Forming an LLC in Kansas
Are you interested in forming a Kansas limited liability company? A limited liability company (LLC) is a business entity that many small businesses choose to organize themselves when they are just getting started.
An LLC has a few advantages for small businesses but may not be appropriate for larger ventures or startups seeking investors. In addition, LLCs have a unique business structure that can get very technical.
It would help if you looked closely at other business entities like partnerships and S-corporations before launching a Kansas LLC.
Advantages of LLCs:
- Limited personal liability for members for business debts and lawsuits
- Fewer reporting and recordkeeping requirements than other kinds of entities, including corporations
- Avoiding the double taxation—business and personal—of corporations if taxed as a pass-through entity
- Unlike corporations, Kansas LLCs do not have to file annual or biennial reports with the state
Disadvantages of LLCs:
- An LLC is not a good investment vehicle for outside investors
- LLCs and S and C-corporations pay commercial activity taxes, unlike sole proprietorships and partnerships
- LLC owners may pay self-employment taxes
Registering Foreign LLCs in Kansas
Any foreign (out-of-state) LLC that wants to do business in Kansas must register with the Secretary of State. There is a $165 filing fee.
Step-By-Step: Forming a Kansas Limited Liability Company
With all of that, you have decided to form an LLC in Kansas. You have your members, your business plan, and a little startup capital, and you are on your way.
Here is a step-by-step guide for creating a fully operational Kansas LLC.
Before You Begin
Before starting any part of this process, create an account with KanAccess. This will allow you access to the Kansas online business center.
Step I: Name Your LLC
Creating a legally proper LLC name and then protecting it is one of the first actions in LLC formation. This process can be complex and time-consuming, but the LLC needs to operate legally in Kansas.
The first thing you have to do is create a great name (that's up to you). Kansas law requires that the name be unique and different from any other company's name.
Your first task will be to search the Secretary of State business entity search page to make sure that your chosen name isn't already in use for an existing business.
This search is just a preliminary step to the state filing. You still need to go through the registration process to get your name approved by the state.
The name you decide on must contain one of the legal suffixes:
- Limited Liability Company
- Limited Company
- Ltd. Co.
- Or any other variation
Professional LLC in Kansas
A Kansas professional limited liability company must use the designation "Chartered" or "Professional Association" or the abbreviation "PA." That designation is limited to certain professions—check with the Secretary of State to see if your occupation qualifies.
The name of the LLC cannot use any variation of the word “corporation." It cannot use language considered obscene or that claims a profession or business affiliation that does not exist.
Reserve Your Business Name
Kansas allows you to reserve a business name for 120 days while the formation process continues. This is done through the Kansas Business Center after you have created an account there. Reserving a name is not a guarantee that your name will be approved, but it keeps anyone else from using it for that time. There is a $30 filing fee for this.
Step II: Appoint a Registered Agent
The State of Kansas requires an LLC to have an agent for service of process before formally filing with the state. A registered agent is designated to receive process (legal documents) on behalf of the LLC. A Kansas registered agent can be an individual or a company (domestic or foreign), but it must have a physical Kansas street address. A forming LLC will often choose a professional registered agent service or the company lawyer.
Step III: Legally Protect Your Business Name
Next, make sure that no one else can use your name in business or on the internet. This means that you have to make sure that no one else uses that name. You do this by doing a name search to ensure that the internet domain name is available. If available, grab it immediately (that will only cost a few dollars).
If you want to do business nationally or operate in several other states, you should trademark the nonprofit's name with the United States Patent and Trademark Office (USPTO). This process takes some time and money. While that application is pending, the name is still protected as a common law trademark.
Once you receive your federal trademark, apply to the Kansas Secretary of State to register it as a Kansas trademark or service mark. You may also trademark the Kansas LLC name with just the state, without a federal trademark.
If you are going to do business under a fictitious name—that is, a DBA, you must register that name with the City Clerk's office in the city in which you are doing business. A DBA name is not registered with the state of Kansas.
Now you can keep anyone else from using that name and it conforms to Kansas law.
Step IV: Structure the Business
An LLC has a particular, unique business structure.
To begin with, the stakeholders of an LLC are called “members." There is no stock issued, so they cannot be “stockholders." This is the primary reason that forming an LLC is not a good investment vehicle for either the founders or potential investors.
There is no number of members required. You can have a single-member LLC-- say, for a one-person office.
Then you should write an LLC operating agreement. This is not required under Kansas law, but it is a good idea to keep everybody's interests clear.
A Kansas limited liability operating agreement should contain the following points:
- Percentage of members' ownership
- Voting rights and responsibilities
- Powers and duties of members and managers
- Distribution of profits and loses
- Holding meetings
- Buyout and buy-sell rules (procedures for transferring interest or in the event of a death)
The members may manage an LLC or hire an outside manager. You will indicate which you have chosen on your registration application.
Step V: Write and File Your Kansas Articles of Organization With the Secretary of State
You are now ready to compose and register your Kansas LLC as your business registration with the Kansas Secretary of State.
Foreign LLCs cannot use this process. They must register separately, as noted above.
Your LLC Articles of Organization must contain the following:
The Certificate of Formation must be accompanied by a cover letter that includes the following information:
- LLC name and mailing address
- Name and street address of the registered agent
- Tax closing month – you choose this when you form the LLC, and it is connected with when you will file your annual report
- Effective date of the LLC
- Organizer name (must be at least one)
- Organizer signature(s)
- Filing fee of $160 online or $165 for paper forms
This is filed with the Kansas Secretary of State through the Business Center, which you will have access to after getting your KanAccess account.
If you file online, you will have an immediate response. If you file with paper forms, it will take 2-3 business days.
After You File Your Articles of Organization
You will have numerous state and federal requirements for your new LLC after filing with the state.
State Business Licenses
Certain kinds of businesses (professionals, construction, liquor businesses, etc.) must be licensed with Kansas. In addition, there may be local business licensing requirements, environmental impact requirements, etc.
State Employer Filing Requirements
Your LLC will be subject to state rules if it has employees—even if the employees are also members.
Register with the Kansas Department of Labor as an employer, and then register each employee. This site also contains Unemployment Insurance information.
You must also register for Workers' Compensation Insurance.
Register with Kansas Revenue Services
Register online with Kansas Revenue Services of the Kansas Department of Revenue for all of your LLC's Kansas business taxes, including withholding taxes, sales taxes, use, and service provider taxes.
You will be subject to both state taxes and federal income taxes. This is a job for your accountant, but here is a brief outline of your tax obligations.
You will be subject to both federal withholding tax if you have employees and, of course, to business income taxation.
You may choose one of several different tax designations for your LLC, including C or S-corporation, partnership, or pass-through organization with personal liability for the members. Consult with your accountant for the best approach.
If you have employees, you must file to receive an IRS Federal Employer Identification Number (FEIN) on the Internal Revenue Service website. You must also apply for your FEIN if the LLC has more than one member. You will be subject to all federal tax-withholding rules.
LLCs also have particular requirements for filing taxes.
Kansas LLCs must file an annual report with the Secretary of State to remain in good standing. This is due on the 15th day of the fourth month after your formation month.
Get Professional Legal Help Starting Your Kansas LLC
Although the information and links provided above paint a pretty clear picture of forming an LLC in Kansas, it's always helpful to consult with an experienced and knowledgeable legal professional. So, if you're starting an LLC in Kansas, it's a good idea to get in touch with a skilled business organizations attorney in your area.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
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