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Kansas: A Guide to Starting Your Own Business

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  • Digital Team 

In the Sunflower State, the only thing sweeter than a bowl of chili paired with a homemade cinnamon roll might be owning a successful business.

Becoming a founder or entrepreneur is challenging; from licensing and permits to filing taxes and getting insurance, it can be pretty daunting.

However, the good news for residents or investors with hopes of starting a business in Kansas is the upward economic trend over the years. The Midwestern state has been experiencing about 1.7% annual GDP growth over the past five years, making the region ripe for more business opportunities. 

How can you make the most of this?

Let’s walk you through a detailed guide on avoiding rookie business owner mistakes and creating your dream company in Kansas.

  1. Create A Detailed Plan

The first step to any successful business is a plan.

A detailed plan is your business’s road map to success. It must highlight your short—and long-term goals, strategy, operation costs, possible challenges, and even your competition.

When writing a business plan for any location, not just Kansas, think of it as a blueprint, and it will help you to:

  • Define your business goals
  • Have clarity on the services/products you’ll offer
  • Know your business costs and expenses
  • Understand the risks and opportunities
  • Identify your market and potential clients
  • Know your unique selling proposition (USP)
  • Secure funding and investments
  • Know your competition
  1. Choose A Business/Brand Name

Choosing the right name can either make or break a business. Regarding marketing, your desired business or brand name should be unique, easy to say, and reflect your services.

For prospective LLCs and Corporations, the business name must be distinguishable from others registered with the Kansas Secretary of State (SOS). Check the Kansas SOS website to confirm the availability of the name you prefer for your business.

There are some requirements when choosing names for LLCs and Corporation;

  • For LLCs, including “L.L.C” into the business name
  • For Corporations, including “Company” in the business name

Kansas SOS allows using legal name(s) as business/brand names for sole proprietorships and partnerships. Plus, if your business is online, registering it as a domain name might be the best option.

If you are unable to officially kickstart your business, you can file for a Temporary Reservation Of Business Entity Name with the Kansas SOS. Doing this keeps your business name safe for 120 days—no other entity or business can claim the name within that period.

  1. Pick a Location and Check Zoning Regulations

An essential aspect of running a business in Kansas is knowing the perfect location to place it. The cost of living and running a business within the state is lower than the U.S. average. Moreover, amongst the different cities within Kansas, the average cost varies.

For instance, the average cost of living and operating a business in Manhattan or Wichita is slightly higher than in Lawrence. Understanding the cost disparity can help you decide which area best fits your budget.

Like most of the moving companies in Lawrence, KS, they spend less on daily operations than those in other major cities in the state

Plus, it’s essential that you know the zoning laws regarding the city and the exact spot you intend to place your business in Kansas. Depending on the type of service you intend to provide, ensure the place you want to start allows such a business to operate.

  1. Determine The Source of Funding

Starting a small business in Kansas requires funding, and depending on the size of your plan, the cost of operations can vary. However, there are several ways to get funding to ensure the proper operation of your business.

  • Small Business Loans

They are usually obtained from banks or lenders within the city of choice in Kansas. As you know, interest is always added to this loan’s reimbursement. Calculate the interest rate and see if it fits into your budget.

  • Outside Investment

Using this method of funding can be beneficial to your business. Often, the investor provides the needed amount while requiring a percentage of ownership in the business.

  • Family and Friends

Loans from these individuals usually have reduced interest rates and can be a cost-effective way to start a business. However, to avoid future conflicts, it’s best to have a written agreement on interest rates and loan terms.

  • Bootstrapping

If it’s a small business you plan on operating, bootstrapping can be an excellent choice. Using this method means you are in complete charge of funding your business operations from your pockets. You have no obligation to pay back interest or give out percentages of your business.

  1. Decide on A Business Structure

Running a business in Kansas can legally take different forms. Depending on what type of business you plan on starting, the structure can be one of the following:

  • Sole Proprietorship

Establishing a sole proprietorship is the easiest business structure to get in Kansas. You don’t need to file any organizational documents. All that’s essential is assuming a business name or DBA (doing business as) identity to continue operations.

  • Partnership

Similar to a sole proprietorship, you also don’t need to file any organizational documents. However, you must file a Statement of Qualification with Kansas SOS to form a limited liability partnership. Plus, as expected by law, you are to have a formal legal agreement with your business partners in case of disputes.

