Are you someone looking to set up an LLC to convert your new, novel idea into a reality in Kansas? Then you are at the right place! Of the many types of business structures, a Limited Liability Company, or LLC, enjoys many advantages, including tax benefits and operational flexibilities.
In Kansas, LLCs are no longer required to pay a yearly franchise tax to be able to do business in the State. However, missing the annual report due date can lead to your Kansas LLC’s forced dissolution.
Kansas has its procedure for forming an LLC; missing a step could mean you have to do the whole process again. Through this article, we will look at all the steps involved in forming an LLC in the State.
Name Your Kansas LLC
Your LLC’s name will define your brand and identity in the market. Therefore, your name should be creative, catchy, and unique.
The State of Kansas has rules you must follow when choosing a name. Let’s take a look at the naming guidelines laid down by the State so that you do not face any difficulties in getting your LLCs name approved.
Your LLC’s name must include the phrase “limited liability company” or “limited company” or an abbreviation of the same such as “L.L.C.” or “L.C.” Alternatively, you may use the designators “LLC” or “LC.”
Your company name should be distinguishable and unique. This means it has to be different from the names of existing entities.
The name you select for your LLC should not give the impression that your entity is a government agency. This includes words like the “Department of Revenues,” “FBI,” “State Treasury,” etc. For example, you cannot form an LLC named “Carol Insurance Agency” and abbreviate it as “CIA.”
Your LLC’s name cannot include restricted words such as Bank, University, Attorney, etc. If your name consists of these words, you’ll have to get prior permission from Kansas. Additionally, a licensed professional would have to be part of your LLC, and you would be required to file extra paperwork.
Does Your Business Need a DBA?
A DBA or ‘Doing Business As’ certificate enables your LLC to conduct its business under a name different from the registered one.
Kansas has no formal legal framework surrounding DBAs. Therefore, there are no provisions for filing a DBA at the State level. However, it might be possible to register a DBA name at the county level, depending on where you are operating your business. You may get in touch with your local county administration to know more.
Doing a Name Search and Name Reservation
Conducting a name search helps ensure that your LLC’s potential name is not already in use. You may use the State’s business entity search portal to check if the name you have in mind is similar to any name already registered in Kansas. You should see “no matches found” after searching if your LLC’s name isn’t already being used. For more information, you can read the Kansas Name Availability Guidelines.
If you are not ready to form your LLC but have decided on a name you like, you can reserve the name for 120 days. You can do this by applying to the office of the Secretary of State.
Registering Your Business Domain Name
An online presence in an increasingly digital world goes a long way in expanding your business. You should check the currently available domain names and register one you feel is apt for your business.
Choose a Registered Agent in Kansas
Kansas State Code Section 17-7666 requires you to appoint a registered agent for your LLC. A registered agent is a person or another business entity who acts as the point of contact between your LLC and the State. They are responsible for receiving all official communication on behalf of the LLC.
A registered agent ensures that your LLC operates smoothly without encountering problems like late submissions, delayed notices, or delayed payments.
Who can be a registered agent?
Anyone can be your LLC’s registered agent – including yourself, your friends and family, or members of your LLC – provided they meet the following requirements:
- The person is above 18 years of age
- They have a street address in Kansas
- They are available during regular business hours
Alternatively, you may appoint another business entity as the registered agent of your LLC. However, such a business entity should have obtained authorization to transact business in the State.
Individual v. Registered Agent Service
It is advisable that you hire a professional registered agent service as it has many advantages. Opting for a registered agent service will mean that you have an expert taking care of the communications addressed to the LLC by the authorities in Kansas. They ensure that everything is organized and that you don’t fail to duly respond to any notice or communication sent to your LLC.
You will be able to focus on the core activities of your business without worrying about notices and other communications from the State. Expanding your business into other States becomes easier, given most commercial registered agents offer services in multiple States.
A registered commercial agent would set up one repository where they update communications received by, and sent from, your LLC, all of which can be easily accessed by you.
File the Articles of Organization with Kansas
Filing Articles of Organization is necessary to provide legal existence to your LLC and bring it into the records of the State. It is a legal document that must be filed with the Secretary of State to register your LLC.
After you obtain the form from the State, you must duly fill in the details about the following:
- The LLC’s name
- Registered agent name and address
- The official mailing address
- The tax closing month of your choice (Please note that the default tax closing month in Kansas is December, if not specified)
Since the document will be submitted to the State, make sure that you double-check all the information provided. For more information, you can read the Kansas Article of Incorporation General Filing Instructions.
Currently, there are no provisions in Kansas for expediting the processing time for your LLC’s Articles of Organization.
Publish Notice of Formation
The state of Kansas does not require your LLC to publish a notice when it is formed.
Create an Operating Agreement for Your Kansas LLC
What if you and your partners disagree on profit distribution, decision-making powers, or any matter regarding the management of the LLC? Often, such disputes affect the business negatively and disrupt your operations. This can be avoided if you have an operating agreement.
An operating agreement is like a contract between the members of the LLC, which provides a framework concerning the duties of members of the LLC and its managers. It acts as a guiding force in matters of the day-to-day functioning of the LLC. And thereby ensuring the smooth, effective, and efficient functioning of the LLC in the long run.
Even though the State does not require you to have an operating agreement, drafting one is highly recommended, especially if you plan on forming an LLC with more than one member.
