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There are many different ways that an entrepreneur can structure their business. One of these is with a Limited Liability Company (LLC). There are a number of advantages of forming an LLC in Kansas, regardless of what niche your business is in. For example, not only does an LLC help shield business owners from personal liability, it also offers tax benefits and doesn’t require a lot of bookkeeping. Below are 6 steps to forming a Kansas LLC.
Here are the steps you’ll need to take in order to get your LLC in Kansas.
Below, you’ll find a detailed explanation to walk you through each step.
The first thing you need to do is choose a name for your business. Your Kansas LLC needs to have a creative, unique name that is distinguishable from other similar companies in your area. If the name you choose for your business is too similar to that of a competitor, you could be sued for infringing on their copyright. If your name isn’t recognizable, it will be more difficult to market your brand to the ideal audience.
It’s typically a lot of effort to change your business name after the fact, particularly if you’ve filed legal forms or created banking accounts with the name of your business on them. Instead, make sure the name you choose is what you’ll stick with throughout the life of your business. It should adequately describe the services or products you offer and what you’re doing differently for customers than your competitors.
Start by checking that the business name you’re interested in is available in Kansas. If it’s not, you’ll have to start from square one and come up with something different and more unique. You can find out if the name you want or something similar is already taken by visiting the Kansas.gov Business Center and clicking Name Availability. You don’t need to reserve a business name in Kansas, but this is usually a good idea to do. You can reserve a business name for up to 120 days. If you do not register the name within this time frame, it will become available for anyone to register.
If you want to do business under a name other than your company’s legally registered name, you may wish to file a DBA. In Kansas, this is generally done at the county or local level, since there is no formal state registration process for DBAs. Filing a DBA is a formal way of registering a business with local and state governing authorities. Some companies don’t have a DBA, depending on how the LLC is organized and what aligns with the company’s goals.
Sometimes, a DBA is called a trade name, a fictitious name, or an assumed name. The most common example of this is when a business has a parent company and wants to do business as other brands within that company model. A DBA connects all businesses and brands underneath the same company. You will need a DBA if you have a limited liability company (LLC), limited liability partnership (LLP), limited partnership (LP), general partnership, sole proprietorship, a corporation, or a nonprofit entity that wants to do business with a name other than the registered company name.
Typically, most entrepreneurs who intend to have DBAs within their business structure ensure these names are not taken or trademarked by other competitors, or even companies in a totally different industry, at the same time as they file for the name of the parent company. There is no limit to the number of DBAs a parent company can have underneath itself, so if you decide to go in a different direction, you can always file a new DBA with the state.
Next, you’ll want to register the name of your business as well as the names of any unique products or services that your company will offer. While you can’t have normal, everyday things trademarked, you can trademark distinctive names. For example, a pet store can’t trademark the term “dog food,” but they can trademark a creative and unique name like “Bark n’ Bites.”
You can trademark the name of your business, the titles of services or products that are only available through your company, and any one-of-a-kind slogans that you may want to use in your advertising materials. By doing so, you deter other businesses from attempting to use your intellectual property.
Kansas Trademarks & Service Marks 101
The Kansas Secretary of State defines trademarks as “brand names, logos, [and] slogans.” They further define the difference between trademarks and service marks, stating “Trademarks are used to identify tangible goods. Service marks are used to identify services. The term ‘mark’ is used to refer to both trademarks and service marks.”
A mark can be any name, word, symbol, or combination thereof that is used by a business entity to distinguish their products and/or services from those of other competing businesses.
How Getting a Trademark or Service Mark In Kansas Can Benefit Your Business
Typically, a company stands to benefit from a trade or service mark for two reasons: it notifies the public that your business has been created, and it proves that your mark was registered first—especially in the event that another company attempts to use it or something similar to yours.
