How to Start an S Corp in Kansas
Kansas offers entrepreneurs and business owners a business-friendly landscape in which to build and grow their ventures. Given its central location within the country, affordable cost of living, access to a dedicated workforce, and abundance of business incentives and resources, Kansas has a lot to offer businesses of all sizes.
Choosing your business structure is one of the most important first steps in establishing your business. By electing to form an S corporation (S corp), you can save money on your taxes every year. Whether you want to open a café, start a laundromat, or offer a service, your business can benefit as an S corp in Kansas.
Read on to learn how to set up your business as a Kansas S corp. This guide also provides tips to help you keep your business in good standing with state laws and guidelines.
Want to form an S corp elsewhere? Check out our other How to Start an S Corp guides to learn more.
Recommended: If you have at least $60,000 in net earnings, an S corp may offer tax advantages. Let Northwest start your S corp today.
Factors to Consider Before Starting an S Corp in Kansas
Before forming an S corp, you have to consider the following factors:
- Is an S corporation the best strategy for your business?
- S corporation restrictions
- Are S corp tax advantages right for you?
Is an S Corporation the Best Strategy for Your Business?
For help with choosing the right structure for your business, visit our Choosing a Business Structure guide.
S Corporation Restrictions
S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read our What Is an S Corporation guide for full details.
Are S Corp Tax Advantages Right for You?
An S corporation is a tax designation that can be elected by a limited liability company (LLC) or corporation. With an S corp, business owners are considered employees of the company and must receive a reasonable salary. Since all S corps technically have employees, the s corp must run payroll.
In order to benefit from a Kansas S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take large distributions in addition to their salary.
How to Form a Kansas S Corp
There are two main ways to start an S corp:
- By forming an LLC and electing S corp tax status from the Internal Revenue Service (IRS) when you request your employee identification number (EIN)
- By forming a corporation and electing S corp status from the IRS
We recommend forming an LLC because it’s simpler and more cost-effective.
Recommended: If you have an existing LLC, visit our How to Convert an LLC to S Corp guide.
Steps for Forming an LLC and Electing S Corp Status in Kansas
Starting a Kansas LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider like Northwest to guide you through this process.
There are five basic steps to start an LLC and elect S corp status:
Step 1: Name Your LLC
Step 2: Choose a Registered Agent
Step 3: File the Articles of Organization
Step 4: Create an Operating Agreement
Step 5: Get an EIN and File Form 2553 to Elect S Corp Tax Status
Step 1: Name Your LLC
Choosing a company name is the first and most important step in starting your LLC in Kansas.
Be sure to choose a name that complies with Kansas naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines for a Kansas LLC:
Your name must include one of the following terms or abbreviations: Limited Liability Company, Limited Company, L.L.C., L.C., LLC, or LC.
Your name can include the name of a member or manager of the LLC.
Your name can also include one of the following words: Company, Association, Club, Foundation, Fund, Institute, Society, Union, Syndicate, Limited, and Trust.
Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
Certain restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual to be part of your LLC.
Your name must be distinguishable from any existing business in the state.
You can also read the Kansas state statute about LLC naming guidelines for more information.
2. Is the name available in Kansas? You can use the Business Entity Search Station on the Kansas Business Center website to see if your desired LLC name is available.
3. Is the URL available? We recommend checking to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.
Find a Domain Now
Step 2: Choose Your Kansas Registered Agent
You must elect a resident agent, also known as a registered agent, for your Kansas LLC.
An LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Articles of Organization.
Many business owners choose to hire a registered agent service. Many of these services will form your LLC for a small fee and include the first year of registered agent services for free.
Step 3: File the Kansas LLC Articles of Organization
The Kansas Articles of Organization is used to officially register an LLC.
File Your Kansas Articles of Organization
OPTION 1: File Online With KanAccessFile Online
- OR -
OPTION 2: File Form DL 51-09 by MailDownload Form
State Filing Cost: $160 online and $165 by mail, payable to the Secretary of State (Nonrefundable)
Kansas Office of the Secretary of State
Memorial Hall, 1st Floor
120 SW 10th Ave.
Topeka, KS 66612
Step 4: Create an LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.
