed in Kansas?

Separating your business and personal funds is crucial, especially for simplified accounting and tax preparation. Also, for business entities like corporations and LLCs, maintaining separate finances helps preserve the limited liability protection these structures provide. If you mix personal and business funds, you risk “piercing the corporate veil,” which could expose your personal assets to business liabilities.

Sole proprietorship & partnership – Trade Name Certificate, EIN or SSN, and owner(s) driver’s license.
Corporation – Articles of Incorporation, bylaws, Certificate of Good Standing, EIN, and owner(s) driver’s license.
LLC – Articles of Organization, Operating Agreement, Certificate of Good Standing, EIN, and owner(s) driver’s license.

Securing funding is a crucial step for many Kansas small businesses, and there are several options available to you, including conventional bank loans, SBA loan guarantees, microloan programs, and investors. Let’s go through each of these options and discuss the differences:

Conventional bank loans: Traditional bank loans are a common funding source for small businesses. Banks in Kansas offer various loan products, such as term loans, lines of credit, and commercial real estate loans. When applying for a conventional bank loan, you’ll typically need a strong credit score, a detailed business plan, financial projections, and collateral to secure the loan.

Lenders will require that you personally invest money into the business, with a 15%-25% investment being common.

SBA loan guarantees: The U.S. Small Business Administration (SBA) offers loan guarantee programs to help small businesses secure financing through approved lenders. These programs, such as the 7(a) loan program and 504 loan program, reduce the risk for lenders by guaranteeing a portion of the loan amount. To qualify for an SBA loan guarantee, you’ll need to meet the SBA’s eligibility requirements, which may include a good credit score, personal investment, collateral, and a solid business plan.

Microloan programs: Microloans are small, short-term loans designed to help startups and small businesses with lower capital needs. In Kansas, various organizations offer microloan programs, such as local economic development agencies, nonprofit organizations, and community development financial institutions (CDFIs). Microloan programs often have more lenient eligibility requirements, making them accessible to businesses that might not qualify for traditional bank loans or SBA loan guarantees.

Investors: Another option for funding your Kansas small business is to seek out investors, such as venture capitalists, angel investors, or even friends and family. These individuals or organizations provide capital in exchange for equity in your company or a percentage of future profits. To attract investors, you’ll need a compelling business plan, a clear path to profitability, and the ability to demonstrate the potential for high returns on their investment.

Related: Understanding the different types of business funding

Hiring your first employee is an exciting milestone for any small business owner, but it also comes with responsibilities and obligations. A few considerations include:

Understand the labor laws: Familiarize yourself with federal and Kansas state labor laws to ensure compliance. The U.S. Department of Labor (DOL) and the Kansas Department of Labor (KDOL) are two key sources of information on new hire reporting, minimum wage, overtime, safety regulations, and workers’ compensation requirements.

Obtain an Employer Identification Number (EIN): If you haven’t already, apply for an EIN from the Internal Revenue Service (IRS). This unique number is required for tax purposes and when reporting employee information to the state and federal government.

Verify eligibility to work in the United States: Ensure your new employee is legally authorized to work in the U.S. by completing the I-9 Employment Eligibility Verification form and verifying the required documents.

Prepare and post required notices: Make sure to display all required labor law posters in a visible location at your workplace. These posters inform employees of their rights and your obligations as an employer.

Related: Steps to hiring your first employee in Kansas

Insurance is a vital aspect of running a business, as it helps protect your investment, assets, and potential liabilities. As a small business owner in Kansas, it’s essential to understand the importance of insurance.

Financial protection: Insurance helps protect your business from unexpected financial losses, such as property damage, theft, or liability claims. Having the right coverage in place can save your business from bankruptcy or severe financial strain.

Legal compliance: Depending on your industry and location, certain types of insurance may be required by law. For example, most states, including Kansas, require businesses with employees to carry workers’ compensation insurance.

Contractual obligations: Insurance may be required to fulfill contractual agreements, such as leases or client contracts. Many commercial landlords require tenants to carry general liability and property insurance, while clients may require professional liability coverage or bonding for construction projects.

Employee protection: Insurance not only protects your business, but it also safeguards your employees. Offering benefits such as health insurance and workers’ compensation can help you attract and retain top talent while ensuring their well-being. All employers, except those in certain agricultural businesses or if they have a gross annual payroll of $20,000 or less, must provide Worker’s Compensation insurance for all employees, including family members.

Peace of mind: Lastly, having the appropriate insurance coverage provides peace of mind, knowing that your business and assets are protected from unforeseen events.

Related: Types of insurance your business may need

Establishing a good accounting system is crucial for a variety of reasons.

Compliance with tax laws: A good accounting system helps ensure your business complies with federal and state tax laws. Proper recordkeeping is vital when it comes to filing your taxes accurately and on time. In Kansas, businesses are subject to various taxes, such as sales tax, withholding tax, and unemployment insurance tax. By maintaining accurate financial records, you’ll be better equipped to calculate and report the correct tax amounts and avoid potential penalties or audits.

Simplified tax preparation: When tax season rolls around, having a well-organized accounting system will make the process of tax preparation much smoother. Detailed financial records enable you, your bookkeeper, or your accountant to quickly and easily identify deductible expenses, calculate depreciation, and determine your taxable income. This not only saves time but also minimizes the risk of errors and ensures that you’re taking advantage of all the tax benefits available to your business.

Informed decision-making: Accurate financial records provide valuable insights into your business’s performance and financial health. A good accounting system allows you to track your income, expenses, and profitability, which is essential when making strategic decisions about your business operations. These insights can help you identify growth opportunities, cut unnecessary expenses, and manage cash flow more effectively.

Related: Setting up accounting for a business