Step two in starting a Kansas LLC is to file articles of organization for your business. In some cases, these may be referred to as articles of incorporation. Similar to a business plan, articles of organization are specific to how your company will be structured and operated. They tend to be highly detailed in nature and are necessary for your company to legally conduct business in Kansas. It’s crucial that you make the effort and time to create high-quality articles and to file them appropriately.
In Kansas, the fee for filing articles of organization is $165.00. This is made payable to the Secretary of State. Check with governing bodies in your chosen industry to determine if there are any other state fees associated with starting your Kansas LLC.
Usually, the following items are necessary to file your company’s articles of organization in Kansas:
You can file your company’s articles of organization online at the Kansas Secretary of State website or by filling out and submitting a paper form. In most situations, businesses will do this at the same time they file other important paperwork for their companies, like registering their business name and filing forms for a trademark. Once your articles of organization are approved by the state, they act as a sort of “constitution” for your business. You can then adapt or fine-tune these to your company’s individual needs and use them to create your policies, employee handbook, etc.
Like the rest of the United States, Kansas legally requires that businesses have a registered agent in order to operate within its borders. Regardless of which U.S. state you live and/or conduct business in, you must name a registered agent for your company. Sometimes, a registered agent may be referred to as a “statutory” agent.
In Kansas, a registered agent is someone who you put in your articles of organization who has agreed to receive business communications on your behalf.
It’s a requirement in Kansas that you have a registered agent, as well as any other state in the U.S. It’s against the law not to have a registered agent and you may be subject to fines in the event someone attempts to formally serve your business and no physical address for an agent is on file.
To be eligible to be a registered agent for a business, the person must have a physical mailing address. It cannot be a post office box or a mail delivery address, and this is where letters, forms, and other paperwork from governing authorities to the business will be sent. You don’t need any special education or certificates to become a registered agent for someone’s company, but it may be a good idea to hire a professional based on the individual needs of your business and its overall goals.
Some businesses choose a professional registered agent over a friend or family member in order to avoid the consequences of any naive oversights or mistakes that someone in the position of a registered agent might make. A professional registered agent in Kansas can help ensure that a company receives important communication in a timely fashion and can provide assistance with navigating important business matters.
Once you assign a registered agent, they will act on your company’s behalf throughout the life of the business. This is different from an incorporator or a business organizer whose responsibilities are generally relieved after the business has been formed. One critical task that a registered agent is responsible for is receiving copies of legal notices, claims, or disputes for the business, as well as federal and state correspondence and tax documents.
If you haven’t named a registered agent, the Kansas Secretary of State can obtain service of process on the company’s behalf. That said, this can create significant, preventable delays in the receipt of your company’s important correspondence. If your registered agent is occupied with other tasks or your correspondence goes to the state, this could negatively impact your business.
A business owner may act as their own registered agent of their organization. This can be done just by completing the appropriate form with the Kansas Secretary of State with the business owner’s name and physical address instead of the contact information of another person. But acting as a registered agent can become difficult for new business owners experiencing growth to keep up with. Additionally, owners may need to file their home address with the state if there is no other physical address that is not the business location to send correspondence to.
When you hire a professional registered agent in Kansas, their business location will be the address used on the filing form. Since this information is publicized along with your business name so anyone serving your company can contact you, it may benefit you more to have a registered agent other than yourself. This prevents your home address from being a matter of public record. It’s also a good idea to consider a professional registered agent if you would rather work a nontraditional schedule. This way, someone representing your business can be contacted any time during business hours.
After selecting your registered agent, the next thing you should do is create an operating agreement for your Kansas LLC. This is also a crucial document that is utilized across all points of a business, so it’s important to ensure that it’s carefully considered, written, and filed.
An operating agreement is a master document designed to manage the operations of your business to meet its unique needs and that of your managers and shareholders. LLC members are required to sign and once they do, they are legally bound to the business contract and its terms and conditions.
Typically, an LLC member can only exit an agreement of this nature if the other members allow it. Or, a member must prove that the entire operating agreement or their signature on it was invalid. For example, if a member was coerced into signing, they may be able to use this evidence to get out of the agreement.