For more information, read our Kansas LLC Operating Agreement guide.
Our operating agreement tool is a free resource for business owners.
Step 5: Get an EIN and Complete Form 2553 on the IRS Website
An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business.
EINs are free when you apply directly with the IRS.
Elect S Corp Tax Status
During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.
Visit our Form 2553 Instructions guide for detailed help with completing the form.
This is the form to elect S corp tax status for your LLC:
Keep Your Kansas S Corp Compliant
After completing the formation process and electing S corp status for your business, you’ll want to ensure you keep it in good standing by complying with state and local requirements. Each year, you’ll need to file an annual report and pay Kansas taxes.
Kansas S Corp Annual Report
All Kansas LLCs need to file an annual report with the Kansas Secretary of State. Because your business is an LLC taxed as an S corp, you must comply with this requirement. The state uses these annual reports to collect up-to-date information on your business’s address, tax closing date, and registered agent contact information.
Even if your business isn’t profitable or doesn’t undergo any changes, you must still file an annual report every year. You’ll need to pay the filing fee and file your annual report by the 15th day of the fourth month after the end of your business’s fiscal year. If your S corp has a fiscal year that ends in December, for example, you’ll need to file by April 15. If you don’t file an annual report, the state of Kansas may dissolve your business.
Check out our Kansas Annual Report guide for a step-by-step overview.
Kansas S Corp Taxes
S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from their reasonable salary and distributions, and Kansas S corp owners will need to pay various taxes.
Federal Self-Employment Taxes
Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.
Kansas Income Taxes
Kansas’s graduated income tax rate ranges from 3.10% to 5.70%, depending on your income bracket. Many local jurisdictions also levy a local income tax on top of this. Given that some states have income tax rates nearing 10% while others have no income tax, Kansas sits right in the middle of this spectrum.
Register for Kansas State Business Taxes
In order to pay state business taxes, you must register your business online with the Kansas Department of Revenue. Make sure to do this before you start conducting business in the state.
Kansas Sales and Use Tax
Kansas has a 6.5% statewide sales tax rate, and many local jurisdictions levy an additional sales tax on top of this. However, the state caps local tax rates at 4%. That means the total sales tax rate can’t exceed 10.5% no matter where your business operates in Kansas.
Additional State Taxes
The Kansas Department of Revenue outlines numerous state-specific taxes your business may need to pay, depending on its industry, number of employees, and location. Some examples of these additional taxes include:
- Charitable Gaming Tax
- Cigarette and Tobacco Licensing and Tax
- Clean Drinking Water Fee
- Mineral Severance Tax
- Sand Royalty Tax
Visit the Kansas Department of Revenue for more information.
Kansas Local Taxes
Local jurisdictions may have specific laws that can impact your business. Whether you do business in Wichita, Kansas City, or a smaller town in the state, check with your local jurisdiction to ensure you understand any laws that apply to your business.
Start a Kansas S Corp FAQ
No. The default taxes for an LLC and taxes for an S corp are not the same.
With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax.
With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.
S corp owners are required to earn a “reasonable” salary, which basically means a fair market rate based on the individual’s qualifications as well as their duties and responsibilities at the company. The purpose of this requirement is to prevent S corp owners from paying themselves an artificially low salary in order to pay less self-employment tax.
A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employee salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.
While Kansas is home to many major industries, small businesses comprise much of the state's economy. You can elect to form an S corp and enjoy the resulting tax benefits in just about any industry as long as your business meets the requirements set by the IRS.
If you originally structured your business as an LLC, you can file an additional form to elect the S corp tax designation. The process to form an LLC is nearly the same as for an S corp — you just need to also file Form 2553 with the IRS. Make sure your business meets the requirements for an S corp, though, before you file this additional form.