How to Incorporate in Kansas (May 2024 Update)
Incorporating a business in Kansas can provide your company with valuable benefits like liability protection and tax advantages. However, the incorporation process involves several key steps. This comprehensive guide will walk you through everything you need to know to successfully form either an LLC or a corporation in Kansas.
Choosing a Business Structure: LLC vs. Corporation
The first decision you need to make when starting a business in Kansas is whether to structure your company as a limited liability company (LLC) or a corporation. Both business structures provide personal liability protection, but there are some key differences:
Ease of Maintenance
LLCs generally involve less Complex paperwork and recording requirements than corporations. LLCs are not required to hold annual meetings, keep minutes, or issue stock certificates. Many small business owners are drawn to the simplicity of LLC maintenance.
Tax Treatment
LLCs are considered "pass-through entities" for tax purposes. This means the business itself does not pay taxes. Rather, profits and losses pass directly to the LLC members' personal tax returns. This avoids the "double taxation" issue faced by traditional C corporations. Corporations, however, may allow more flexibility regarding reinvestment of earnings.
Access to Capital and Investors
Corporations can make it easier to attract outside investment through the sale of stock. The corporate structure provides more familiarity and credibility for potential investors. LLCs often have restrictions in place regarding the transfer of ownership interests.
When weighing the pros and cons, many small or mid-sized Kansas companies opt to form LLCs to benefit from pass-through taxes and lower administrative burdens. But the corporate structure offers advantages for businesses aiming to eventually go public or raise outside capital from investors.
Steps for Incorporating in Kansas
If you decide to incorporate in Kansas, several key steps are involved:
Check Name Availability and Reserve Your Business Name
You'll first want to verify that your desired corporate name is available for use in Kansas. The Secretary of State website offers an online name search and reservation tool. Reserving a name secures the exclusive use of that name in Kansas for 120 days.
Appoint a Registered Agent
Kansas corporations must designate a registered agent on file with the state. This agent receives important legal and tax documents on behalf of the business. Many companies choose to work with a third-party registered agent service to ensure proper handling of all notifications.
File Articles of Incorporation
To legally form your Kansas corporation, you must file formal Articles of Incorporation with the Secretary of State. This document contains basic information about your company like corporate name, shares, directors, registered agent, and more. State filing fees for new Articles of Incorporation are $89 online or $90 by mail.
Draft Corporate Bylaws
Bylaws provide an outline for your corporation's operating and management procedures. Though bylaws do not get filed officially, they help establish administrative rules regarding stock, directors, officers, meetings, and more.
Hold an Organizational Meeting
Kansas statute requires new corporations to hold an initial organizational meeting. Shareholders or directors use this meeting to take actions like appointing company leadership, issuing stock certificates, and adopting bylaws. Official minutes should be recorded.
Obtain an EIN from the IRS
Even if you do not plan to have employees, your corporation will need a Federal Employer Identification Number (EIN) for tax and banking purposes. EIN applications are free and available on the IRS website.
Get Any Necessary Kansas State Tax Registrations or Licenses
Depending on your industry, location, and business activities, you may need to register for certain Kansas tax accounts. Common tax registrations include sales tax, payroll tax, liquor tax, and more. The Kansas Business Center website offers more information on licensing requirements based on your business type.
File for S Corporation Tax Status (Optional)
Standard C corporations face "double taxation" on business income. But S corporations receive tax pass-through treatment similar to partnerships and LLCs. To get S corporation tax treatment, you need to file Form 2553 with the IRS after incorporating.
Maintain Your Corporation by Filing Annual Reports
All Kansas corporations must submit annual reports to the Secretary of State. These reports confirm that your business information is current. Annual report fees are $50 online and $55 if filing by paper. Most corporation annual reports are due by April 15 each year.
Comparing Incorporation to Forming a Kansas LLC
Forming a Kansas LLC follows a similar process to incorporating but with some differences:
- To establish an LLC, you file Articles of Organization instead of Articles of Incorporation. State filing fees for new Kansas LLC registration are $166.
- LLCs use an Operating Agreement instead of corporate bylaws to outline member rights, allocation of profits/losses, voting procedures, etc.
- Annual reporting for LLCs also costs $50 online or $55 for mailed paper forms, with most due by April 15 each year.
On the tax side, new Kansas LLCs receive pass-through taxation by default like a partnership or sole proprietorship. LLC income passes directly to members' personal returns. An LLC can elect to get taxed as a C or S corporation by filing additional IRS paperwork. Many small business owners view the pass-through treatment of LLCs as a tax advantage over corporations.
Conclusion - Get Started with Kansas Incorporation or LLC Formation
This guide summarizes the key steps involved in incorporating or forming an LLC in Kansas. Following the process ensures that your new business becomes officially compliant and gains benefits like liability protection.
Both LLC and corporate structures have pros and cons in Kansas related to taxes, investor access, administrative needs, and more. Evaluate your specific situation carefully to pick the right entity type.
Many companies also benefit by working with a specialized service provider to handle state filings, annual reports, and other compliance tasks smoothly. This frees you to focus energy on building your business.