  • Limited Liability Company (LLC)

How to start an LLC in Kansas is where things start becoming more complicated. You must file for Articles of Organization with the state’s SOS and also appoint a resident agent (a.k.a registered agent in other states).

  • Corporation

Filing for Articles of Incorporation with Kansas SOS is the first step to creating a corporation-type business within the state. Like LLCs, you must appoint a residing agent for service operations.

  • C Corporation: In this type of corporation, shareholders are major business owners. This option is more lucrative for companies seeking financing, and it requires annual filing of reports and other documents with Kansas SOS.
  • S Corporation: This usually refers to a business with less than 100 shareholders. Small businesses can take advantage of IRS regulations by incorporating this type of structure to avoid federal taxes. The government will require you to complete additional paperwork, like the IRS Form 2553, for this structure.
  1. Register The Business with the Kansas Secretary of State

Once you have determined the structure of your business, you can register in the Kansas SOS Office or online through the KanAccess portal.

Sole Proprietors aren’t required to register their businesses in Kansas; however, Partnerships, LLCs, and Corporations must undergo this process.

  • Step #1: Choose a Residing Agent

The individual or corporation handles all legal requirements and communicates with the government on your behalf.

  • Step #2: Get a Federal Employer Identification Number (FEIN or EIN)

After paying any required fees based on your business type, the law requires you to get an EIN for business taxes. You can apply for FEIN or EIN online.

  • Step #3: Register State-Level Taxes

Depending on the business you are creating, you will need to register for various state-level taxes within Kansas. Visit the Kansas Department of Revenue Customer Service Center to discover what business taxes you need to register for.

  1. Get Licensing and Permits

In Kansas, there are requirements for all businesses to file for a general business license (a.k.a business tax certificate). 

The need for licensing and permits differs across the various levels of government and mainly covers building constructions, health and safety, and the environment.

  • Federal Level

Based on your business-type, there are various permits and licensing required. For more details, visit the U.S. Small Business Administration (SBA) website.

  • State Level

There are no specific state licensing requirements in Kansas. Once you register as a Partnership, LLC, or Corporation through Kansas SOS, you can operate anywhere. However, county and local levels might have their unique licensing requirements.

  • Local Level

The required permits differ across the different large cities in Kansas. What’s required in Wichita differs from that of Lawrence or Topeka—check-in with your locality’s county-level and municipal government to get the requirements.

  1. Open a Business Bank Account

Regardless of the type of business and structure you start, you need to open a separate account, especially for Corporations and LLCs.

It helps you maintain liability protection for your business. Mixing your business and personal finances in a single bank account while in Kansas puts your startup at risk. Having separate accounts disconnects your assets from those of the company.

  1. File and Report Taxes

The state of Kansas taxes businesses based on size or structure.

For instance:

  • Sole Proprietorship

For businesses like this, owners pay personal state income tax returns using Form K-40.

  • Partnership

Businesses like this also require the owners to pay personal tax and an additional Form K-120S.

  • LLCs

Members pay personal taxes alongside state taxes for the LLC. The specific form depends on how federal tax revenue classifies the business.

  • Corporations

Shareholders pay state taxes from their dividends from the corporation. The company is also subject to Kansas corporation taxes as required during registration.

  1. Obtain Business Insurance

Business insurance is primarily a protective step for startup owners, protecting their company and its assets in case of accidents or lawsuits.

Using an insurance agent, you can explore various coverage options. Depending on the size/structure of your business, here are some insurance coverages.

  • Workers’ Compensation Insurance

This is mostly required for businesses with one or more full-time employees. It covers employees’ missed earnings or medical care expenses from work-related health scares.

  • Business Interruption Insurance

Covers expenses arising from the unforeseen temporary closure of your business.

  • General Liability Insurance

Protects your business from lawsuits if someone or an employee sues for physical or property damages.

Wrap Up

While becoming an entrepreneur and business owner might seem good on a resumè, it can be much more challenging than you know.

Whether you are a resident in the Sunflower State or just someone looking to invest in the growing economy, starting a business in Kansas can actually be smooth and less stressful for you—if you have the proper knowledge. 

Follow this guide precisely and keep up with Kansas laws governing business operations in the state and you can be sure of smooth operations day in and day out. 

Good luck!

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