How to Incorporate in Kansas vs. How to Start a Kansas LLC

LLCs and corporations both provide liability protection for their owners. This means that each business entity acts as a shield between the human element and the physical business, so that if a lawsuit was to be filed, or a bankruptcy was to occur, the owners of the business are not likely to see their personal assets (cars, homes, savings, investments, etc..) to be used to pay debts. But beyond that, most people don’t entirely understand the differences between LLCs and corporations. Active Filings is about to drop some knowledge. Let’s take a quick look at some of the structural differences between corporations and LLCs. People looking to start a business often ask whether they should set up an LLC or incorporate for their new venture. Like everything else in life, the answer depends. Below you’ll find the three factors we think will help you make an informed decision.

• Ease of maintenance
  LLCs have the appeal of providing entrepreneurs lower overall annual maintenance and paperwork, creating a big selling point for the LLC structure. Corporations require annual meetings, directors meetings, recorded meeting minutes, and a notable amount of paperwork, while LLCs have little to no maintenance of this type. LLCs not only require less resolutions, but can make executive decisions without the need to hold an official meeting.
• Desired tax structure
  Unlike a corporation, which must pay its own taxes, LLCs are known as pass-through entities, meaning their tax structure is designed to have its profits, losses, credits, and expenses pass directly through to the owners, who report them on their personal income tax returns (similar to if the owners had a partnership or sole proprietorship). Corporations have a default tax structure known as the C corporation. This structure imposes a double-taxation, where the net income is initially taxed, and then taxed a second time as personal income after the profits and losses are distributed to the shareholders. At first glance, double taxation may seem like a downside, but for the right business it can provide advantages, such as reinvesting profits into the business.
• Investors
  When it comes to investing in a company, most investors feel most comfortable investing their hard earned money into corporations. The biggest reason investors prefer corporations is their favorable taxation rules. Unlike LLCs, a corporation’s shareholders are not taxed on company profits unless profits are distributed, which means the dividends paid from the corporation can be structured to take advantage of the best tax scenario for the shareholders. If you plan to grow your small business into a larger entity and attract investors, forming a corporation is your best bet.

Note that whether you form an LLC or a corporation, you’ll need to file a Beneficial Ownership Information (BOI) Report with the Financial Crimes Enforcement Network (FinCEN) once your company is officially formed with the state of Kansas. This report provides the federal government with identifying information about your company and those with the most control over profits and business operations. However, unlike state filings, the information shared in your report does not go on the public record and there is no filing fee. (Though if you don’t want to file this on your own, we offer BOI filing service for just $25.)

One final thought on LLCs and corporations. While the local florist down the street is a fine upstanding company, their LLC just doesn’t have the prestige of a Nike, Inc or a Walmart, Inc. When you hear the word corporation, many people think of big multi-national companies with tons of resources at their disposal. While the LLC is perfect for the small to medium-sized business, the words Limited Liability Company (LLC) doesn’t carry the same weight as the corporation. While LLCs first came into being in the late 1970s, the corporation is the oldest recognized business entity in the US, and thus they carry with them an aura of prestige.

While we’ve already broken down the differences between an LLC and a corporation, we’re going to dig a bit deeper into the pros and cons of forming an Kansas LLC or corporation. Take a look below to see what makes Kansas LLCs and corporations unique:

• Low Cost Biennial Report
  Kansas doesn’t charge an arm and a leg for businesses to keep the state updated. For just $100 every other year (or $50 per year), corporations and LLCs can check in with the state, and be done with it. Easy and affordable with almost no hoops to jump through.
• Corporate Income Taxes
  The Kansas corporate net income tax rates are 4% for anyone showing earnings of up to $50k, and then the tax rate jumps to 7% for anything over $50k. That’s quite the leap.
• Sale and Property Taxes
  Kansas’s average sales tax of 6.5% ranks it in the top 10 lowest taxed states in the US. The Tax Foundation ranks Kansas at 15th for lowest property taxes. Low taxes help keep money in the pockets of consumers, which in turn allows them to have more purchasing power, which often leads to them spending more money on local businesses. States with high property and sales taxes can hinder business growth.
• Online Filing
  Kansas encourages you to file your Articles online. The state actually charges you more ($5) and makes you wait longer (3-5 days) to file a paper copy by mail than it does if you just file online through the state business formation portal. They do the same thing with your biennial report, charging $100 to file online and $110 to file by mail.

Kansas LLC or Kansas Corporation? Our Final Answer.
The Kansas LLC will be your best choice if you are operating a small or medium-sized business, and investors are not one of your top priorities. If your business will be growing substantially and investors will be the key for that growth, and you have the means for the amount of paperwork required and understand the difference in the asset protection, your best bet will be to form a corporation.

To start a corporation in Kansas, you must file Articles of Incorporation with the Secretary of State. You can file the document online or by mail. The Articles of Incorporation cost $90 ($89 online) to file. If you hire Active Filings, we’ll make sure the process of incorporation is as painless and straightforward as possible, and as a bonus you’ll get to use all of our info on the submission documents, which means we’ll insulate you and your business from getting hit with junk mail and annoying sales calls.

Here’s a list of the information you will need in order to complete your Articles:

To start an LLC in Kansas, you must file Articles of Organization with the Kansas Secretary of State. You can file the document online or by mail. The Articles of Organization cost $166 to file. Once filed with the state, this document formally creates your Kansas LLC. As you fill out your Articles, you’ll come to realize maybe it’s best to hire Active Filings. You have to divulge a ton of personal info on these forms, but when you hire us, you get to use our information, thus keeping your private life and information separate from your business.