Operating agreements can provide moderate protection from personal liability for LLC members. An operating agreement outlines who your LLC members are and what responsibilities they have. Without one, it’s possible that your business may run more like a sole proprietorship or joint venture. This means LLC members may be at risk of personal accountability for the company’s insolvency should it occur.
Verbal agreements aren’t enough to offer LLC members adequate protection. You should ensure that all company agreements are in writing to avoid misunderstandings or communication failures. You can always refer to the operating agreement if necessary to clarify issues should a conflict or dispute between members come about.
Without an adequately drafted operating agreement, how your company runs and what policies, regulations, and guidelines apply to your company is determined by the state of Kansas. These default guidelines are quite wide in scope, meaning that your business is unlikely to have much, if any, legal protection in the event of insolvency. Instead of allowing potentially careless state employees making decisions about the operation of your company, you should protect your interests as the owner of your business by having a solid operating agreement with which you can conduct successful business.
Kansas does not require businesses to have an operating agreement on file. However, not having one is unadvisable for both new and established entrepreneurs because it puts you and your LLC members at risk. While you don’t have to address specific issues within your operating agreement and have full control over what goes on in it, you should consider including topics recommended by other industry professionals.
Creating an operating agreement does not need filing anywhere with the state of Kansas. An operating agreement is designed to provide benefits to your company and the people who’ve invested in it, which includes yourself as well as others.
Consider including the following points in your company’s operating agreement:
If your company has employees or will have employees in the future, you should file for an Employer ID Number, or EIN. You cannot opt out of having an EIN unless you are operating a sole proprietorship and you are the only one working.
An EIN is much like a social security number, but for a business. It is a unique Employer Identification Number that the U.S. Internal Revenue Service (IRS) uses to identify a company. An EIN is generally used for the purposes of filing business taxes in Kansas and is a nine-digit number broken into two parts like so: XX-XXXXXXX.
It’s a requirement for all companies in the U.S. to have an EIN to do business, with the exception of sole proprietorships. An entrepreneur running a sole proprietorship can use their personal Social Security number to file taxes. You will not be able to file your taxes properly without an EIN if you have employees, withhold taxes from non-wage sources, or meet other specific criteria.
Having an Employeer Identification Number is beneficial to a company in a variety of ways. It helps keep financial records for your business separate from your personal finances, which is extremely important even for sole proprietorships.
There are three ways to register for an EIN in Kansas: either by applying online through the IRS website, or by fax or mail. The quickest way to obtain your company’s EIN is by filing your application online. You’ll be able to get your EIN while logged into the IRS website after connecting and submitting your application.
Often, business owners are focused on growing their businesses and don’t want to invest their time and effort into getting an EIN themselves. In this case, you may choose to hire a professional who can assist you with the EIN application and/or apply on behalf of your company. This is a relatively simple task that can be delegated to your registered agent while you stay on track with the important work that will make your business successful.
Last, you’ll need to make sure that your Kansas LLC complies with all applicable tax laws. If you fail to do so, at best your company will be fined. At worst, you could face criminal charges yourself, even with limited liability.
Your Kansas LLC will need to withhold and pay a variety of different taxes to maintain compliance with the Internal Revenue Service. For example, you’ll need to withhold local, state, and federal income taxes from employees and pay into the state of Kansas. Simultaneously, if you sell products, you’ll need to charge Kansas sales tax and any local sales taxes. You are responsible for calculating how much taxes your business owes and paying them quarterly.
Your income must be paid out of the company’s profits and you’ll need to pay traditional income tax on this amount, depending on what tax bracket you fall into. In Kansas, if you earn between $0 and $15,000, your tax responsibility is 3.10% of your income. If you make between $15,000 and $30,000 per year, your tax responsibility is 5.25% of your income. If you earn over $30,000 annually, your tax responsibility will be 5.70% of your income. Kansas does not have local income taxes.
