Are you looking to form a limited liability company (LLC) in the state of Kansas, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Kansas LLC that is compliant and able to do business in the state.
What is a Kansas LLC?
The Kansas LLC is one of the most popular business structures in state. It's a more casual and flexible type of business than a corporation, but includes the same personal asset protection you get with a corporation. That means you aren't personally liable for debts or lawsuits against your business. This is a critical protection that is lacking from sole proprietorships and general partnerships.
LLCs in Kansas have simple formation and maintenance requirements, several options for how they can be taxed, and flexible management. From one-person businesses to multi-member LLCs with several owners, the LLC is a popular choice for a reason.
Forming an LLC in Kansas (in 6 Steps)
Step One) Choose an LLC Name
Your LLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
Legalities: In the state of Kansas, every limited liability company is required to have either the initials “LLC” or the phrase “limited liability company” in the name. In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).
Explanatory Naming: Another aspect to consider is including language that explains what your business does ― for example, if you’re a plumber, put the word “plumber” or “plumbing” in your LLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?: At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your LLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming an LLC is to not get too attached to any one business name until you have either reserved the name with the state of Kansas, or you’ve officially formed your business. You can easily determine whether or not your desired name is in use by searching it at this link; if no results pop up, your name is still available. If you’re not yet ready to form your LLC, you can reserve your desired name with the Reservation of a Corporate Name online form. This process protects your business name for 120 days while you get your LLC’s affairs in order.
Step Two) Designate a Registered Agent
Every LLC in Kansas is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
According to the Kansas Secretary of State,
Each limited liability company shall have and maintain in the state of Kansas…a resident agent for service of process on the limited liability company, which agent may be either an individual resident of the state of Kansas whose business office is identical with the limited liability company’s registered office, or a domestic corporation, or a domestic limited partnership, or a domestic limited liability company, or a domestic business trust or a foreign corporation, or a foreign limited partnership, or a foreign limited liability company, or foreign business trust authorized to do business in the state of Kansas having a business office identical with such registered office, which is generally open during normal business hours to accept service of process and otherwise perform the functions of a resident agent, or the limited liability company itself.”
Without a registered agent, you could lose your good standing with the state of Kansas, and the state also has the right to dissolve your LLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
Our Recommendation: At the end of the day, we recommend designating a Registered Agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record. Incfile and Northwest Registered Agent both offer a free Registered Agent service when you utilize their services to form an LLC. Both are fast and affordable. In fact, they’re the best available.
Step Three) File Formation Documents with State
Once you are ready to form your Kansas limited liability company, you will fill out the articles of organization.
This is THE document that will register your LLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Your chosen business name
- Name and address of your registered agent
- Management style (member-managed or manager-managed)
- Name(s) and address(es) of the LLC’s manager
- Name and address of the LLC’s organizer
- Signature of organizer and registered agent
- Effective date
Cost to Form an LLC: The state of Kansas charges a fee of $160 to file online and an online $165 fee to form an LLC.
Processing Time: It takes 2-3 business days for the state to process your paper Kansas LLC formation paperwork and get your finalized documents in the mail to you. However, online filings are completed almost instantly. Please note that the estimate of business days begins once ALL required paperwork is in order and filed correctly.
Step Four) Create an Operating Agreement
After you register an LLC in Kansas, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for this document in order to open an account. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your Operating Agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your Operating Agreement or create one from a free template online. You can read more about Operating Agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the LLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of LLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important LLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
When it comes to state-level LLC taxes, Kansas levies these taxes based on the nature of your business. The most important of these is income taxes. If your LLC is considered a pass-through entity—usually a sole proprietorship or partnership—you’ll pay income taxes on your individual tax returns. However, LLCs which choose to be taxed as corporations will be subject to the state’s corporate income taxes. You can learn more about Kansas’s corporate income taxes here.
The most common business tax is sales tax. In Kansas, the state sales tax rate is currently 6.5%. The tax applies to the sale of tangible retail goods, recreation admission tickets, and services provided in the state. You can read more about the sales tax here.
Every business is also required to pay an annual Franchise Tax. There is a separate filing fee of $55 which accompanies this tax and the annual report.
LLCs with employees are also required to pay a number of taxes as well. Withholding taxes, for example, are portions of employee wages that you hold back from each paycheck and pay to the state. Unemployment insurance taxes help to fund the state’s unemployment assistance program, and how much you contribute depends on what type of business you run. You can learn more about your unemployment tax responsibilities here.
In addition to these taxes, you may need to pay some taxes specific to your industry. In Kansas, some of these industry-specific taxes include liquor, minerals, vehicle rentals, and more. Determining which taxes you’ll be expected to pay is complicated. Thankfully, the Kentucky Department of Revenue provides a list of taxes for businesses at the Division of Taxation that you can use as a helpful starting point.
Depending on where in Kansas your business is located, you could also need to pay some local taxes. The most common of these local taxes is your property taxes: how much you pay depends on where in the state your business is located. You can read more about property taxes here. In addition, some counties in Kansas add a surcharge to the state sales tax. You can read about the most recent local tax changes by county here. We strongly recommend that you contact your county office to determine any local taxes you’ll need to pay. This step is potentially crucial, so you won’t want to overlook it.
Step Six) Obtain Business Licenses and Permits
The state of Kansas does not have a general business license that each LLC needs to acquire in order to do business.
However, Kansas upholds the licensure required by the federal government for certain occupations, including agriculture, aviation, and more. Please consult the Small Business Association’s listings for federally-regulated industries requiring licensure.
And much like the state has industry-specific tax requirements, it also has licenses and permits that are required for businesses in certain industries. Kansas has hundreds of these licenses, so there’s a good chance at least one of them applies to your LLC.
To get started, you can browse the Kansas list of common business licenses and permits. This list isn’t comprehensive, but it will give you a feel for the kinds of professions that are regulated in the state.
Would you prefer to have a professional form your LLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online incorporation service like LegalZoom and Incfile. To see which is the better option for you, check out our side by side comparison.
Next Steps: What to do After Creating a Kansas LLC
Open a business bank account: We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Get Business Insurance. Every Kansas business with employees is strictly required to acquire workers’ compensation insurance. For more information on either of these policies, check out the Kansas Department of Labor. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.
Understand income reporting. Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year. The state of Kansas provides FAQs to help clarify policies for income reporting and taxes.
Understand annual reporting. Kansas requires that all LLCs file an annual report. You can file it online here with the Kansas Business Center. All for-profit entities are required to pay a $50 filing fee. This annual report will essentially serve to update the state on any pertinent information regarding your business that has changed over the course of the year.
Find an accountant. We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how best to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.