There are no prescribed templates for an operating agreement in Kansas. Some of the commonly included terms in an Operating Agreement are:
- Organization Details
- Duties of Members and Managers
- Management and Voting
- Capital Contributions
- Division of Profit and Losses
- Bookkeeping Procedures
- Procedure for adding new members
- Requirements concerning Meetings and Procedures thereof
Writing an Operating Agreement Yourself v. Hiring a Service
You can create your operating agreement, or you can purchase templates that you can customize to draft the operating agreement of your LLC. However, if your LLC needs a more complex operating agreement or you are not comfortable preparing it yourself, you can always hire a commercial service. Most commercial registered agents also offer services to draft operating agreements.
Limits of Operating Agreement
Your Operating Agreement can include anything that you deem necessary for the purpose of the internal administration of your LLC. However, the terms are limited to the law. You cannot include something prohibited by the laws of Kansas.
Obtaining an EIN for your Kansas LLC
An Employer Identification Number (EIN) is used for tax administration purposes. The IRS issues it for your business and is used to identify an operating business entity for taxation purposes.
It will also be necessary to open a bank account, file tax returns, and hire employees. You can apply for the same online or by mail. The IRS does not charge you any money for obtaining an EIN for your business.
File Annual Reports in Kansas
An annual report is a legal document that you need to file your LLC with the State. In Kansas, filing Annual Reports is mandatory. This is how the State keeps track of your business and gets the latest and updated information about all the business entities operating in the State.
Failure to file the report will mean the dissolution of your LLC. You have a 90-day grace period after a due date within which the report must be filed, or you risk getting shut down by the State.
The due date for filing an annual report is the 15th day of the fourth month after your tax closing. For example, if your LLC’s tax closing month is August, your due date is the 15th of December. The default tax closing month in Kansas is December.
Kansas Secretary of State Memorial Hall, 1st Floor 120 S.W. 10th Avenue Topeka, KS 66612. The fee is $50 if you file it online and $55 by Mail.
Tax Liabilities for Your Kansas LLC
By default, an LLC is treated as a pass-through entity. This means that the LLC isn’t taxed directly. Its members are. You can choose to present your LLC as a corporation with the IRS, which will change how your LLC is taxed.
The way your LLC will be taxed depends upon the number of members in your LLC. There are four ways in which LLC will be taxed:
- Sole-proprietorship: a business owned by a single person
- Partnership: a business owned by multiple people
- C – Corporation: income is split or segregated for taxation
- S – Corporation: tax liability is split between the business and its owners
Federal Tax Liability
As a member of the LLC, you may be subject to Federal Income tax. The amount of tax will vary depending on your income, filing status, deductions, etc. However, federal corporate taxes must be paid if you treat your LLC as a corporation for tax purposes. Additionally, you must pay Federal self-employment tax (presently 15.3%) on the profits you take from your LLC.
If you’re a single-member LLC, your default taxation type will be that of a sole proprietor or ‘disregarded entity’. The LLC has to report its activities under Schedule C, Schedule E and/or Schedule F of Form 1040.
If your LLC has more than one member, it will be taxed as a ‘partnership’ by default. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in K-1 of each partner.
State Tax Liability
Most states charge a Business Privilege tax on new business operations. This is not the case in Kansas. A franchise tax was charged earlier but has now been discontinued.
If you wish to operate your LLC as a corporation, you’ll have to pay corporation tax at 4% of your LLC’s federal taxable income and a 3% surtax on taxable income above $50,000.
Additionally, if your LLC sells certain specific goods to consumers in Kansas, your LLC will be required to pay sales tax. You have to obtain a seller’s permit first for this purpose.
Miscellaneous Tax Liability
Permits & Licenses
The type of Licenses and Permits you might need to operate your business varies from state to state. Operating without the correct permit or license can lead to the dissolution of your LLC, fines, or other penalties. So it is extremely important to find out what permits are needed for your business.
Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.
Some business activities requiring Federal Licenses and Permits are
- Alcoholic beverages
- Firearms, ammunition, and explosives
- Fish and wildlife
- Commercial fisheries
- Maritime transportation
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
- Transportation and logistics
At the State level, Kansas requires you to obtain a seller’s permit if you are engaged in selling any commodity to which sales tax applies. Additionally, certain professions require specific state permits.
Depending on where you are operating, you may also need county or city permits. For example, in Topeka, certain businesses require a city license. You may get in touch with your local county administration to know more.
For more information regarding;
- Kansas Common Business Licenses and Permits
- Kansas Department of Revenue website
- Federal Permits and License
Business Bank Account & Phone Number
By opening a business bank account, you can ensure that your personal and business information are separated. This also comes in handy in unforeseen circumstances such as a lawsuit or dissolution. Your assets will be safe from legal action in such cases.
Apart from this, it also helps in better organization of the accounts of your business and aids in receiving certain business loans, licenses, permits, subsidies, and other benefits the government gives through different welfare programs.
Your bank will need your LLC’s EIN, among additional information, to open your LLC’s bank account.
Much like a separate bank account, a different phone number will keep the professional separate from the personal and maintain your privacy.
Businesses increasingly require mobility and a specific contact mechanism with their customers for general purposes, feedback, and other communications. Many network providers offer business/enterprise plans; choose the one suitable for your LLC.
Kansas is a good choice for your business. Some of the largest companies in the country, including Koch Industries and Synergy Group, are based in Kansas.
The State has a business-friendly environment and provides many schemes and programs aimed at helping small and medium enterprises.
These include incentive schemes such as the Foreign Trade Zones (FTZ), Economic Development Grants, and the State Small Business Credit Initiative. Get in touch with your local county or city government office to determine if your LLC is eligible for any of these incentives.
Do make sure to double-check the information you fill in the forms before submitting them. Keep a note of your annual report due date, as missing it has dire consequences in Kansas. Best of luck to you and your brand new LLC!