Kansas’ sales tax rate is on the higher side at 6.50% on the dollar. Local ordinances may also charge additional sales tax in some cases. This isn’t as high as other states like Ohio, where the sales tax can be as high as 8%, but is significantly higher than the handful of states that don’t charge any sales tax at all. States that have no sales tax include Alaska, Delaware, Montana, New Hampshire, and Oregon.
You will also owe what is called self-employment tax, which is an additional tax on your income for being self-employed. In Kansas, self-employed individuals like entrepreneurs and contractors must pay 15.3% self-employment tax. This is the same as Ohio and less than California. California’s self-employment tax is the highest in the nation at 13.3%, while there are no personal income taxes in these 7 states: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.
All businesses in Kansas must withhold income taxes on employee wages. These funds should be sent quarterly to the Kansas Department of Revenue on behalf of those employees. State and federal taxes are typically both withheld by employers, and both are paid by the employer for the employee. Your Kansas LLC is responsible for determining which tax bracket employees are in depending on their wages, as well as withholding the correct amount of taxes and remitting those funds to the Department of Revenue.
Many U.S. states have additional state taxes that are unique to that state. Kansas has a corporate income tax that is added onto other taxes, specifically for corporations in the state. If a corporation makes between $0 and $50,000, the tax rate is 4% of the corporation’s total income. If the business makes over $50,000, they will owe another 3% surtax on the additional income for a total of 4% on the first $50,000 and 7% on the rest.
For other questions about taxes for LLCs in Kansas, contact the Kansas Department of Revenue. There are three Taxpayer Assistance Centers in the state, which offer tax help to both individuals and businesses in the state.
After setting up your Kansas LLC, you need to do a couple more things, like:
As mentioned earlier, it’s important for the financial health of your company to never combine business and personal expenses. You should aim to keep them completely separate and if this isn’t possible, get as much separation as you can.
Whether or not you have funds to deposit into a business banking account and whether or not your company is turning a profit is irrelevant to the need for your company to have its own dedicated checking account. You should open a business banking account as soon as you have the name of your Kansas LLC registered with the state. Be sure to keep accurate, detailed records of all financial transactions that go through your checking or savings accounts.
Your company should also have a separate bank account where you deposit tax money that is withheld from employee paychecks. This is the account you will write checks to the state and the Internal Revenue Service from to pay the taxes your company owes.
While this isn’t a requirement in Kansas, it’s extremely beneficial for LLCs. Instead of having to come up with all of your tax money once every quarter or even every year, you can just draw what you owe out of this account. If you’ve calculated the taxes your business owes correctly, you should have enough in the account to cover your tax obligation. Having a separate account just for taxes makes quarterly or annual filing significantly easier.
You may wish to open a company credit card or a line of credit for your LLC in Kansas. This depends largely on what kind of business you have, what industry you’re in, and how much startup capital you have available. If you have a lot of startup capital to invest in your company, say from an inheritance or other financial windfall, you may not want to take out any lines of credit.
But if you have relatively low funds with which to build your company, a credit card or business loan can be extremely helpful. You can use these funds to pay for expenses before your company starts turning a profit. Then, you can pay back your debts with revenue and put extra aside for your company’s growth.
Once you’ve started your Kansas LLC, it’s important to understand what fees you have to pay on an ongoing basis. The state charges a $50 fee annually, and you may or may not have other fees associated with your industry or type of business.
After your Kansas limited liability company has been established, you need to ensure you have the appropriate licenses or certification necessary to operate the type of business you own. For example, if you run a restaurant that will serve alcoholic beverages, you need to apply for a liquor license within the state. Other examples include but are not limited to permits for salons, caterers, and farms.
Starting an LLC in Kansas can seem intimidating, especially when you consider all the various steps involved before you even open for business. However, this process is necessary in order to own a company and do business within the state of Kansas. Working with professionals who have skills to help you start a Kansas LLC can make it easier.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.