Kansas views biennial reports as legal compliance documents that are crucial to a business’ operations in the state. These reports help the state keep track of any changes that have occurred during the past two years. Changes may include a change to your corporate structure or a change to the place in which you conduct business. Basically the state is taking a pulse of your business to see if you’ve made any changes.

How do I file my Biennial Report?
Kansas’ Secretary of State website to either file online or print out the forms and mail them in. Here’s how you do that:

On the state website, go to the Business Entities Filings & Forms page and select “Forms by Business Type.”

Select “File Now” to file online OR click the form name to download and print a paper form.

To file online, you will need to enter your business name and ID number. If you don’t have your number, you can easily find it by searching the Kansas Business Database.

When filling out the biennial report, you’ll include the following information and update it if necessary:

Name and address of the company.
Names and addresses of members/managers or directors/officers.
You cannot use the biennial report form to change your registered agent in Kansas. If you need to make a change, you must file a separate “Change of Registered Office/Resident Agent” and pay an additional $35 (online) or $30 (paper) fee.

If mailing your form, include a check or money order.

Mail your report to:
Kansas Secretary of State
Memorial Hall, 1st Floor
120 SW 10th Avenue
Topeka, KS 66612-1594

How much does it cost?
Kansas Biennial Report fees for all corporations, LLCs, LLPs, and LPs are $100 when you file online or $110 by mail. Nonprofits pay $80 for both mail and online.

When is my Biennial Report due?
Due dates vary, and depend on whether your business is a calendar year filer, or a fiscal year filer. Corporations, LLCs, and partnerships (LLPs and LPs) must file on the 15th day of the fourth month after the closing of your tax closing month, which is going to April 15th for most. Nonprofits must file on the 15th day of the sixth month after the closing of your tax closing month. For most nonprofits, this will be June 15th. The easy math with this is take your fiscal year close date and add four months to it. For non-profits add six months.

Let’s be honest, taxes are like root canals. No one enjoys them. They are, however, an integral part of keeping your business legal and healthy. While we’re not tax professionals, we’ll definitely do our best to try and explain what kind of taxes your business will be expected to pay.

How will my corporation be taxed?
Corporations face “double taxation.” First they pay taxes on net profits from the business, and then get hit a second time when taxed on the dividends they receive from those earnings. Dividends are taxed at the shareholder’s personal tax rate. An LLC doesn’t have this problem, which means anyone looking to form a corporation should take note of a state’s corporate income tax and personal income tax. One way of avoiding double taxation may be to elect for your corporation to be taxed as an S Corp. By filing IRS Form 2553 (Election by a Small Business Corporation), a corporation with 100 or fewer shareholders can elect to be taxed as an S Corp. Of course, if a corporation chooses S Corp status, they’ll have to jump through a few extra hoops and meet certain requirements required by the IRS.

How will my LLC be taxed?
Single member LLCs, meaning it’s just you running your business, are treated like sole proprietorships by the IRS. This means that any profits or losses your LLC experiences, will pass-through to you as the single owner. All you have to do is file a Schedule C, which reports profits or loss from your business, with your personal tax return (IRS Form 1040). It should be noted that an LLC can elect to be taxed as a corporation under Subchapter C, by filing IRS Form 8832 (Entity Classification Election), or as a corporation under Subchapter S by filing IRS Form 2553 (Election by a Small Business Corporation).

What if my LLC has more than one member?
As with a single member LLC, the IRS will view your multi-member LLC as a partnership. The LLC will retain it’s pass-through tax status, with a few wrinkles with regards to paperwork. Instead of one member filing a 1040, instead each member will have to file a Return of Partnership Income form (IRS Form 1065). This document lets the IRS check and make sure each owner is reporting their income properly. Beyond that, each LLC owner will attach a Schedule K-1 (Partner’s Share of Income, Deductions, Credits, etc.) to their Form 1040. This form shows the IRS each member’s share of the LLC’s profits and losses.

Here’s a tip: If your LLC is going to have more than one member, it would be a good idea to draw up a simple operating agreement. Most states don’t require an LLC to have one, but with so many cooks in the kitchen, you’ll want clear documentation with regards to ownership percentage, voting rights, distribution of profits and losses, as well as rules for buying out a member. You won’t be require to file the agreement, but it should be signed by each member and kept with the LLC’s important documents.

Beyond the basic information you’ll also need:
• payroll documents
• bank and credit card statements
• accounting documents
• partnership agreements
• depreciation schedules
• gross receipts
• checking and savings account interest

What tax forms do I need to file?
Corporations: K-120
Partnerships: K-120S
LLCs: K-40

What are the Kansas corporate net income tax rates?
For corporations whose business income is solely within state boundaries, the tax is 4% of net income. In addition, net income in excess of $50,000 is subject to a 3% surtax. For those corporations with business income both inside and outside the state, the net income attributed to the Kansas operation is based upon the percentage of the corporation’s business located in Kansas.
$0-50,000 4%
$50,000 + 7%

What are the Kansas personal net income tax rates?
$0 – $15,000              3.10%
$15,000 – $30,000    5.25%
$30,000+                   5.70%

When are my taxes due?
Kansas tax returns are due the 15th day of the 4th month following the end of the tax year. For a calendar year taxpayer (tax year of January – December), the due date is April 15th.

What if I need an extension?
Kansas tax extensions are automatic, which means there is no state application to complete. If you have a valid Federal tax extension (IRS Form 4868), you will automatically receive a Kansas tax extension. Make sure to include a copy of your Federal extension with your Kansas tax return when it’s filed.